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Chapter-I PHILIPS ELECTRONICS LTD. -AN OVERVIEW

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COMPANY PROFILE
MISSION & VISION

Mission
"Improve the quality of people¶s lives through timely introduction of meaningful innovations."

Vision
³In a world where complexity increasingly touches every aspect of our daily lives, we will lead in bringing sense and simplicity to people.´

VALUES
y y y y

Delight Customers Deliver great results Develop people Depend on each other

GOALS & OBJECTIVES Delight Customers We anticipate and exceed customer expectations
y y

We demonstrate Passion for Philips and "sense and simplicity" We create superior customer experiences, based on deep insights

We act as One Philips ambassadors all the time Deliver great results We continually raise the bar
y

We play to win big and always set ambitious targets

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y y

We challenge the status quo and experiment with new ways We take clear decisions and implement with speed and discipline

Develop people We get the best from ourselves and each other
y y y

We attract the best players to create strong and diverse teams We take risks by giving people stretch assignments to accelerate their development We personally invest significant time to coach and recognize people

Depend on each other We deliver more value by working as One Philips
y y y

We think as One Philips and act as owners We trust and empower each other to contribute our best We team up and allocate resources to the most promising opportunities

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HISTORY
. When Philips started manufacturing incandescent lamps in 1891, there was already a separate industrial research laboratory outside the factory; a concept virtually unknown elsewhere. In 1913, another major step was taken with the opening of a physics laboratory (the 'Nat. Lab.'). Under the leadership of Dr Gilles Holst, the Philips Research organization became a major center of technical competence and innovation. From 1914-1945 1914 to 1945 saw considerable growth and diversification. Improvements were made to the incandescent lamp, and gas discharge lamps proved more efficient in generating light. Meanwhile our 'bulb expertise' led to new products such as the X-ray tube and the radio valve. The invention of the pentode gave Philips an important patent in radio. In 1923, Philips decided to become a 'systems supplier' instead of a 'components company', and consequently the research organization broadened its scope into radio as well as television. 1945-1970 After World War II there was a period of expansion. The sky was the limit. Television built on research carried out in the 30s became a mass-produced consumer phenomenon. The invention of the transistor by Bell Labs changed the world of electronics forever. We built up a strong patent position in magnetic materials, and contributed many breakthroughs such as the LOCOS process (LOCal Oxidation of Silicon), used in every modern Metal-Oxide-Semiconductor (MOS) IC, the rotary heads for the Philishave electric shaver (1950s), and the compact audio cassette (1963), a breakthrough in audio recording. Research laboratories in England, France, Germany and the USA were founded. 1970-today From 1970 to the present day, our research has been tied much more closely to our industrial and business activities. This resulted in revolutionary developments such as the introduction of the CD, the DVD and Blu-ray Disc. In the medical sphere we made great strides forward in magnetic-resonance imaging and ultrasound, and with our increasing focus on health and wellbeing, these developments are still ongoing: in 2006, we saw the first commercial launch of a 3D scanner. In that same year, we sold 80% of our Semiconductors business as a new independent company, NXP, was created. We also adopted Open Innovation as our way of working: the High Tech Campus Eindhoven was opened up to external companies. At Philips Research, we continue to focus on meaningful innovations that improve people¶s lives. Ambilight, for example, has brought a whole new dimension to TV viewing, and in 2007, we developed Lumiramic ± a groundbreaking new phosphor technology for energy-efficient white LEDs ± together with our partners. The future of Philips Research Philips Research will remain an important driving force in realizing Philips¶ vision to become an even more market-driven and people-centric health and well-being company. We do this by

Philips integrates technologies and design into people-centric solutions. Philips is a part of practically every Indian's life. Philips employs approximately 121. home decorative lighting range and ALU range. Philips stands as a source of easy to use. . at work. the company is a market leader in cardiac care. Philips is a simpler and more focused company with global leadership positions in key markets of Healthcare. now and in the future. As one of the nation's most well-known and well-loved brands. Royal Philips Electronics of the Netherlands is a diversified Health and Well-being company. energy efficient lighting solutions and new lighting applications.5 continually evaluating key issues and trends in society to ensure that people¶s needs are at the heart of our innovations. focused on improving people¶s lives through timely innovations. based on fundamental customer insights and the brand promise of ³sense and simplicity´. male shaving and grooming. Today. on the move and at rest.000 employees in more than 60 countries worldwide. as well as lifestyle products for personal well-being and pleasure with strong leadership positions in flat TV. is the leading Health and Wellbeing company. Philips Electronics India Limited Philips Electronics India Limited.500 employees around the country. acute care and home healthcare. trendy and innovative internationally acclaimed products with superior design and technology that enhance the quality of consumers' professional and personal lives.at home. a subsidiary of the Netherlands-based Royal Philips Electronics. portable entertainment and oral healthcare. With recent launch of Philips Respironics product categories in obstructive sleep apnea management and home respiratory care. lifestyle and lighting. As a world leader in healthcare. Lighting and Consumer Lifestyle. Philips products find use in virtually every aspect of an individual¶s daily life 24X7 . Headquartered in the Netherlands. addressing people¶s Health and wellbeing needs and aspirations as its overarching theme. With sales of EUR 26 billion in 2008. The company has an excellent pan India distribution and after-sales service network. Philips has been operating in India for over 75 years and employs over 4.

With worldwide electrical lighting using 19 per cent of all electricity. The centre currently employs 35 engineers. new consumer experiences that meet consumers¶ desire for relaxation and improving their state of mind. body and appearance. China. Lighting Electronics. hospitality and home. . In 2008. The facility which is situated in Noida will not only cater to the needs of the Indian market but also the Asia-Pacific. Around 40 per cent of Philips¶ revenue in India comes from the lighting business Consumer lifestyle Guided by the brand promise of ³sense and simplicity´ and the consumer insights. Europe and North America. Philips inaugurated a global research and development (R&D) centre for lighting electronics in India. Philips provides advanced energy-efficient solutions for all segments: road lighting. Philips is also a leader in shaping the future with exciting new lighting applications and technologies such as LED technology. Luminaires. provides attractive benefits and endless new µnever-before-possible¶ lighting solutions. The other R&D centres are located at Eindhoven in the Netherlands and in Shanghai. office & industrial.6 BUSINESSES Lighting Philips Electronics India. Automotive and Special Lighting. Philips Consumer Lifestyle offers rich. as global leader in Lighting. Philips India has been consistently working with industry bodies such as ELCOMA. Philips also responds to the consumer's desire for wellness and pleasure by introducing products that meet the individual¶s interests in terms of their mind. This was its third such unit in the world. the use of energy-efficient lighting will significantly reduce energy consumption around the world and thereby cut harmful CO2 emissions. Bureau of energy efficiency and NGOs towards addressing India¶s power crisis through promotion of energy efficient lighting in India. Today. space. India¶s largest lighting company operates in business areas of Lamps. One of the primary research areas for the centre is to develop products that can tackle high voltage fluctuations in India. Philips is driving the switch to energy-efficient solutions. besides energy efficiency. which.

Working at PIC are about 1000 of the industry's finest professionals. competencies in the areas of project management. Philips Innovation Campus (PIC) Philips Innovation Campus (PIC). our way of working is very dynamic. with a vision to be an innovation hub creating next generation solutions and products for Healthcare and Lifestyle. at the fastest time-to-market and the lowest cost of ownership.7 The Consumer Lifestyle arm in India operates in the business areas of Home Entertainment solutions and Personal Infotainment with product categories such as TVs. home theatre systems. PIC is an ISO 9001/Tick IT. In addition. But. 60. the boundary between fundamental scientific research and applied research is becoming increasing blurred ± particularly when it comes to some of the most exciting areas of research.000 registered patents illustrate the innovative nature of the company. With the objective of meeting the growing need for highquality. the answer is a resounding ³yes´. Domestic Appliances and Personal care. Philips Research has been at the forefront of fundamental scientific research. Philips has adopted an Open Innovation strategy which leverages the joint innovative power of partnering companies and researchers to bring more innovations to the market effectively and faster. is this still the case? If some of the pioneering work being done by scientists across Research is anything to judge by. component-based software engineering and multi-threaded architecture to drive the creation of tomorrow's products and services. ³This means that you can apply both the µfundamental¶ and the µapplied¶ labels to many of the projects that we¶re . personal entertainment solutions.´ says Philips Research¶s Chief Science Officer Emile Aarts. It was established in August 1996. The Netherlands. PIC¶s share has increased significantly from 8% in 1998 to around 20% in 2008. requirement engineering and quality assurance have been established to offer customers products and services of the highest quality. sound accessories.. with market focus being more and more important across almost all corporate R&D organizations. DVD players. SEI. RESEARCH AND DEVELOPMENT Since its foundation 100 years ago. using state-of-the-art software engineering paradigms and platforms including real-time systems. PIC has built-up extensive know-how and expertise in the software engineering and technology domains relevant to its business. It¶s different at the cutting edge In today¶s market-focused corporate R&D organizations. CMM SM level 5 company & has emerged as a critical partner in the development of strategic & futuristic technologies for Philips worldwide. ³Here at Philips. cost-effective software development capacity within the organization.V. music systems. Bangalore is a division of Philips Electronics India Limited. which is owned 96% by Royal Philips Electronics N.

such as deep-brain stimulation and multi-modal imaging for healthcare applications.8 working on because they are both very flexible terms. is an excellent example of this more dynamic approach. That¶s why we¶re involved in investigating the key issues at a more fundamental level together with our university and research institute partners. The only difference is that we want this research to lead to marketable products and solutions.´ In the future. ³This has mainly occurred in fields that don¶t support the execution of our company¶s Health and Well-being strategy. for instance. ³This is a very important area for Philips ± but there¶s currently very little fundamental knowledge available. Philips Research will continue to develop its reputation in a number of exciting fundamental domains ± ³green lighting´ and skincare are just two examples ± albeit with a more applied focus.´ Philips Research¶s work on sleep.´ Open Innovation in new areas Despite the flexible nature of the ³fundamental´ and ³applied´ labels. it is still possible to detect a decline in some areas of more fundamental research at Philips in recent years. this refocusing exercise has gone hand-in-hand with an expansion of more fundamental research activities in a number of new fields. . this research will enable us to build on our strong heritage of improving the quality of people¶s lives.´ says Aarts. As he explains. ³In these fields we¶re considered to be an extremely important research partner ± especially by colleagues working in universities. ³Hopefully.

9 BOARD OF DIRECTORS Non-Executive Director & Chairman Executive Vice Chairman & Managing Director Executive Director Non-Executive Director S. Datta Murali Sivaraman Jan-Hein Louwman S. M. NAGARAJAN ± Human resources VIVEK SHARMA ± Chief Marketing Officer WIDO MENHARDT ± Philips Innovation Campus Corporate OfficePhilips Electronics India Ltd.Healthcare JAN-HEIN LOUWMAN ± CEO MAHESH KRISHNAN ± Consumer lifestyle RAJEEV CHOPRA ± lighting RAKESH SHARMA ± Strategic Business Development S. Chakala. Technopolis Knowledge Park Mahakali Caves Road.Mumbai 400 093 Tel: +91 22 66912000 . Andheri (East).CEO ANJAN BOSE . Venkatramani India Management Team MURALI SIVARAMANN .

We develop our people¶s leadership. . SUSTAINABILITY In 2009 we evaluated our sustainability strategy and resolved to fully leverage sustainability as an integral part of our overall strategy and an additional driver of growth. we aim to fuel growth by making Philips the leading brand in Health and Well-being. technology. We put our end users front and center of product innovations starting with understanding their needs and aspirations. We invest in a strong brand and consistently deliver on our brand promise of ³sense and simplicity´. We use best-in-class research facilities and agencies to validate and ensure that our product innovations are designed around people¶s needs and aspirations. while also increasing shareholder value. we are putting people right at the center of things. We are thereby putting into practice our mission: improving the quality of life through the introduction of meaningful innovations. These capabilities are firstly. This is implemented through sharpened strategies in the three core sectors: Healthcare. products and services 3. Lighting and Consumer Lifestyle. We deliver innovation by investing in world class strengths in end-user insights. We drive operational excellence and quality to best in class levels. in our actions. Vision 2010 further positions Philips as a market-driven. design and superior supplier networks 4. We are committed to sustainability and focus on making the difference in efficient energy use 7. people-centric company with a strategy and a structure that fully reflect the needs of its customer base. BRAND PROMISE It is the combination of two unique capabilities that enables us to deliver on our ³sense and simplicity´ promise. We invest in high growth and profitable businesses and emerging geographies to achieve market leadership positions 6. as reflected in the Philips Management Agenda 2010. talent and engagement and align ourselves with high performance benchmarks 5. President and CEO of Royal Philips Electronic. technology integration and product design.10 VISION 2010 Through the Vision 2010 strategy. easy to experience and advanced. ³With Vision 2010. by understanding people and secondly. allowing us the above mentioned strategic investments in our businesses.´ ± Gerard Kleisterlee. with Health and Wellbeing as our overarching theme. We are a people-centric company that organizes around customers and markets 2. Our Ways of Working: 1.

we defined a set of complementary performance indicators to accelerate change and drive performance. all compared with the base year 2007. Lighting µenergy efficiency¶ and Consumer Lifestyle µmaterials¶. µcare¶. we have identified three sustainability leadership key performance indicators where we can bring our competencies to bear. recycling amounts and recycled materials in products by 2015 compared to 2009. Each sector will take the lead on one of the leadership key performance indicators with Healthcare leading µcare¶. focusing on energy efficiency and healthcare. Within the company. including the EcoVision4 parameters With EcoVision4 we have committed to the following by 2012: ‡ Generate 30% of total revenues from Green Products ‡ Double investment in Green Innovations to a cumulative EUR 1 billion ‡ Improve our operational energy efficiency by 25% and reduce our CO2 emissions by 25%. Building on our rich heritage of involvement in social issues.11 To deliver on our brand promise of ³sense and simplicity´ and at the same time provide the company direction for the longer term in this area. In addition. . we have established our own approach of supporting the communities where we live and work. SOCIAL COMMITMENT Living up to this commitment means we use our capabilities to enhance the lives of our employees and people in society at large. µenergy efficiency¶ and µmaterials¶ including targets for 2015: y y y Bringing care to more than 500 million people Target: 500 million lives touched by 2015 Improving energy efficiency of Philips products Target: 50% improvement by 2015 (for the average total product portfolio) compared to 2009 Closing the materials loop Target: Double global collection. we encourage teamwork and collaboration in an environment that enables employees to reach their full potential.

the Netherlands ± Today Philips Design presents the latest Design Probe: Metamorphosis. AEX: PHI) is proud to announce that Philips Design will receive 8 iF communication design awards. The awarded products received recognition in the categories digital media and the category packaging. and KIRAN. a hand-cranked LED flashlight. The Triennial explores the work of designers addressing human and environmental problems across many fields of the design practice. the Netherlands ± Royal Philips Electronics (NYSE:PHG. The Beauty of Interactionµ. penetrating our living and working space while letting in natural light. July 14. The project explores how we have become separated from the natural world.Wednesday. 2010 Philips Design receives 8 iF communication design awards 2010 Eindhoven.6 billion people who live in areas with no access to the electricity grid or where the grid is unreliable. Annual Design Review 2010. industrial noise. Friday. 2010 Philips Design launches new Design Probe Metamorphosis Eindhoven.12 Sustainable lighting There is a pressing need to find innovative lighting solutions for the 1. SMILE includes two lighting solutions: UDAY. 2010 Philips Design presents innovative design during the Shanghai World Expo .D. the Netherlands ± Philips received an honorable mention for its OLED luminaire concepts. the Netherlands ± Philips Designs¶ award-winning smokeless stove. Tuesday. air and sound. Today are distributed in eighth Indian states. PRESS RELEASES Tuesday. It views the home as a filter to limit air pollution. electromagnetic smog. 2010 Philips OLED luminaire concepts receive honorable mention in 2010 I. Tuesday.D. confirming Philips Design¶s wide-ranging expertise in people-focused design. Annual Design review Eindhoven. in the coveted I. which will start today in the Smithsonian. July 20. both in terms of our surroundings and how we perceive and manage our time. Launched as a pilot in 2006 in four Indian states. May 11. That¶s why we have developed SMILE (Sustainable Model in Lighting Everywhere). Chulha is part of the The National Design Triennial program. 2010 Philips Design's Chulha at the National Design Triennial in the Smithsonian Eindhoven. June 08. May 14. a rechargeable portable lantern.

2010 Philips Design Food probes in London Design Museum Eindhoven. May 07. These 2 red dots are in addition to the 10 red dot awards that have been awarded for Philips products. as announced this week. Philips has announced that Rogier van der Heide will be appointed in the newly created position of Chief Design Officer for Philips Lighting.Wednesday. the smokeless stove and the futuristic Biopharm. 2010 Philips Design's award winning solutions for Bosch and Sang Fei Eindhoven. Both products have been designed by Philips Design.13 Eindhoven. Both products have been designed by Philips Design. March 31. . the Netherlands ± With no less than 12 red dot awards (including one honorable mention). Friday. the Netherlands ± Philips Design received two red dot awards for products designed for companies outside Philips. These 2 red dots are in addition to the 10 red dot awards that have been awarded for other Philips products. Philips Design is once again recognized for its design excellence in product design. Both items Illustrate Philips Designs innovative view on the World Expo¶s theme: Better City. 2010 Philips appoints first Chief Design Officer for Lighting Amsterdam. Better Live. the Netherlands ± Philips Design received two red dot awards for products designed for external companies: the Ultro Discussion System designed for Bosch Security Systems and the Philips Xenium X712 mobile phone for Sang Fei. Tuesday. concepts from the Philips Design Probe: Food will be exhibited at the Design Museum in London. The role of Chief Design Officer has already been established within the Philips Consumer Lifestyle and Healthcare Sectors. Recognizing that design is a key factor of brand differentiation and a significant source of competitive advantage. The Netherlands ± From March 31 until the beginning of September 2010. from Designs Probes program. These awards further validate Philips¶ commitment to designing simplicity-led solutions for people. . 2010 Philips Design's award winning solutions for Bosch and Sang Fei Eindhoven. the Netherlands ± Philips Design has sent award winning Chulha. April 13. Both the Nutrition Monitor and the Biosphere Home Farming design concepts will be included in the Sustainable Futures exhibition which supports the idea that every single piece of design should consider the sustainability of its source material and to raise consciousness of our waste levels in the future. to the Shanghai World Expo. The Netherlands ± Today Philips announces a further step in elevating the role of design in the company. April 14.Wednesday. 2010 Philips awarded by prestigous red dot for product design Eindhoven.Wednesday. February 24. as part of the Philips Design Consulting and Brand Licensing business: the CCS 900 Ultro Discussion System designed for Bosch Security Systems and the Philips Xenium X712 mobile phone for Sang Fei.

so pricing can be a problem. ‡ The first image of the product lasted long in the eyes of the consumer and the first to enter the market could gain the largest market share ‡ PHILIPS is committed to enhance its image to the Chinese market as investors ‡ PHILIPS was building a wholly owned manufacturing plant in India to show the Chinese the commitment Korea had to the Chinese society. PHILIPS focus on the domestic India market should be to penetrate the rural household market. ‡ Loss of profitability because related to over-employment at most facilities ‡ Is the per capita income level such that it can support sales of product at any level ‡ If PHILIPS fails to be successful in the Chinese market with high-end product it will be known . and European higher end customers. which would mean that for those purposes the low-end production of sets in the 13´ to 20´ range should be produced to appeal to that segment¶s purchasing ability. ‡ Since PHILIPS didn¶t have an established marketing strategy. ‡ Labor costs in India were less and would defray the cost of producing high-end ‡ Samsung has been making color TVs for many years in Korea before moving to the Chinese market Weaknesses: ‡ PHILIPS must continue to control all costs to maintain success ‡ India has a reputation of being a protected market (protectionism) ‡ India was a market where the first mover enjoyed advantages over late comers. PHILIPS can establish themselves as high-end producers around the world Threats: ‡ PHILIPS faces intense competition in the color TV market ‡ A premium-priced product wouldn¶t sell in large volumes. while Samsung would have to catch up in that area ‡ Samsung is not as experienced in manufacturing high-end TVs for a higher-end market segment Opportunities: ‡ Based on the data that on 28% of the 220 million rural households own a color TV.14 SWOT ANALYSIS Strengths: ‡ India was a market where the first mover enjoyed advantages over latecomers. as well as being an export to the U.S. issues of how to market the product may arise. PHILIPS is trying to overcome the first comer advantage Japan manufacturers have over them by being those first comers ‡ Companies such as Sony and Matsushita had built sales and service networks that were favorable to their sales programs in India. ‡ Larger more high-end models can be produced to appeal to an urban customer in India. ‡ With success in the higher-end manufacturing and sales of premium TVs in India.

‡ Labor costs in India were less and would defray the cost of producing high-end.15 around the world ‡ India was a market where the first mover enjoyed advantages over late comers. . ‡ The first image of the product lasted long in the eyes of the consumer and the first to enter the market could gain the largest market share ‡ PHILIPS is committed to enhance its image to the Chinese market as investors ‡ PHILIPS was building a wholly owned manufacturing plant in India to show the Chinese the commitment Korea had to the Chinese society.

and its name was changed to PHILIPS ELECTRONIC INDIA Ltd. but in the year 2001 the company ownership changed and the whole shares was bought by PHILIPS ELECTRONIC INDIA Ltd. MOHALI LIGHT FACTORY. . as its second division of lamp industry after the varodra plant . Total employees of tis plant is 532 including casual employees. The plant is situated in Industrial focal point PHASE-9 MOHALI near Mohali railway station and is sreaded in 26 acres.16 PHILIPS ELECTRONICS MOHALI PLANT The mohali plant was established in 1985 as PUNJAB ANAND LAMP Ltd. This company is a landmark in the Punjab state as it is the only factory which is most profitable one than any industry located in Punjab. at that time it was a joint stock company and majority of shares was with Punjab Anand Lamp around 75% .

Beard Trimmers. Personal Care . Home Lighting. Plasma.In Cars. Professional Lighting . Audio/Video Accessories. City Beautification and Petrol Stations. Motorcycles and Trucks. ManufacturingToday the product range of Philips include the following products ±           Televisions. Water Purifiers. Kitchen Appliances . Sports Lighting.Mouse and Keyboard. Hospitality. Audio Products .Blenders and Hand Blenders. Flat Screen . Accessories like Headphones and Speakers. Food Processors and Mixers.     Automotive Lighting . Remote Controls. Frying and Grilling Appliances. Portable Audio and Video Systems. DVD Players.LCD.17 OVERVIEW OF VARIOUS FRONTS OF PHILIPS ELECTRONICS INDIA Ltd. Road and Area. Vacuum Cleaners. Shops and offices. Juicers and Citruspresses.Audio Systems. Household Products . Recorders. External Hard Disk Drives. Toasters and Snacking Products. Multi Media Headsets. PC Products .Irons. Digital Photo Products and Frames. Coffee Makers and Kettles. Mobile Phones.Industrial.Dry Shavers. Male Shaving and Grooming . Smart Touch XL. . I pods and Home Theatre Systems.Beauty and Hair Care Products.

18 watt. At Philips we offer consumers a convenient way of recycling their unwanted. Designing products for recycling is an integral part of this approach. 11 watt. 23 watt. 14 watt. The program encompasses 8 major cities across India. Philips understand the corporate social responsibility and takes steps towards providing a safer environment to the future generations. 23watt.5 watt. Consumers can approach one of 27 authorized Philips service centres. Genie . 14 watt. which will act as collection points for consumer products which need recycling. Our efforts are to expand the network in the near future. 3. 11 watt Essential ± 8 watt. obsolete and damaged Philips products by dropping them off at convenient locations. This also calls for manufacturers to engage in developing solutions for effective and efficient recycling of their products.18 SERVICS Philips E-waste Management Program in India Philips has tied up with a recycler for collecting. MANUFACTURING AT MOHALI PLANT ± Mohali plant mainly manufactures lighting products basically of domestic usage this includes the following products ± CFL bulbs ± 1. . 8 watt. 4. 8 watt. transporting and recycling unwanted / broken down consumer products. We will continue to promote and invest into improved recycling systems to reduce the impact of electronic waste on the environment. Philips ensures that the consumer products received will be recycled in an environment-friendly manner. We design our products to continuously realize improvements and reduce their overall life cycle environmental impact. 18 watt. 29 watt Tornado ± 5 watt. 11 watt. 29 watt T5 slim tube 28 watt Coil plant ± Philips Electronics India is the only company that produces coils in the whole lighting industries in the world and in India only at the MOHALI PLANT. 2. Our aim is to use our planet¶s limited resources effectively and respect the principle of extended producer responsibility.

19 Chapter-II OBJECTIVES OF THE STUDY .

To study the effect of current assets and current liabilities on the profitability and liquidity position of the company. To suggest remedial measures for the improvement of the company¶s performance y y y y . To analyze the working capital position of the company in previous 4 years. and analyze them to identify the financial strength of the company.20 OBJECTIVES OF THE STUDY y To study the various components of financial statements of Philips Electronics India Ltd. To analyze the effect of current assets on the company¶s return and risk.

21 Chapter-III RESEARCH METHODOLOGY .

Internal data is that secondary data. Secondary Data can be obtained from both external and internal sources. Secondary data is previously collected and assembled for some project other than the one at hand. External data may be collected from books and periodicals. Research can be defined as the systematic and objective process of gathering. There are basically two techniques adopted for obtaining information: Primary Data. covering financial parameters and come of the important ratios to carry out research. journals and interest. As the project is explanatory in nature secondary data is collected from the reports of the company. official records and standing orders of the units. which is created. the research is exploratory in nature. recording and analyzing data for aid in making business decisions. books. Secondary data is gathered from annual reports. Primary Data is gathered specifically for the project at hand through personal interviews with the accounts officers. It is gathered and recorded by someone else prior to current needs of the researcher. . recorded or generated by the organization. It is less expensive than the primary date. government sources.22 The basic task of research is to generate accurate information for use in decision-making. Secondary Data. As the project involves analyzing of financial structure. media and other commercial sources.

23 Chapter ±IV FINANCIAL PERFORMANCE OF PHILIPS ELECTRONICS INDIA Ltd. .

or may reveal a series of activities over a given period of time as in the case of income statement. Various interested parties like management. The nature of analysis will differ depending upon the purpose of the analyst. requires understanding of the past to anticipate the future. . The users of financial statements can get better insight about financial strengths and weaknesses of the firm if they properly analyze the information given in these statements. Forecasting. creditors. government and others to form judgement about the operative performance and financial position of the firm use the information contained in these financial statements. an analysis of following aspects is done: Working Capital Management. The present analysis is undertaken to evaluate performance of PHILIPS ELECTRONICS INDIA Ltd. the financial and social performance of Philips is measured. Financial data can be used to analyze a firm¶s past performance and assess its present financial strength. investors. A financial statement is a systematic collection of data according to some logical and consistent accounting procedures. which is an important pre-requisite of effective planning. In the present study.24 FINANCIAL PERFORMANCE OF PHILIPS ELECTRONICS INDIA Ltd. Such analysis is the starting point for making affective plans. Its purpose is to convey an idea about some important financial aspects of a business firm. It may show a position at a moment of time as in the case of the balance sheet. The process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of balance sheet and profit and loss account is called financial analysis. For this purpose.

230 6191 Net Profit (12) 463 EPS 14.25 KEY FINANCIALS OF PHILIPS ELECTRONICS INDIA Ltd IN MILLIONS Particulars Share Capital June 2009 13.39 16.65 .372 July 2010 15.797 Reserve & Surplus 1.853 1.803 Sales 5.

2.26 WORKING CAPITAL MANAGEMENT Working capital refers to the excess of current assets over current liabilities. Principle of Cost of Capital. Cost of raising capital is different for different sources of raising working capital finance. the current liabilities and the interrelationship that exists between them. In other words. higher is the cost and lower the risk. A conservative management prefers to minimize the risk maintaining a higher level of current assets or working capital while a liberal management assumes greater risk by reducing working capital. it refers to all aspects of administration of both current assets and current liabilities.Principal of Risk Variation Risk in this context. The reason behind this is if the firm cannot maintain a satisfactory level of working capital. The goal of working capital management is to manage the firm¶s current assets and current liabilities in such a way that a satisfactory level of working capital is maintained. refers to inability of a firm to meet its obligations as and when they become due for payment. The basic current liabilities are accounts payable. bank overdraft. A sound working capital management should always try to achieve a proper balance between these two. It is generally dependent on the degree of risk involved in raising capital from a particular source. marketable securities. PRINCIPLES OF WORKING CAPITAL MANAGEMENT The following are the main principles of a sound working capital management policy: 1. The basic current assets are cash. Thus there is a definite and inverse relationship between the degree of risk and profitability. Management of working capital is concerned with the problems that arise in attempting to manage the current assets. Larger investment in current assets with less dependence on short-term borrowing increases liquidity reduces risk and thereby decreases the opportunity for a loss. accounts receivable and inventory. lower is the cost. reduces liquidity as well as profitability. However the goal of management should be to establish a suitable tradeoff between profitability and risk. . outstanding expenses. less investment in current assets with greater dependence on short-term borrowings increases risk. To the contrary. bills payable. it is likely to become insolvent and may even be forced into bankruptcy. Higher the risk.

The level of current assets may be measure with the help of two ratios. Generally. The term Gross Working Capital. Thus this principle is concerned with planning the total investment in current assets. Maturity pattern of various current obligations is an important factor in risk assumptions and risk assessments. Net Working Capital. the financial manager may consider the relevant industrial average. Every rupee invested in the current asset should contribute to the net worth of the firm. means the total current assets. This principle states that a firm should make every effort to relate maturities of payment to its flow of internally generated funds. Principle of Maturity of Payment. Current assets as a percentage of total sales. shorter the maturity schedule of current liabilities in relation to expected cash inflows the greater is the inability to meet its obligations in time. Current assets as a percentage of total assets. Principle of Equity Position. There are two concepts under working capital-: Gross Working Capital. 4. It is concerned with planning the sources of finance for working capital. And second definition of Net Working Capital is that portion of current assets which is financed with long-term funds. The term Net Working Capital can be defined in two ways: mostly Net working Capital refers to the difference between the current assets and current liabilities. also referred to as working capital. . While deciding about the composition of the current assets.27 3. This states that the amount of working capital invested in each component should be adequately justified by a firm¶s equity position.

There is always minimum level of current assets. The extent to which profits can be earned will depend upon the volume of sales of a firm. it is necessary to generate sufficient profits. The continuing flow from cash to suppliers.28 Need for Working Capital-: The objective of financial decision making to maximize the shareholders wealth. to inventory. That is why a sufficient amount of working capital is needed in the firm. Therefore. However. a need of Working Capital in the form of current assets to deal with the problem arising out of the lack of immediate realization of cash against goods sold. this is referred to as the operating or cash cycle. to accounts receivables. and then back into cash is operating cycle. sales do not convert into cash immediately there is a time lag between the sale of a goods and the receipt of cash. Permanent or fixed working capital Permanent or fixed working capital is the minimum amount. Debtors and Receivable bill Cash Finished goods Raw Material Work progress Operating cycle in Nature of Working Capital Requirements The working capital requirements of a concern can be classified as: Permanent or fixed or regular working capital requirements. Temporary or variable working capital requirements. which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets. Technically. The operating cycle can be said to be the heart of the need for working capital. which is continuously required by the enterprise to .

Amount of capital blocked in these assets is called as permanent or fixed working capital. Temporary or variable working capital Temporary or variable working capital is the amount of working capital. which is required to meet the seasonal demands and some contingencies.29 carry out its normal business operations.A. (B) Working capital (A-B) Increase or Decrease in Working capital . FORMAT OF WORKING CAPITAL:Schedule of change in working capital Current Year Previous Year Increase (2007) (2006) Particulars Decrease Current Assets:Stock Debtors Cash Total C.L. (A) Current Liabilities:Total C. finished goods and cash balances. A company maintains minimum level of raw materials.

and inexpensive source of finance.30 FINANCING OF WORKING CAPITAL Permanent working capital should be financed in such a manner that the enterprise may have its uninterrupted use for a sufficiently long period. 4. no charge is created on the assets of the company. Shares: Issue of shares is the most important source for raising the long term capital. 3. etc. retention of control. . Debentures: A debenture is an instrument issued by the company acknowledging its debt to its holder. also provide short term. It is most suitable for an established firm for its expansion. over capitalization. Loans from Financial institutions: Financial institutions such as Commercial Banks. taxation benefits. misuse of funds. State Financial Corporation of India. moreover. etc. Important sources are: 1. It is an internal source of finance and it often referred to as self financing or ploughing back of profits. Debentures carry a fixed rate of interest which is a legal charge against revenue of the company. replacement. The firm issuing debentures also enjoy a number of benefits such as trading on equity. But excessive resort to ploughing back of profits may lead to monopolies. Retained Earnings: It refers to reinvestment by a concern of its surplus earnings in its business. modernization. etc. Life Insurance Corporation. 5 . Industrial Development Bank of India. trading on equity. tax benefit. Raising of permanent capital through the issue of shares has certain advantages like there is no fixed burden on the resources of the company and. This source of raising finance became popular because of the imperfect development of banking system in the country. The debentures are generally given floating charge on the assets of the company. medium term and long term loans. Public deposits: Public deposits are the fixed deposits accepted by a business enterprise directly from the public. This mode of financing has a large number of advantages such as very simple and convenient source of finance. 2.

how fast and to what extent can they be converted into cash. nothing very sacrosanct about the 2:1 ratio. should maintain sufficient liquidity. The following ratios have been calculated for the said purpose. Current Ratio: The current ratio is an indicator of a firm¶s short term solvency. to survive on a continuing basis. What is more important is the quality of current assets. 5. There is. 4.. . the technique of ratio analysis is adopted. Inventory Turnover analysis. however. Creditor¶s turnover. A firm. Comparative debtors¶ analysis. The idea of having double the current assets as to current liabilities is to provide a cushion against possible losses and to ensure a smooth day to day functioning of the firm. 1. As a rule of thumb. 3. 2. Current ratio.31 To comment upon the working capital management in PHILIPS ELECTRONICS INDIA Ltd. 2:1 is considered to be an ideal current ratio. Working capital turnover ratio.

a low current ratio represents that the liquidity position of the firm is not good and the firm shall not be able to pay its current liabilities in time.24:1 in semi FY 2010. In FY 2009 it was 1.24:1 A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current obligations in time and when they become due.45 Average collection period 2009 = no. Years Current Assets Current Liabilities Ratio July 2009 July 2010 11.191/4268 = 1. The above table indicates that there are also fluctuations in the current ratio of PHILIPS.38 debtors Debtors Turnover Ratio July 2010 = 6.27 .358 13. Debtors/Receivables Turnover Ratio: Debtor¶s turnover ratio indicates the velocity of debt collection of firm.38 = 8. it indicates the number of times the average debtors are turned over during a year Debtors Turnover Ratio July 2009 = total sales = 5.32 Yearly Trend of Current Ratio of PHILIPS ELECTRONICS INDIA LTD.40:1 and then decreases to1. In simple words.520 8.40:1 1.097 10835 1.69 DTR Average collection period July 2010 = 12/1. of months = 12/1. On the other hand.230/3796 = 1.45 = 8.

. But considerably there is more debtor collection period i.38 1.e.1.e. during the year. Since liquidity position of a company depends upon the quality of its debtors to a great extent. the company¶s main product i.T. lighting which accounted for nearly 95% of its turnover is being sold against credit only. The reason is.45. PHILIPS has made special efforts to reduce dealer outstanding by focusing attention on increasing retail sales and reducing dealer stocks and thereby increase in collection from dealers. A close analysis of this ratio of two years from Dec 2009 to July 2010 has a fine turnover ratio in 2009 but it increasing Y-O-Y and it is highest in the 2010 i.e.45 8.27 Since 1985.69 8. two ratios i.33 2 Yearly Trend of Debtor Turnover Ratio of PTL Years Sales Debtors D.R Collection Period (months) JULY 2009 JULY 2010 5230 6191 3796 4268 1.e nearly 8and half months which is very high. Debtors Turnover Ratio and Average Collection Period are calculated to judge the quality and liquidity of debtors of the company and comment on efficiency.

34 Current Assets & Current Liabilities of PHILIPS in Period July 2009 .95 16.57 33.23 4.) 2685 .928 4.C. .7 1.11 38.July 2010 Current Assets Inventories Sundry Debtors Cash & Bank Other current assets Loans & Advances TOTAL Total 3.L.462 1746 4132 732 763 10835 %age 31.268 4.13 6.A.75 7.44 100 Current Liabilities Sundry Creditors Short term debt Accrued liability Short term Provisions Other Liabilities TOTAL Total 3.493 636 195 13520 %age 29 31.04 100 Net Working Capital (C.

C. Net Working Capital of PTL Year July 2009 July 2010 Current Assets 11.261 2.097 10.35 Working Capital Turnover Analysis: The amount of working capital is sometimes used as a measure of a firm¶s liquidity. For this purpose. 3. which indicates the velocity of the utilization of net working capital.16:1 4. In the following lines a comparative statement of working capital turnover ratio of PHILIPS is produced. Working capital turnover analysis is. Ratio 3.. is worked out.520 Current Liabilities 8. working capital turnover ratio.685 W.868 Net W. used to measure the efficiency with which the firms are using their working capital.358 13. the one having the larger amount of working capital has the greater ability to meet its current obligations.42:1 Turnover . therefore.305 11.835 Net Capital 3.261 2685 Working Working Capital Turnover Ratio of PTL Years 2009 2010 Sales 10. It is considered that between the two firms. A higher ratio indicates efficient utilization of working capital.C.

It is low because it has not accounted the remaining 2 quarters but it is high as compared to previous year first two quarters. under and over trading. This no doubt indicates the maximum use of working capital or quick turnover of current assets due to handsome sales of its main products. To ensure maximum profitability. . But it is quite high in 2010 in respect to previous year. working capital has to be managed skillfully to avoid situation of both.36 An analysis of this table shows there is slight variation of the ratio from Dec 2009 to July 2010.

And frequent stock outs may hamper production activities and may ultimately affect profits. Turnover Ratio July 2009 10. This indicates that the company has a good inventory management. This analysis is done by calculating inventory turnover ratio.02:1 The above table shows PHILIPS has the moderate inventory ratio during this period. . A lower inventory turnover is an indicator of higher efficiency in managing the inventory. In FY 2009 there is moderate inventory turnover.09:1 July 2010 11. Inventory Turnover of PHILIPS in 2 Years Particulars Sales Inventory I.868 3. It also evaluates the efficiency with which a firm is able to manage its inventory. The inventory turnover ratio should be moderate because we can¶t blindly accept very high inventory turnover ratio as indicative of efficient inventory management as it may be due to very low levels of inventory which generally results into frequent stock outs.330 3.928 3.37 Inventory Turnover Analysis: Every firm has to maintain a certain level of inventory of finished products so as to be able to meet the requirements of the business and ensure an uninterrupted production. Inventory turnover ratio which is calculated by dividing sales by average inventory indicates the number of times the stock has been turned over during the year.305 3.

46 July 2010 = 12/2.14:1 Average Payment Period Ratio = 12/CTR July 2009 = 12/2. the trades creditors are taken as one of the components of the ratio and in place of average daily sales.409 Sundry Creditors 2.462 = 2. Generally lower the ratio better is the liquidity position of the firm and higher the ratio less liquid is the position of the firm.69:1 July 2010 = 7.60 The average payment period ratio represents the avg.560 = 2. average daily purchases are taken as the other component of the ratio.46 5.900 7.69:1 2.409/3.462 Creditors Turnover 2.60 Creditors Turnover Analysis of PHILIPS in 2 SEMI years Year 2009 2010 Purchases 6.38 Creditors Turnover Analysis: The analysis of creditor¶s turnover is basically the same as of debtor¶s turnover ratio except that in place of trade debtors. number of days taken by the firm to pay its creditors.14:1 Payment Period (months) 4. .560 3.69 = 4.14 = 5.900/2. And in this case the company has a favorable creditor turnover ratio as the company is giving more credit period for its customers and is also paying its liabilities in less period that is about 4 months as compared to 8 months given to its customers. It can be calculated as: Creditors Turnover Ratio = Net Credit Annual Purchases Average Trade Creditors July 2009 = 6.

03 54.15 53.797 29.85% 46.85 100 ± 46.314 = 46.159 34.03% Solvency Ratio -: =100 .372x100/29.39 Following are some ratios which can also be considered while analyzing the working capital management: Equity Ratio -: Equity Ratio =Shareholders Fund *100 Total Assets (Fixed assets+Current assets+Investments) July 2009 = 13.03% Years Shareholders fund Total assets Equity Ratio July 2009 July 2010 13.85% July 2010 = 15.372 15.159 = 45.314 45.797x100/34. .97 The company equity ratio is quite acceptable as it is more than 50% and is merely constant in every financial year which means that company has enough to pay its liabilities and also the solvency ratio is quite good and constant in both the quarters which shows that the company has a strong financial management in their kitty which is a very positive point for a company in todays world of corporate business.Equity Ratio Years July 2009 July 2010 100 ± 45.

40 Chapter-V CONCLUSIONS AND RECOMMENDATIONS .

The visitors feel happy after the campus. PTL still enjoys moderate payment period and highest velocity of creditors and debtors.41 CONCLUSION On the basis of financial performance of Philips Electronics India Ltd. Indigenous Technology: PHILIPS is the only lighting manufacturing company based on purely indigenous technology. None of the other electronic company has shown such a steady growth. with this lowest current ratio. Philips was appropriately chosen as the brand name as self reliance and building up of Indian Engineering capabilities remain the guiding spirit of PHILIPS. . Working results: PTL has registered a handsome and constant growth in its profits because of a brisk demand for new and better technology electronic items. The working environment of the company is very healthy. Financial structure: PHILIPS is a low debt company signifying its dependence mainly on its internal accruals for its financial requirements. following conclusions are drawn: General Profile: The plant of PHILIPS is ideally located in the Mohali . on a campus of 17 hectares. Philips has recorded the lowest current ratio. PHILIPS continues to strengthen its financial position by channelising these internal accruals to fund its expansion programmes. However. Industrial focal point Phase 9 near Chandigarh. the capital of Punjab. made in the previous chapters.

that is they should appoint permanent and skilled workers as against casual workers which generally add up to the profit of the company.  Another recommendation for Mohali plant is about the HR department . as it will help in improving company liquidity.  PHILIPS should decrease the credit facilities provided to its consumers. the total cost will spread over more units thereby decreasing the per unit cost. It should work at full capacity to minimize its cost of production. .42 RECOMMENDATIONS  PHILIPS should increase its capacity utilization. With this increase in capacity utilization.  PHILIPS should focus more on the consumer lifestyle goods in India parallel to its other business as it accounts very less as compare to other businesses of Philips. The payback period is quite high in case of debtors as compared to creditors it should be more or less equal.

43 ANNEXTURE CONSOLIDATED BALANCE SHEET CONSOLIDATED P&L STATEMENT - I II .

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