ECONOMIC ANALYSIS FOR MANAGERS

ASSIGNMENT-TWO

Prepared By:
Advaith Suresh
17MBA0005
ABOUT THE COMPANY:

JK Tyre & Industries Ltd is an Automotive Tyre, Tubes and flaps manufacturing company based
in Delhi, India. The name JK is derived from the initials of Kamlapatji (1884–1937) and his father Seth
Juggilal (1857–1922). The company is the market leader in Truck/Bus Radial tire in India and is the only
tyre manufacturer offering the entire range of 4 wheeler radials for Trucks, Buses and Cars. JK Tyre has
a worldwide customer base in over 80 countries across all 6 continents. It is a part of J. K.
Organisation group of Companies. JK Tyre acquired Mexican tyre major – Tornel in 2008.With production
facilities in all 9 plants, total production capacity is almost 20 million tyres p.a.

The Company is headquartered in New Delhi, Bahadur Shah Zafar Marg. Registered office is in Kankroli,
Rajasthan. Manufacturing plants are located at Nine centers in India, located at –
 Karnataka Madhya
Rajasthan(1)
(3) Pradesh (1)

Tamil Uttarakhand
Nadu(2) (3)

JK Tyre has also enhanced its global reach by taking over Tornel, a Mexican company, which has 3
plants in Mexico. Jk tyre has acquired LAKSAR plant of BIRLA TYRES located in Haridwar, in the name
of Cavendish Industries. With the new agreement company has now total of 10 manufacturing plants in
India.

It has an R&D division, Hari Shankar Singhania Elastomer And Tyre Research Institute (HASETRI) with
headquarters at Kankroli under the directorship of renowned scientist, Dr. Mukhopadhyay. It has two
more branches: one in Faridabad and one in Chennai. It is known for its state-of-the-art Finite Element
Method, NVH and tyre-testing capabilities. This R&D facility is one of its kind in Asia. HASETRI is India's
first and foremost independent Research and Testing Center, which fulfills the Nation's need for
developing newer and better technologies for Elastomer and Tyres. It is recognized
under SIRO (Scientific and Industrial Research Organization) by the Department of Scientific and
Industrial Research (DSIR), Govt. of India. It is also acknowledged by the Indian Institute of
Technology (IITs) and other universities for registration leading to higher studies. Product Development
Center & R&D facility is present at Mysore, Karnataka. The Chennai operation is a joint initiative of IIT
Chennai and JK tyres.

DATA (FOR PAST 5 YEARS)

*data was compiled by sourcing information mainly from companies Annual Report as
well from data collected from CMIE (Prowess IQ) data source.

DATA COLLECTED ON THE COSTS INCURRED AND THE REVENUE EARNED BY

MARICO FROM THE FISCAL YEAR 2012-13 TO 2016-17.

Fiscal Year 2013-2014

PARTICULARS FY13 (AMOUNT IN FY14 (AMOUNT IN

RUPEES CRORES) RUPEES CRORES)
FIXED COST
Employee Cost (Wages & 670.97 799.58
Salaries)
Depreciation, Amortisation & 1,873.89 2,625.88
Impairment
Other Expenses (rent, 187.8 211.2
legal and professional charges,
donation,
certain one-time project based
consulting
charges for capability building
and value
enhancement in the
organization)
TOTAL FIXED COST (A) 2,644.86 3,525.46
VARIABLE COST
Material Cost 4,193.12 2,926.47
Power & Fuel Cost 1,964.09 3,313.64
Miscellaneous Expenses 2,527.27 6,240.11
(freight, subcontracting charges,
power
and fuel, warehousing etc.)
TOTAL VARIABLE COST (B) 28,684.48 12,480.22
SALES 35,491.81 45,297.72

Fiscal Year 2014-15

PARTICULARS FY14 (AMOUNT IN FY15 (AMOUNT IN

RUPEES CRORES) RUPEES CRORES)
FIXED COST
Employee Cost (Wages & 799.58 946.83
Salaries)
Depreciation, Amortisation & 2,625.88 2,584.50
Impairment
Other Expenses (rent, 211.2 222
legal and professional charges,
donation, certain one-time
project based consulting
charges for capability building
and value enhancement in the
organization)
TOTAL FIXED COST (A) 3,525.46 3,731.33
VARIABLE COST
Material Cost 2,926.47 9,921.27
Power & Fuel Cost 3,313.64 3,475.67
Miscellaneous Expenses 6,240.11 13,396.94
(freight, subcontracting
charges, power
and fuel, warehousing etc.)
TOTAL VARIABLE COST 12,480.22 26,793.88
(B)
SALES 45,297.72 46,087.32

Fiscal Year 2015-16

PARTICULARS FY15 (AMOUNT IN FY16 (AMOUNT IN

RUPEES CRORES) RUPEES CRORES)
FIXED COST
Employee Cost (Wages & 946.83 1956.46
Salaries)
Depreciation, Amortisation & 2,584.50 2,351.45
Impairment
Other Expenses (rent, 222 295
legal and professional charges,
donation, certain one-time
project based consulting
charges for capability building
and value enhancement in the
organization)
TOTAL FIXED COST (A) 3,731.33 4,507.91
VARIABLE COST
Material Cost 9,921.27 11,333.08
Power & Fuel Cost 3,475.67 3,093.12
Miscellaneous Expenses 13,396.94 4,426.20
(freight, subcontracting
charges, power and fuel,
warehousing etc.)
TOTAL VARIABLE COST 26,793.88 18,852.40
(B)
SALES 46,087.32 36,706.92

Fiscal Year 2016-2017

PARTICULARS FY16 (AMOUNT IN FY17 (AMOUNT IN

RUPEES CRORES) RUPEES CRORES)
FIXED COST
Employee Cost (Wages & 1956.46 1,167.58
Salaries)
Depreciation, Amortisation & 2,351.45 2,824.61
Impairment
Other Expenses (rent, 295 324.4
legal and professional charges,
donation, certain one-time
project based consulting
charges for capability building
and value enhancement in the
organization)
TOTAL FIXED COST (A) 4,507.91 4,192.19
VARIABLE COST
Material Cost 11,333.08 18,708.59
Power & Fuel Cost 3,093.12 4,096.84
Miscellaneous Expenses 4,426.20 5,163.46
(freight, subcontracting
charges, power and fuel,
warehousing etc.)
TOTAL VARIABLE COST 18,852.40 27,968.89
(B)
SALES 36,706.92 52,290.11

ANALYSIS OF THE DATA COLLECTED ON THE COSTS AND SALES OF MARICO

FOR THE LAST FIVE FISCAL YEARS.

PARTICULAR Mar '17 Mar '16 Mar '15 Mar '14 Mar '13 AVERAGE
Fixed cost
Employee Cost 1,167.58 1956.46 946.83 799.58 670.97 1,108.28
Depreciation 2,824.61 2,351.45 2,584.50 2,625.88 1,873.89 2,612.07

Total fixed cost 4,192.19 4,507.91 3,731.33 3,525.46 2,644.86 3,720.35

Variable cost
Raw Materials 18,708.59 11,333.08 9,921.27 2,926.47 4,193.12 14,016.51
Power & Fuel Cost 4,096.84 3,093.12 3,475.67 3,313.64 1,964.09 3,188.67
Miscellaneous 5,163.46 4,426.20 13,396.94 6,240.11 2,527.27 6,350.80
Expenses

total variable cost 27,968.89 18,852.40 26,793.88 12,480.22 28,684.48 27,555.97

Net Sales 52,290.11 36,706.92 46,087.32 45,297.72 35,491.81 43,174.78

Total cost = TFC 45,161.08 13,360.31 30,525.21 16,005.68 31,329.34 27,276.32

+TVC
Contribution = sale 11,321.22 7,740.95 8,151.54 9,338.07 6,807.33 8,671.82
- TVC
Profit = 7,129.03 4,233.04 4,420.21 5,812.61 4,162.47 5,151.47
contribution - Total
Fixed cost
PV Ratio = 0.2165079 0.2108853 0.1768716 0.2061488 0.1918 0.20
Contribution / Sales
BEP in Amount = 19362.761 16634.208 21096.259 17101.532 13789.675 17,596.89
TFC / PV Ratio
Margin of safety = 32,927.35 20,072.71 24,991.06 28,196.19 21,702.13 25,577.89
Sales - BEP in
amount

INFERENCE FORM THE FOLLOWING DATA.

If we consider the total fixed costs (TFC) we can certainly conclude that stayed some what
on the same line throughout the years.

The total variable costs on the other hand first decreased drastically but then on it has
increased in a constant rate

The total sales increased at an increasing rate but had a drastic fall in the year 2015-16.

GRAPHICAL REPRESENTATION OF THE BREAK EVEN ANALYSIS FOR THE

THREE FISCAL YEARS :
60,000.00

50,000.00

40,000.00 2016-17
2015-16
30,000.00
2014-15
2013-14
20,000.00
2012-13

10,000.00

0.00
Sales Total Cost Fixed Cost

In the above graph we are measuring the Sales, Total Cost & Fixed Cost along the vertical axis
and the Total Output along the horizontal axis. The blue line indicates the Break-Even Analysis
for the fiscal year 2014-15, the red line refers to the Break-Even Analysis for the fiscal year
2015-16 and the green line captures the data pertaining to the Break-Even Analysis for the fiscal
year 2016-17.

SOURCES OF DATA:

1.) http://www.jktyre.com/annualreports.aspx
2.) https://prowessiq.cmie.com
3.) https://hbr.org/2014/07/a-quick-guide-to-breakeven-analysis
4.) Materials as provided by Dr. P Ganesan (VIT BS)