SUMMER TRAINING REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS

CAPITAL RESTRUCTURING

SUBMITTED BY: APOORVA BHATEJA
MBA-IB (2009-2011) Roll No. : A1802009027

INDUSTRY GUIDE Mr. Pardeep Kapoor Manager Escorts Ltd

FACULTY GUIDE Ashu Jain Lecturer AIBS

AMITY INTERNATIONAL BUSINESS SCHOOL, NOIDA

AMITY UNIVERSITY – UTTAR PRADESH

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CERTIFICATE OF ORIGIN
This is to certify that Ms. Apoorva Bhateja, a student of Post Graduate Degree in MBA-IB, Amity International Business School, Noida has worked in Escorts Ltd, under the able guidance and supervision of Mr. Pardeep Kumar, Manger Finance, Escorts Ltd. The period, for which she was on training for 7 weeks, starting from 17th May to 3rd July. This Summer Internship report has the requisite standard for the partial fulfillment the Post Graduate Degree in International Business. To the best of our knowledge no part of this report has been reproduced from any other report and the contents are based on original research.

Signature (Faculty Guide)

Signature (Student)

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ACKNOWLEDGEMENT

I express my sincere gratitude to my industry guide Mr. Pardeep Kumar, (Designation) Manager, (Company) Escorts Ltd, for his/her able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible. I would also like to thank the entire team of Escorts Ltd, for the constant support and help in the successful completion of my project. Also, I am thankful to my faculty guide Mr. Ashu Jain of my institute, for his continued guidance and invaluable encouragement.

Signature (Student)

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Graphs Case Study PAGE NO: 6 8 10 12 14 16 20 21 22 23 4 26 33 39 43 46 48 50 52 56 58 60 62 64 66 4 5 6 7 8 9 10 11 .TABLE OF CONTENTS CHAPTE R NO: 1 2 3 SUBJECT Executive Summary Introduction Objectives Industry Profile • Introduction • Historical Perspective • Farm Machinery Industries in India • Agricultural Machinery Marketing & After Sale Services • Popularization of Agri-Machinery • Future Thrust in Agricultural Mechanization • Future Perspective in Agricultural Machinery Manufacture Company Profile • About The Company • Businesses of Escorts • History of Escorts • Outlook of Escorts Sectors • Quality Policy Issues and challenges facing the organization Reflections on what has been learned during the placement experience Analysis & Findings • Analysis • Findings Recommendations Bibliography Annexure a. Tables b.

12 Synopsis of the project 74 5 .

EXECUTIVE SUMMARY 6 .

The project includes the definition and benefits of capital restructuring and also the different aspects which are touched by it. its historical perspective. company profile of Escorts Ltd. Although Escorts operates in many sectors but basically it belongs to the agri machinery industry. Escorts is into different businesses like i) Agri machinery. railway equipment and auto components. ii) Engineering which includes railway equipment and auto component. its founding philosophy and the corporate social responsibility. The Escorts Group is among India's leading engineering conglomerates operating in the high growth sectors of agri-machinery. After that comes the profile of the company i. which means to re-allocate the assets of the company in order to improve liquidity or availability of the assets. This forms the analysis part of the project. 7 . construction & material handling equipment. Then we find a suitable blend of debt and equity which will maximize the shareholders rate of return. It includes the objectives of capital restructuring as well. It explains what Escorts is all about. Then is how agricultural machinery is popularized. The project has been done on the capital structure of Escorts Ltd. Therefore the project has industry profile of agri machinery industry which includes introduction to the industry. future thrusts in agricultural mechanization and finally the industry profile has the future perspective in agricultural machinery manufacture. different types of farm machinery industries in India like village craftsmen.EXECUTIVE SUMMARY The title of the project is Capital restructuring. tiny and small scale industries and farm organized industry.e. and iii) Construction Equipment In this project we first study the cost of borrowed funds in the capital structure of Escorts Ltd.

INTRODUCTIO N 8 .

often monetary. Restructuring them means re-allocating them to improve their availability (liquidity). Objectives of Capital Restructuring 1 To enhance the shareholder value. Ownership & Asset arrangements to find opportunities to increase the share holder’s value. 9 . Thus the liquidity of capital should be high. The process requires selling assets to buy different ones in order to improve your capital (monetary) position so that you can improve your asset position thus enabling you to earn more with them. Capital mix. To reorganize or divest less profitable or less making business/products. It is generally undertaken by companies that are generally doing poorer than expected and wish to stabilize future performance of their assets. For this the company should continuously evaluate its: a) b) c) d) 2 3 4 Portfolio of businesses.INTRODUCTION Capital Restructuring Capital is generally the assets. it can innovate securities that help to reduce cost of capital. To focus on asset utilization and profitable investment opportunities. The company can also enhance value through. that are available to generate more assets.

Debt Restructuring: It is a process that allows a private or public company . companies have the option of undertaking Debt Restructuring . this aspect relates to divesting divisions and / or businesses to improve the financial standing of the organization. FDI Participation: This aspect relates to the change in structure of the shareholding due to the increasing FDI inflows.Capital Restructuring touches upon the following aspects: 1. Benefits of Capital Restructuring a) Greater Financial Muscle b) Access to Better / Greater Technologies c) Focus on Core Competencies 10 .especially if it is a Debt laden company (high debt leveraged company). to reduce and renegotiate its deliquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its operations. Divestitures: As stated earlier in the types of Divestiture in Portfolio and Asset Management. 3. Here. 4. Investment Pattern: This relates to ability of corporations to identify the various investments opportunities that would lead to higher returns.or a sovereign entity . 2. Leverage of the company: This is essentially the Debt: Equity Ratio.facing cash flow problems and financial distress.

3 To observe the functioning of finance department of escorts. 5 To develop new skills. 2 To seek out the difference between theory and practical work. 11 . 4 To gain knowledge about different policies of escorts. 6 To have a direct contact with the employees of Escort to learn from them.Objectives of the study 1 To understand and observe the practical work in escorts.

INDUSTRY PROFILE 12 .

Traditional hand tools and bullock drawn implements are largely fabricated by village craftsmen (blacksmith and carpenters) and smallscale industries. sowing. was the major achievement of Indian engineers. tractors and threshers were gradually introduced for farm mechanization. Besides it helps in reducing the drudgery in farm operations. plant protection and threshing have been widely accepted by the farmers. Irrigation pumps. Equipment for tillage. The manufacture of agricultural machinery in India is quite complex comprising of village artisans. State Agro-Industrial Development Corporations and organized tractor. mechanization of horticulture. chaff cutters. The development of power thresher in 1960. tillage equipment. Even farmers with small holdings utilize many improved farm equipment through custom hiring to ensure timeliness of farming operations. The pace of farm mechanization in the country accelerated with the manufacture of agricultural equipment by the local industries. irrigation. The early agricultural mechanization in India was greatly influenced by the technological development in England.INDUSTRY PROFILE A INTRODUCTION Farm mechanization helps in effective utilization of inputs to increase the productivity of land and labor. However. especially after Green revolution in 1960s. The small-scale industries depend upon public 13 . plantation crops and commercial agriculture is yet to be introduced in the country. small-scale industries. tiny units. with integrated Bhusa making attachment and aspirator blower and mechanical sieves for grain and straw separation. The high yielding varieties with assured irrigation and higher rate of application of fertilizers gave higher returns that enabled farmers to adopt mechanization inputs. engine and processing equipment industries. to-day the Indian farm machinery industries meet the bulk of the requirement of mechanization inputs and also export. Gradually demand for other farm machinery such as reapers and combine harvesters also increased. With the modest beginning of manufacture of tractors in 1960s with foreign collaboration. These threshers were widely adopted by the farmers. The present trend in agricultural mechanization is for high capacity machines through custom hiring and for contractual field operations.

The enhanced scope of import of technology (product designs and manufacturing process) by organized sector and entry of foreign investors is likely to accelerate exports.institutions for technological support. milling and dairying equipment. however. upgrade these designs and production processes with experience. Since cost of production of farm machinery in India is more competitive due to lower labour wages. and some of them match international standards. These industries. These industries have adopted sophisticated production technologies. shall need improvements in quality for gaining major export growth. engines. the importers from various Countries will find Indian farm equipment more attractive. 14 . Indian products. For this. mass production of critical and fast wearing components and their standardization would greatly help. Organized sectors confine to the manufacture of machines like tractors. however.

and Tractors and Farm Equipment Ltd started manufacturing tractors with foreign collaborations. The early agricultural mechanization in India was greatly influenced by the technological development in England. importation continued up to 1977. To meet the additional demand.B HISTORICAL PERSPECTIVE Blacksmiths and carpenters have been the traditional fabricators of agricultural equipment in India. Watts and Kaisar introduced ploughs. The horse drawn equipment imported from England were not suitable for bullocks and hebuffaloes used in India and thus. Demand of tractors in the country was met through importation until 1961 when Eicher Tractors Ltd. Allahabad in 1942. manufactured by the Agricultural Development Society. who was the Agriculture Minister in the Punjab Government (1926-37). International Tractors (India) Ltd. The Indian farmers gradually responded to farm mechanization technology especially after Green revolution in 1960s. The development of power thresher with integrated Bhusa making attachment and aspirator blower and mechanical sieves for grain and straw separation in 1960s was the major achievement of Indian engineers which was widely adopted by our farmers. Escorts Ltd (1966). In 1889. Horse drawn and steam tractor operated implements were imported during the latter part of the 19th century. Sardar Joginder Singh (1897-1946). This enabled the farmers to start adopting mechanization. Gradually demand for other farm machinery such as reaper and combine harvester also increased. High yielding varieties with assured irrigation and higher rate of application of fertilizer gave higher yields and better economic returns. Naini in early forties. and Hindustan 15 . (1966). the development activities in agricultural machinery accelerated and as a result bullock drawn Meston. were suitably modified by small scale manufacturers to suit Indian draught animals. Meanwhile many other industries started manufacturing tractors with foreign know how such as Gujarat Tractors Ltd (1963). introduced the steam tractors in India in 1914 for reclamation of waste land and eradication of ‘Kans’. With the establishment of Allahabad Agricultural Institute. corn grinders and chaff cutters Cawnpore (now Kanpur) Experimental Farm in Uttar Pradesh. Shabash and Wah-Wah ploughs were introduced in Uttar Pradesh.

Punjab Tractors Ltd. 16 . started their production with indigenous Technology in 1974. Many more industries started manufacturing tractors since then with indigenous and foreign know how.Machine Tools Ltd (1977).

Classification of Industries The classification of industries in India is based on total capital investment (plant and machinery) rather number of workers employed. These are (i) village craftsmen. Organized sectors manufacture sophisticated machinery such as tractors.C FARM MACHINERY INDUSTRIES IN INDIA The adoption of mechanization technology depends upon the local manufacture and after-sales-services besides credit and financial incentive provided by the Government. Category Village artisans and cottage industries Tiny industries Small scale industries Medium scale industries Maximum Capital Investment Unorganized in rural areas Rs. The small-scale industries seldom have R&D facilities and they depend upon public institutions for technological support. Traditional hand tools and bullock drawn implements are largely fabricated by village craftsmen and small scale industries. small scale industries to State AgroIndustrial Development Corporations and organized tractor. 1 crore Rs. mills and dairying equipment. This classification was done to help the small-scale units through incentives and marketing support. (ii) cottage industries. engines. upgrade the technology with experience. (iv) small scale industries. 5crores 17 . The manufacture of agricultural machinery in India is quite complex comprising from village artisans. (v) medium scale industries and (vi) large scale industries. These industries however. engine and processing equipment industries. They require not only drawings but also prototypes and technical guidance to manufacture the equipment. (iii) tiny industries. 15 lakhs Rs. tiny units.

sieves. Heat treatment practices are generally inadequate except in few industries manufacturing knife & tillage tools. irrigation pumps. planters. Some of them are more organized and have better fabrication toolings and thus are able to manufacture better quality machinery. harvesting & threshing equipment. Equipment manufactured by the SSI units includes Soil working tools. reaper harvesters. Agricultural machines are reserved for small-scale units. sowing devices. yokes. manual water lifting devices etc. bullock carts. threshers. threshers. leveller. combines. They use materials from mild steel to medium carbon steel. 18 . spade. hand hoes. Some of these units also fabricate implements and equipment for tractor and power tiller manufacturers. The bulk of the farm machinery is made by the small-scale industries. If village artisans are properly trained they will accelerate the adoption of mechanization inputs due to their proximity with farmers. local ploughs. These include implements and tools like khurpi. mills. They may lack good machine tools and heat treatment facilities. graders. oil ghanis. disc ploughs and harrows. seed drills. wooden storage structures. plant protection equipment. combine harvesters. oil expellers etc. sickle. cultivators. sprayers & dusters. cleaners. diesel engines. crushers. grinding wheels. There are more than 18000 such units scattered all over the country but have concentration in selected regions.Village craftsmen Village artisans are the main source of supply and repair and maintenance of hand tools and traditional implements are made by village craftsmen. maize shellers. cleaners. dairy machinery etc. mills. decorticators. seeding & planting equipment. patela. hand mills. handoperated milk churning tools. Tiny and small-scale industries The tiny and small scale units fabricate bulk of improved agricultural machinery such as ploughs. graders. oil expellers. winnowing devices. bakhar. like reapers.

Kanpur. Khurai. Bhopal. Kakinada. Batala. Pune. tractors. Ranchi. Faridabad. therefore. 600 irrigation pump. electric motors. Durgapur. Ernakulam. Patna. Delhi. Nagpur. Karnal. Baroda. Raipur. Western region Bombay. Hoshiyarpur. Panipat. 48 combine and 188 earthmoving machinery manufacturers (Table 21). Vidisha and Gwalior. Sambhalpur. Moga. Ahmed Nagar. Anantpur. Chennai. land development machinery. Dewas. These 19 . post harvest and processing machinery and dairy equipment. power tillers. Guntur. Ahmedabad. 200 diesel engine. Jalandhar. Madurai. 2 power tiller. Coimbatore. Organized farm machinery industries The medium scale and large scale industries manufacture diesel engines. Salem. Kolhapur. Bina. Sangli. There are 13 tractor. Vardhaman. irrigation pumps. The marketing of agricultural machinery by these industries is through their network of dealerships and. Southern region Hyderabad. Junagarh. Anand. Muzaffarnagar. Eastern region Calcutta. Lucknow. Meerut. Ghaziabad. sprayers and dusters. these manufacturers are able to provide effective after-salesservice. Sholapur. Palghat.Regions having concentration of agricultural machinery Northern region Ludhiana. Agra. Kochin and Bangalore. Rudrapur. Dhanbad and Muzaffarpur. Fatehpur and Allahabad. Indore. Goraya. Bhubaneswar.

Tractors parts and accessories 14. Africa. Dairy and food industries No.industries upgrade their product and process technologies through their own R&D efforts. Seed drills 12. in addition to technological support from external agencies. Sugarcane crusher 18. Earth movers 4. India is recognized as a leading country in the world for the development and manufacture of agricultural implements and equipment. India is the exporting increasing volumes of these to various countries including USA. Drip irrigation system 7. dairy and agro-processing equipment. Sprinkler set 6. The range of equipment includes. Diesel oil engines 16. Asia. etc. Earth moving machinery and parts 15. land development machinery. Power tillers 3. Plant protection equipment 8. Reapers 10. Threshers 11. Ploughs. Combines 9. harvesting and threshing equipment. Status of farm machinery industries in India Equipment manufacturers 1. Chaff cutter 19. tractors. plant protection machines. of units 13 2 3 600 35 35 300 48 60 6000 2500 5000 546 188 200 300 50 50 500 20 . irrigation and drainage pumps. cultivator and harrows 13. Rice processing machinery 17. sprinkler systems. etc. Agricultural tractors 2. Today. Pumps 5.

Village craftsmen 1 million 21 .20.

supply of parts. etc. their market size is limited to their proximity. the tools and implements. 22 . and the new requirements of the farmers to undertake product developments. conduct product awareness training programmes for the prospective customers. repair and maintenance. production processing or quality. made by them are against specific requirements of individual customers . provide after-sales-service to the customers including free services. Therefore. Due to this. and they are not able to develop their businesses. The village artisans on the other hand are located in the villages and therefore provide immediate attention to the needs of the farmers in their immediate neighborhoods.D Agricultural Machinery Marketing and After Sale Services The large and medium scale manufacturers have well organized distributors and dealers through out the country to undertake advertising and product promotion in their respective territories. this organized sector has the whole of the country as their market due to which their production volumes are large. etc. Therefore. improvements required in design. In the absence of standardization of parts and components farmers are compelled to carry their machines to the manufactures for repair and replacement of parts and components. and their information feed back about their product performance. Very few small-scale industries have established their marketing network and therefore provide service support in their premises.

New technology also requires network for transfer of technology to the manufactures. (iv) developing extension or technological models for the state extension systems. (ii) testing and verifying the technologies on the farmers field (iii) providing opportunities to get firsthand scientific feed-back. Government of India. and (vi) promoting research in transfer of technologies. 23 . to set up pilot plants for intensive evaluation and extensive demonstrations besides. The Ministry of Food Processing promotes technology related to agro-processing. (v) providing training and communication support. The extension system deals with the first-line extension projects with a view to: (i) demonstrating the latest technologies to the farmers as well as the extension agencies. The activities are coordinated by the Department of Agriculture in Cooperation with the Ministry of Agriculture. training and credit support. Popularization of agricultural machinery in the country is undertaken by the Provincial Governments through Department of Agriculture or Department of Agricultural Engineering.E Popularization of agricultural machinery The assimilation of R & D requires an effective technological infrastructure of institutions and services to develop and test prototypes.

• facilitate farming operations which are arduous and hazardous. the mechanization policy may have to be distinctly different to serve hill agriculture. Keeping above objectives. particularly in Hill and Mountain regions. including on custom hiring basis. harvesting and threshing will be preferred. Draught animals and increasing agricultural workers population may remain to be the major source of farm power for soil manipulation and for crop handling. biological and mechanical inputs. and • modernize commercial agriculture to facilitate agro-export. Mechanical power for tillage. As a result of GATT agreement. • increase productivity and conserve resources through effective utilization of chemical.F FUTURE THRUSTS IN AGRICULTURAL MECHANIZATION India is a large country with wide-agro ecological diversity having predominance of rain fed agriculture. 24 . prospects of agro-export are likely to increase and product quality standards stipulated under WTO would encourage more and more farmers to adopt modern agricultural production technologies. Farm holdings are small due to higher population density and land fragmentation will continue due to ‘Laws of Inheritance’ and ‘Hindu Succession Act’. Majority of the farmers have limited surplus money to modernize farms or to invest in improved inputs. irrigation. low lying water logged soils. • be eco-friendly utilizing land water and bioresource catering to the varied group of farm holders. rain fed and irrigated lands and regions having agro export potential. with irrigated agriculture limited to 34% only. The future agricultural mechanization technology package therefore may have to.

sowing. Water is a scarce commodity and in future with increasing demand for more irrigation water. This will also help to export good quality high value agri-products for better returns to farmers and to earn more foreign exchange. including through custom hiring. production and marketing. The green house technology offers ample scope for increasing productivity particularly of high value cash crops like exotic fruits. potato mechanization. With the shift in agriculture towards diversification and agri-business. Draught animal and human power in India will continue to be used. plant protection and threshing has been widely accepted by the farmers in India. green house and covered cultivation. irrigation. Even farmers with small holdings utilize selected improved farm equipment. drip and micro irrigation are new emerging areas which need attention of Agricultural Engineering Institutions and industries for their development. Rice mechanization. flowers and bio-tech plants. The present trend in agricultural mechanization is for high capacity machines to be used on custom hiring and for contractual field operations. sprinkler and microsprinkler systems to economize use of water and improving water use efficiency.G FUTURE PERSPECTIVE IN AGRICULTURAL MACHINERY MANUFACTURE Equipment for tillage. horticulture mechanization. sugarcane mechanization. Design of green house with environmental control mechanized cultivation and product-handling technology package will assume greater importance. 25 . The future mechanization strategy may have to be based on agro-ecological diversity and economic disparity of the farmers. but these are inadequate to ensure timeliness of agricultural operations. cotton mechanization. concerted efforts will be needed for controlled application of water through drip. substantial areas will go under horticultural crops.

flowers etc. the Union Budget of India 1998-99. where there is tremendous potential of growing horticultural crops. The small-scale industries in turn will adopt the technology for local manufacturing at a much lower cost. reliability and safety in the manufacture of agricultural implements. The decision of the Government of India to de-reserve the manufacture of farm machinery will help the organized sector to bring latest farm machinery technology for accelerated adoption by the farmers. spare parts and after sales-services in close proximity. • Lack of effective consumer protection in rural areas for redressel of cases of product problems. Keeping long standing demand of farmers and the Ministry of Agriculture and on the recommendation of the Advisory Committee of the Ministry of Industries.service. quality of produce. manufacturing of critical components need to be standardized and encouraged for mass production by medium and large scale manufacturers. to earn more through gains in productivity. etc. announced the exclusion of farm implements and tools from the list of items reserved for manufacture by small scale industries sector to enable the farmers to get benefit of wider range of implements and tools at competitive prices. the constraints experienced in the growth of farm mechanization so far need to be dealt with so that the farmers are enabled to adopt new methods to produce more. 26 .services. higher prices. The critical constraint factors are: • Reliability and quality of agricultural machinery. However. • Availability of Bank credit on terms where currently the farmers have to mortgage both the equipment purchased and his land. and poor after-sales. etc. • Availability of products. This will help the small-scale sector to become more competitive and to enlarge their market size.Presently little effort has been made to mechanize hill agriculture. and with requisite after sale. In order to enforce quality. In future this calls for developing appropriate technologies for mechanization. for raising their standards of living and better life styles.

COMPANY PROFILE 27 .

rail fastening systems. construction & material handling equipment. Escorts has been a major player in the railway equipment business in India for nearly five decades. Having pioneered farm mechanization in the country. Escorts today is the world's largest Pick 'n' Carry Hydraulic Mobile Crane manufacturer. Escorts is a leading manufacturer of auto suspension products including shock absorbers and telescopic front forks. railway equipment and auto components. we manufacture and market a diverse range of equipment like cranes. vibratory rollers and forklifts. more than 45 variants starting from 25 to 80 HP. shock absorbers. Escorts has played a pivotal role in the agricultural growth of India for over five decades. with continuous development and improvement in manufacturing technology and design. Escorts offers a comprehensive range of tractors. A leading material handling and construction equipment manufacturer. couplers.COMPANY PROFILE A ABOUT THE COMPANY The Escorts Group is among India's leading engineering conglomerates operating in the high growth sectors of agri-machinery. One of the leading tractor manufacturers of the country. new reliable products have been introduced. In the auto components segment. composite brake blocks and vulcanized rubber parts. loaders. Our product offering includes brakes. Over the years. Farmtrac and Powertrac are the widely accepted and preferred brands of tractors from the house of Escorts. Escort. 28 .

are testimony to the manufacturing excellence of Escorts. Escorts is today in the league of premier corporate entities in India. over 1600 sales and service outlets and footprints in over 40 countries have been instrumental in making Escorts the Indian multinational. At a time when the world is looking at India as an outsourcing destination. a prime mover on the industrial front. implements and attachments to tractors. transmissions. 29 . Following the globally accepted best manufacturing practices with relentless focus on research and development. In today's Global Market Place. Over a million tractors and over 16. and shock absorbers for heavy trailers. at every stage introducing products and technologies that helped take the country forward in key growth areas. complemented by a highly satisfied customer base. It has been a harbinger of new technology. Escorts is rightly placed to be the dependable outsourcing partner of world's leading engineering corporations looking at outsourcing manufacture of engines. For this we are going beyond just adhering to prevailing norms. In the over six decades of our inception. gears. we are setting our own standards and relentlessly pursuing them to achieve our desired benchmarks of excellence. Escorts is fast on the path of an internal transformation. technology has always been its greatest ally for growth. Technological and business collaboration with world leaders over the years. hydraulics. Globally competitive indigenous engineering capabilities.Throughout the evolution of Escorts.000 construction and material handling equipment that have rolled out from the facilities of Escorts. which will help it to be a key driver of manufacturing excellence in the global arena. Escorts has been much more than just being one of India's largest engineering companies.

of Escorts (Agriculture and Machines) Ltd. Yudi Nanda as Managing Director and Mr. business acumen and determination and dreams aplenty. Yudi Nanda died in an accident in 1952 . H P Nanda then took on the mantle to realize the dreams which he had always seen with his brother. On 17th October 1944. which had given their family enterprise an unrivalled reputation: customer concern.. and sought instead for ways to make a contribution. in 1948.the discovery of the great business potential that lay in India's villages. with Yudi Nanda as Director.THE FOUNDING PHILOSOPHY Over six decades back two young men set out on a journey together armed with little beyond intelligence. to branch out of their family's prospering transport business and institute ventures that were to become the foundations of Escorts Limited. Escorts Agents Limited was born at Lahore (now in Pakistan) with Mr. Hari Nanda as Chairman.but his spirit remained embedded in the foundations of the company. by this time the Company had already expanded its marketing and service operations. Mr. This led to the launch. this driving ambition to go beyond the expected led Hari Nanda to the first of his many successful business insights . They were in fact writing the first chapter of what has come to be widely recognized as one of the greatest success stories in Indian industry. A vision that led two young brothers. Tragically. both companies had two great strengths in common: the dynamic Nanda brothers and the unifying force of the name they gave their companies. Having initially started with a franchise for Westinghouse domestic appliances. Escorts came into being with a vision. literally 'escorting' their products and services to the customer while most other businessmen were just selling. A vision that eschewed easy paths to profitability. Not long afterwards. Yudi and Hari Nanda. Mr. representing internationally known German and American organizations 30 . They believed that India could only achieve total freedom with a breakthrough in the field of agriculture and mechanization would have to rule the fields. Their youthful enthusiasm had kindled the hope that one day they would make a mark of their own. merged in 1953 to create a single entity -Escorts Agents Pvt Ltd. Though separate business entities then. Escorts (Agents) Ltd. Escorts. It was a trendsetting marketing house driven by the same business philosophy. and Escorts (Agriculture and Machines) Ltd.

a broadbased marketing and service network yet unrivalled. that they were here for the long run. was effected on 18th January. industrial equipment. the crusade to make a difference. in partnership with Goetzewerke of Germany for the manufacture of piston rings and cylinder liners . he imbued the corporation with his own pioneering. He pioneered the revolutionary concept of 'interdependence' between ancillary and large industries. 31 . His concern extended to the society in which he worked.such as MAN. Beyond the growth of the organization. he created institutions devoted to value engineering and training. world-standard technology through strategic international alliances. powerful symbiotic relationships with suppliers and dealers. Haniel & Leug. these principles have ensured that Mr. entrepreneurial spirit. He introduced the discipline of service going before marketing. Knorr Bremse. Escorts' next major industrial activity was the assembly of tractors in 1961 in technical cooperation with URSUS of Poland. construction equipment and telecommunications. He built lasting alliances with an array of the world's most respected names in tractors. The company's incorporation in its present name. Escorts made a major thrust into the agricultural arena by taking on the marketing and service franchise for Massey Ferguson tractors in Northern India.a signal tribute to Escorts' inherent strengths. P. MIAG and BMA for sophisticated electrical and mechanical engineering equipment and Minneapolis Moline and Wisconsin for agricultural tractors. which soon comprised 75% of MF's all-India sales . instilling both a conscience and a vision of leadership. And above all. which were to play a pivotal role in the Green Revolution.followed by production of pistons in collaboration with MAHLE. not only as investments in the company's future but also as catalysts for the enhancement of Indian industry as a whole the Escorts R&D Centre and the unique Escorts Institute of Farm Mechanization. Its first industrial venture came up in 1954. 1960. Going further. Subsequently this led to the manufacture of the country's first indigenous tractors under Escorts' own brand name. AEG. in 1960. implements and engines. institutionalizing vendor development and in the process building Faridabad and the entire belt of townships in the region. reassuring the customer that Escorts would stay with them. Nanda's contribution to the cause of industry and the consumer will endure. Escorts Heart Institute and Research Centre at New Delhi. and he manifested it by establishing the Escorts Medical Centre at Faridabad. also of Germany. twowheelers. as well as numerous village development programmes. H. This went on to lay the foundations that even today are the Company's core strengths -relevant. and above all. Escorts Limited.

He remains the inspiration for our courage. spirit of adventure and ability to ‘Think Big’. 32 .Escorts is testimony to the valor. H P Nanda. These qualities are his enduring legacy and have inspired and encouraged us down the decades and will continue doing so in all our endeavors. vision and values of its Founder Mr.

safety seminars etc. eye care and general health. We strive to earn the respect and trust of our stakeholders. Escorts engages in activities that contribute to the society. health awareness drives are a regular occurrence where workers are given counseling on personal hygiene. secure. to euip employees to work safely. the customers who buy our products or the environment that we work in. The company has implemented systems that promote safety at workplace and have contributed to reductions in lost time injury rates. Escorts has made a concerted effort in making the benefit of progress reach the backward section of the community. We also organize health check up camps for our employees and their families. For children of our employees. Being in a position of advantage. The company has conducted numerous awareness generation campaigns in the rural areas on effective agriculture and horticulture practices. In the last two decades. we recognize our responsibility in fostering sustainable development in the rural communities. Employees Escorts Limited is committed to providing a safe. At Escorts.CORPORATE SOCIAL RESPONSIBILITY CORPORATE SOCIAL RESPONSIBILITY CHARTER At Escorts Limited. Community As a good corporate citizen. fair and stimulating work environment to its employees that empowers them to not only make a meaningful contribution to the organization’s performance but also helps in per sonal and professional growth of the employee. we are committed to making a positive difference in the socio economic fabric of the rural communes where we operate in. We also provide effective rehabilitation programs for our employees. be it the employees who work for us. Educative seminars are conducted on a regular basis for workers where they are exposed to various training and skill development programmes including Fire Fighting demonstration & training. we regularly organize career counseling sessions to help build their future. polio awareness. The company has given assistance to farmers by making available 33 .

distribution of glasses and the like. fertilizers and pesticides for improved agricultural output. free screening of the school going children.certified seeds. Escorts also allocates funds for other agencies. working in the field of improving rural environment. Under this programme 8690 fruit trees and saplings have been planted over a land area of 25 acres and 19200 fruit plants have been distributed to farmers for growing orchards till date. liaisoning with banks and district agencies for the generation of bank loans and government subsidies. or educating the farmers on preservation of food grains Besides this. and upliftment of the rural poor. Escorts has been promoting the “Social Forestry Programme” in order to improve the environment in and around the villages of rural Haryana. Escorts has also joined hands with a number of external agencies and NGOs working in the field of community development. covering 25 villages in the Faridabad District is being run with the able support and help of “The Population Foundation of India”. administering vitamin A. Besides this. to run income generation programme.e. where its factories are based. This programme includes activities i. Escorts also works in collaboration with the National Association for the Blind in the field of prevention of blindness. A complete programme on “quality reproductive health care services”. Escorts has been taking active part in the “Green Haryana Campaign” and thousands of trees have been planted on the National Highway to combat the menace of air pollution. 34 .

was established with equity participation of Ford Motor Co.1 economy range – engineered to give spectacular diesel economy. Farmtrac: World Class Premium tractors. with single reduction and epicyclic reduction transmissions from 34 to 75 HP.B BUSINESSES Escorts has three types of businesses: 1 Agri Machinery 2 Engineering Division 3 Construction Equipment 1 Agri Machinery Background In 1960.. UK for the manufacture of Ford agricultural tractors in India. Escorts Tractors Ltd. Escorts set up the strategic Agri Machinery Group (AMG) to venture into tractors. Technologies Escorts AMG has three recognized and well-accepted tractor brands. Pioneering brand of tractors introduced by Escorts with unbeatable advantages. Escort: Economy tractors having hub-reduction transmission and twincylinder engines from 27 to 35 HP. In the year 1996 Escorts Tractors Ltd. formally merged with the parent company. India’s No. In 1965. offering straight-axle and hub-reduction tractors from 34 to 55 HP. we rolled out our first batch of tractors under the brand name of Escort. Powertrac: Utility and Value-for-money tractors. which are on distinct and separate technology platforms. we have manufactured over 1 million tractors. Since inception.. Escorts Ltd. 35 . In 1969 a separate company. Basildon.

Escorts has made substantial investments towards the modernization of farm technology. mechanics as well as the field staff of Escorts. engineers. maintenance and repair of farm machinery. The Escorts Institute of Farm Mechanization (EIFM) at Bangalore is a unique center where training is imparted in operation. Functional Excellence Manufacturing Quality Assurance Materials Management Sales & Marketing Knowledge Management Finance Human Resources Information Technology Beyond manufacture. Farmtrac Tractors Europe. It is among the few institutions of its kind in the world. towards meeting its objective of enhancing agricultural productivity and improving quality of life in rural India. 36 . dealers.International Subsidiaries Escorts AMG has one international subsidiary. They now cater to 41 countries. Its programs are aimed at encouraging customers.

reliability and safety . Broad Product Portfolio Shock Absorbers Couplers Brake Systems Brake Blocks An ISO: 9001-20000 certified company.2 Engineering Division A. near New Delhi has facilities for advanced product development. Escorts’ engineering experts have trained over 8000 railway personnel of various countries. Railway Equipment Escorts is a leading manufacturer of critical railway components since the last 40 years.the key drivers of business. 37 . As Asia’s largest manufacturer of air brake systems. today it is a multi-product. Having played a significant role in the growth and modernization of Indian Railways. the conversion of vacuum brake stocks to air brakes and installation and commissioning of complete brake systems on new builds are also undertaken by Escorts. AAR and Indian Railways. Escorts manufactures products as per international standards specified by UIC. testing and validation. the largest rail network in the world. It is one of the oldest and most trusted partners of Indian Railways. multi-technology business at Escorts. The in-house Research & Development has played a critical role in bringing about a high level of customer satisfaction. The products are exported to over 15 countries worldwide. A state of the art manufacturing facility located at Faridabad. design.

Germany.QCD Continuous Benchmarking with KAYABA. Germany (1966 . A strong in-house design and development infrastructure of the Division enables introduction of new applications as per specifications of customers. Japan (for Motorcycle Front Forks & Shock Absorbers) since 1998 Quality Systems Obtained TS:16949 in 2004 ( Earlier ISO-9001 ) Adopted KAYABA Quality Systems as a subset of TS:16949 Business Philosophy Customer Satisfaction .OEMs and After Market MUV / LCV / HCV .75) Kayaba. Escorts was the pioneer in Automotive Shock Absorber manufacturing in India in 1966 in Technical Collaboration with Fichtel & Sachs. is the leading manufacturer of auto suspension products including shock absorbers. struts and telescopic front forks. Front Forks.OEMs and After Market Passenger Cars .For Quality & Productivity Production Capacity Per Annum: 5 million (Shock Absorbers.After Market 38 . Japan KAIZEN .B Auto Components The Engineering Division of Escorts Ltd. Broad Product Portfolio Shock Absorbers Front Forks McPherson Struts Technical Collaboration Fichtel & Sachs. Another step forward in this direction is a comprehensive technical collaboration with world leaders Kayaba of Japan. Over the years the technology obtained from Fichtel & Sachs of Germany has been continuously upgraded and new reliable products have been introduced. McPherson Struts) Markets 2 Wheelers & 3 Wheelers .

While recording a rapid growth in Crane Industry we’ve also been able to steadily increase our presence in the field of Vibratory. and is being viewed as the most efficient and effective compaction solutions available in the country. A nationwide network of 16 Sales Offices. back in 80’s. gives it the best market reach in India for the Sales & Service of material handling and construction equipment. The company was a pioneer in introducing the concept of Pick 'n' Carry hydraulic mobile cranes in the 70s in India and continues to be the world's largest manufacturer of these cranes. Suitable for narrow lanes and confined spaces. vibratory rollers and forklifts. Soil & Tandem Compactors. we also manufacture Frontend loaders with payload capacity of 700kgs. but also the largest Pick ‘n’ Carry Hydraulic Mobile Crane manufacturer in the world.3 Construction Equipment Escorts manufacturers and markets a diverse range of construction and material handling equipment like cranes. Escorts was the first to bring the concept of Vibratory Compactors in India in a big way. 50 dealership locations. With over 30 years experience in Construction Equipment Industry. over 300 company trained dealers’ service engineers. we’ve further strengthened the range with a 3T Shoulder Compactor. Recently. Subsequently more models in Tandem Vibratory Compactors and heavy duty Soil Compactor range were added in technical collaboration with HAMM Germany. loaders. Today our range of compaction equipments is one of the most preferred in the market. it not only continues to be the largest mobile crane manufacturer in the country. Along with Cranes and Compactors. these loaders are compact in design and are ideal 39 . Escorts has a proven track record in: Hydraulic Mobile Cranes Loaders Forklifts Vibratory Compactors Today.

small chips. Escorts also offers other material handing solutions like Forklifts from Daewoo Doosan Infracore Ltd. sands. 40 . handing of chemicals. Korea and Articulated boom cranes from Fassi. This single-minded pursuit of precision and customer satisfaction has made us the 3rd largest in terms of Construction Equipment Sales unit per annum. In LPG Forklift category. etc.for garbage handling.. Italy. the company enjoys a market share in excess of 85%.

First Pacific Company. 1954 . Ltd. Mahle.Started importing Massey Ferguson tractors from Yugoslavia 41 . Lucky Goldstar. merged to form Escorts Agents Pvt. and Escorts (Agriculture and Machines) Ltd.Launch of Escorts (Agents) Ltd. Nanda and Mr. CEKOP. These valued relationships be it technological or marketing.Pioneered farm mechanization in the country by launching Escorts Agricultural Machines Limited. Carraro. Claas. Launch of Escorts (Agriculture and Machines) Ltd. Massey Ferguson. implements. Yudi Nanda. In this journey of six decades. 1944 . in an era when joint ventures of Indian firms with foreign companies were virtually unheard of. Mr. Jeumont Schneider. Yamaha. 1948 . based Minneapolis Moline. are our highly cherished experiences treasures. Over the years.1st industrial venture of Escorts to manufacture piston rings in collaboration with Goetze of Germany. URSUS. in Lahore. which have helped us inculcate best in class manufacturing practices and to emerge as a technologically independent world class engineering organization. 1949 . Escorts has had the privilege of being associated with some of the world leaders in the engineering manufacturing space like Minneapolis Moline. Escorts Agents Ltd. 1953 -Escorts (Agents) Ltd.Escorts established India’s first private Institute of Farm Mechanisation at Delhi. engines & other farm equipment. for marketing tractors.Franchise of Massey Ferguson tractors for northern India 1951 . J C Bamford Excavators. H. Dynapac . with a franchise from the U. Goetze. Escorts has surged ahead and evolved into one of India's largest conglomerates. Ford Motor Company. 1958 . Hughes Communications. P.S.C THE HISTORY OF ESCORTS The genesis of Escorts goes back to 1944 when two brothers. launched a small agency house.

the first tractor FORD 3000 rolled out of the factory. Escorts Institute of Farm Mechanisation (EIFM) established at Bangalore. an advancement in Farm Mechanisation launched. 1976 .1st February. Trial production of in-plant manufacturing of engine parts (Block & Head). (EEAL). which was perhaps the world's largest ever airlift of tractors. 1974 .FORD 3600. 1969 .Escorts Tractors Limited was born. Escorts Employees Ancillaries Ltd.Set up of Escorts Limited 1961. 1959 . Collaboration with CEKOP of Poland for manufacture of motorcycles and scooters. 42 . Escorts exports for the first time. USA. The first Rajdoot motorcycle rolls off the assembly line. 400 tractors were exported to Afghanistan.Crossing national boundaries. Soon.Collaboration with Mahle of Germany to manufacture pistons.Setting up of manufacturing base at Faridabad for manufacture of tractors in collaboration with URSUS of Poland and 50% indigenous components. A technical and financial joint venture with the global giant Ford Motor Company.for marketing the same in India. Launch of Escort brand of tractors. Escorts moves into high gear by nurturing the two wheeler culture. Escorts became the largest producer of piston assemblies in India. 1960 . a unique venture in industrial democracy comes into being. Escorts diversifies and starts manufacturing construction equipment. The years ahead saw Escorts grow as the largest tractor manufacturer in India. After winning a global tender. 1971 . to manufacture Ford tractors in India.

Foray into healthcare. 2nd plant at Bangalore for manufacturing piston assemblies was set up. Due to constant technology absorption. indigenisation level touched 72% for FORD tractors.Joint Venture with Claas of Germany to manufacture harvester combines.Collaboration with JCB Excavators Ltd.1977 . 1983 .Escorts enters the world of self-developed technology by setting up its first independent R&D Center. 1988 . 1990-91 . Shares listed on Delhi and Bombay Stock Exchanges. a world class cardiac care facility launched in New Delhi. UK for manufacture of excavators. Escorts Hospital and Research Center set up in Faridabad.Signing of agreement with the Japanese bike giant Yamaha to manufacture motorcycles with Yamaha technology.Yamaha to manufacture motorcycles 1984 . 11. 1980 . Line concept introduced for engine block machining.First Public Issue in February 1991.000 ton floating dry-dock Escorts I launched. Collaboration with Jeumont Schneider of France to manufacture EPABX systems Collaboration with Dynapac of Sweden to manufacture vibratory road compactors 1985 .Escorts Tractors Limited (ETL) offered its first Bonus Issue (1:1). 1979 .Escorts Heart Institute and Research Centre (EHIRC).Escorts Tractors Limited (ETL) established a state-of-the-art research and development centre to spearhead newer breakthroughs in Farm Mechanisation and to maintain industry leadership. 1989 .JV Escorts . over-subscribed four times. Escorts Scientific Research Centre marked its beginning at Faridabad by developing its own Engines for E-27 and E-37. 1984 .. 43 .

2004 .FORD 3620 tractor launched.MoU for Joint Venture with a Polish Company POL-MOT was signed for assembly. 2006 .POWERTRAC series of tractors launched. Joint Venture with First Pacific Company of Hong Kong .1993 . 2005 – Divested Escorts Heart Institute and Research Centre (EHIRC) to Fortis Healthcare. 1996 .Divested Escotel Mobile Telecommunications to Idea Cellular TS16949 certification for Agri Machinery Group. manufacturing and marketing of Farm Machinery. Set up new manufacturing facility in Rudrapur for manufacture of new range of railway equipment 44 . 1998 . 1997 .Disengagement of joint venture collaboration with New Holland and launch of FARMTRAC Tractor. 1999 .Divested in Carraro India Ltd.Joint Venture with Carraro of Italy for manufacturing and marketing of transmission and axles. MoU was signed with Long Manufacturing Company. USA for setting up a Joint Venture in USA.Escotel Mobile Communications.

adding up prospects for the Industrial & 45 . However Tractor density as well as the HP input per hectares is low relative to international standards and the tractor population today is concentrated. in terms of sales volumes.  Tractor industry has been performing well in the last four years and the trend is expected to continue in view of good rains in India. Construction and Infrastructure sectors taking the lead this scenario would be beneficial for capital goods sector. again add to the need for more mechanized farming. Many factors affect tractor sales including the monsoon.  With infrastructure identified as a key focus area by Government. Ports & Airports would continue. all this shows great potential for the growth in this industry. It recorded a growth of 21.  Further the fact that Arable land area remains limited and water tables are shrinking.D Outlook of Escorts Sectors  The Indian Tractor market is the largest in the world. commodity prices.  It is expected that Government agriculture credit estimated at INR 1940 bn would escalate & Banks would continue their focus on tractor finance. means of irrigation and reach of water.  Indian Economy has shown some fantastic growth figures in the last financial year with Manufacturing.  The Industry has also registered an increase of 16% in Exports & volumes have now begun significantly contributing to the Industry's total production. crop production expenses & credit policy announced by RBI (most relevant as more than 90% of tractor sales are on credit). development & construction of Roads & Highways. government support prices for crops.2% in volume over last FY & is expected to perform better with a lot of government focus shifting to agriculture in the 11th Plan.

Motorcycles market at 7.20% for the next few years. It has initiated unprecedented expansion plans targeting 1100 mn tn of freight and INR 8400 mn worth of passenger traffic.4 million in the year 2006-07.82 % over last year.  The Indian Railways (Railways) has seen a fantastic turn around in the last few years.Construction Machinery sector with a large number of infrastructure projects on the anvil. even though the growth in the last year has been slightly less. Nissan.wheeler segment.  Automobile exports have grown by over 40% in last few years and even the auto components segment has seen a growth of 26% in exports.  The two-wheeler industry comprises of motorcycles.  India is the largest 3 wheeler market.  Further the overall construction industry is expected to grow at around 15.  The car and commercial vehicle segments have shown good growth in the last FY. The key development of road infrastructure & the connecting of major cities may further act as a growth driver. It is poised to be the 3rd largest automobile market by 2030. However there has been a slight slow down in 2. Even the 3 wheeler segment has posted a 28% growth. The plans are not only to extend the routes but also number & types of trains running on them. This should translate into a rise in demand of the construction and material handling equipments. Motorcycle industry has been growing at a CAGR of almost 21.5% of the total market. Out of total market of 8.  Global giants like Toyota. In India the auto sector has grown at an impressive 16. scooters and mopeds. Expenditure only for expansion of 46 .1 million accounted for 84. and Honda are eyeing on India as one of their manufacturing bases due to the cost and quality it has to offer.5% since last 7 years. 2nd largest 2 wheeler market & 4th largest Commercial Vehicle market.

 Newly designed coaches with increase passenger capacity have been manufactured at Kapurthala Rail factory on a pilot basis and full fledged manufacture is expected to commence soon. 150 new suburban trains are planned to be operational in Mumbai alone with adequate expansions in other Metros too. However. The number of unreserved coaches is also likely to be increased by 50% for most trains. coupler.  The outlay for Metropolitan transport projects is INR 7. lower tare weight wagons with new technology would be costlier compared to old wagons. This would be done by adding third and fourth lines between destinations and installing automatic signaling between them.  1250 coaches specifically for handicapped. where as the outlay for FY 07-08 is INR 310 bn. These higher pay load.  Railways procure wagons based on RDSO’s designs. with RDSO recommended bogies. wagon manufacturers will now be permitted to supply wagons of their own designs. This is one of the main reasons that it has initiated more freight wagons and enhance current network to run 23T axle trains and mineral routes to run 25T axle trains.2 bn in the current FY. 47 .new routes is estimated at INR 300 bn over 5 years. Budget for overaged asset replacement has also be increased to INR 55 bn a 162% rise y-o-y. old and disabled passengers are planed to be introduced into many trains over the next two years. draft and brake gear.  The Railways plan to double its freight transport capacity.  700 Coaches were added to current trains in FY 06-07 and the railways plan to add 800 more coaches to popular trains this FY.

thereby creating a quality organization geared to ensure total customer satisfaction and the sustained health and prosperity of our business” 48 . with the highest degree of commitment. Each one of us must fulfill the need of our customers. both internal and external.E Quality Policy Of Escorts “We shall strive to continuously improve to meet the ever rising expectations of our customers at the lowest cost.

ISSUES AND CHALLENGES FACED BY THE ORGANISATION 49 .

To strive effective strategies and policies in order to survive in business environment. To maintain the goodwill of the company in the market. Even now there is a heavy dependency on monsoon and a majority of farms are still rain fed. Many farmers still lack access to finance and depend on money lenders. 4. The performance of the tractor industry is directly and closely related to the performance of the agricultural sector.ISSUES AND CHALLENGES FACING THE ORGANIZATION 1. 7. Escorts continues to focus on creating additional mechanisms for access to cash. 50 . 6. 3. Apart from the dependency on monsoons irrigation infrastructure is also suboptimal. 2. there is a huge pressure on the existing agricultural land. All the employees are not allowed to access the internet facility which hinders the cooperation among various departments. The Net Sown Area across States has either remained constant or changed slightly and efficient land utilization is approaching the peak level in all states. 5. Furthermore.

REFLECTIONS ON WHAT HAS BEEN LEARNED 51 .

7. Experienced the working environment of an organization. Confidence level is increased and attained professional attitude towards work. Learned to deal with different situations that I might face while working in an organization. Saw the working and functioning of different departments of an organization. Gained practical knowledge of what we have studied in theory. 4. Gained knowledge about different software that makes your work easier.REFLECTIONS ON WHAT HAS BEEN LEARNED DURING THE PLACEMENT EXPERIENCE 1. 5. 52 . Learned to build and maintain cordial relationship with the staff of the company. 6. 3. 2.

ANALYSIS & FINDINGS 53 .

25% Price per Debenture-----------------------------------------------------Rs9900 Full Value of Debentures ----------------------------------------------Rs 60.84 cr *Amount of Interest on Debentures ----------------------------------Rs 2.ANALYSIS CAPITAL RESTRUCTURING PRESENT SITUATION OF ESCORTS LTD For the year ending 31st March 2009 As per their P&L Account attached PAT – Profit After Tax-------------------------------------------------Rs89.709.496 Price per Share-----------------------------------------------------------Rs 10 Earning per Share--------------------------------------------------------Rs 9.73 cr.58 cr EQUITY Number of Equity Shares-----------------------------------------------90. Tax Rate------------------------------------------------------------------30% DEBT Number of Debentures-------------------------------------------------61455 Interest on Debentures (Rate) -----------------------------------------4.89 54 .

2 3 4 WORKING NOTES Calculation of number of debentures (point 4) No. Now the number of equity shares of the company is 80709496 of Rs 10 each i.WORKING NOTES *Calculation of interest amount Interest = 4.496 to 80.e.25%debentures worth Rs 10 cr with same face value i. For this we will follow the following process: 1 We will buy back the shares from the market.84 +10 9900 = 7155 55 .709496. And it will increase the number of debentures from 61455 to 71555. Rs 9900 per debenture. Then we will issue new 4.709.84 crores = Rs 2. This means we will buy back shares worth Rs 10 crores. value of share is Rs 80. of debentures re-issued = 60. This will reduce the number of shares from 90.58 crores RESTRUCTURING Restructuring means changing the debt-equity ratio in order to increase the earning per share or maximize shareholder’s wealth. We will buy back 1crore shares of Rs 10 each.e.71cr.25% of Rs 60.

25% Price per Debenture -----------------------------------------------------Rs 9900 Full Value of Debentures ----------------------------------------------Rs 70.4325 Tax Rate ---------------------------------------------------------------30% DEBT Number of Debentures -------------------------------------------------71555 Interest on Debentures (Rate) -----------------------------------------4.25% debentures Rs 10 cr net of taxes) 2 Calculation of interest on 4.73 (this is before deducting interest on 4.425 cr 56 .08 WORKING NOTES: 1 PAT as per present situation = 89.496 Price per Share-----------------------------------------------------------Rs 10 Earning per Share--------------------------------------------------------Rs 11.84 cr Amount of Interest on Debentures -----------------------------------Rs 0.25% debentures of Rs 10 cr Interest = 10 cr * 4.709.425 cr EQUITY Number of Equity Shares-----------------------------------------------80.25% = 0.RESTRUCTURED SITUATION PAT – Profit After Tax ----------------------------------------------89.

30%) = 0.08 57 .2975) cr = 89.425 cr * (1.2975 cr 3 Calculation of new PAT PAT = (89.73-0.07 = Rs 11.4325 8.Interest Net of Taxes = 0.4325 cr 4 Earning per Share = 89.

58 . 2. It also maintained the Financial Operating Leverage of the company.25% debentures of Rs 1cr (approx) increased the EPS by Rs 2(approx). Shareholder’s wealth is increased by maintaining appropriate value of debt and equity in the capital structure. Here we found that when number of equity shares is reduced and the number of debentures is increased. EPS increases from Rs 9.FINDINGS Through the analysis we found out: 1.89 to Rs11. 3. The increase in interest on 4.05 4.

RECOMMEND ATIONS 59 .

As a result of increase in the Earning per Share of the company.RECOMMENDATIONS 1. The company should carefully decide the ratio of debt and equity. 2. The company should choose the value of debt and equity in the capital structure in such a way so that the shareholder’s wealth is maximized. the goodwill of the company will also increase. 3. 60 .

BIBLIOGRAPH Y 61 .

agriculturalequipments.agricoop.outlookmoney.com www.com www.escortsagri.com www.BIBLIOGRAPHY Books Referred: 1 Financial Management by I M Pandey Sites Visited 1 2 3 4 5 6 www.com 62 .nic.escortsgroup.com www.seekandsource.in www.

ANNEXURE 63 .

95 7 -17 -11 -6 FY07-08 1993 59 2052 1899 152 8% 51 101 5% 55.93 19 26 14 12 1% FY08-09 2158 32 2190 1982 207 10% 49 158 7% 51.54 -4 111 21 90 4% H1(FY0910) 1272 8 1279 1161 118 9% 24 94 7% 4 3 87 22 65 5% 64 .FINANCIAL INFORMATION OF THE COMPANY 1 Last three years: INCOME STATEMENT Particulars Net Sales Business & Other Income Total Income Expenditure EBITDA EBITDA Margin (%) Depreciation & Amortization EBIT EBIT Margin (%) Interest & Finance Charges Exceptional item PBT Tax PAT PAT Margin (%) FY06-07 2077 27 2103 1993 111 5% 53 58 3% 68.

Written Off Deferred Tax (Net) Total 158 380 173 215 0 & 761 166 16 90 1564 202 518 115 250 10 771 324 11 48 1645 199 329 165 122 15 859 -28 5 28 1708 233 280 279 161 16 843 127 12 1838 65 . Exp.2 Last three years: BALANCE SHEET FY06-07 84 1035 1119 445 1564 867 425 FY07-08 91 1112 1203 442 1645 837 426 FY08-09 91 1353 1444 264 1708 1468 236 H1(FY09-10) 94 1440 1534 304 1838 1461 236 Particulars Sources Share capital Reserves & Surplus Shareholder Funds Debt Total Uses Net Fixed Assets Investments Total Current Assets Inventory Debtors Cash & Bank Bal. Loan & Advances Other Current Assets Less: Creditors Provisions Net Current Assets Misc.

3 Last five Years: TURNOVER 2500 2000 1500 1000 500 0 2007-08 Till March. 2008-09 10 they achieved 2007-07 FY09-10 66 . 2004-05 have2005-06 a turnover of Rs 1272 crore.

Last five years: EBITDA & PAT EBITDA ChartTitle 250 200 150 100 50 0 2004-05 2005-06 2007-07 2007-08 2008-09 PAT -50 90 80 70 60 50 40 30 20 10 0 -10 2004-05 2005-06 2007-07 2007-08 2008-09 67 .

CASE STUDY 68 .

and has four manufacturing plants in Faridabad. but was plagued with a number of challenges. Escorts Limited's Agri Machinery Group (EL-AMG) manufactures agricultural machinery. The company was unable to draw a future roadmap and upgrade its technology. the ERP vendor Avalon had shut shop in India. Business challenges: Despite using an ERP. it deployed a number of modules of the Oracle 11i suite of products and can now make better and more informed decisions. and buggy software. Avalon had shut shop in India. 69 . lack of vendor support. And to make matters worse. the toughest challenge was the inability to draw a future roadmap by leveraging the latest technologies. The use of an ERP thus plays a significant role in the business operations of this busy manufacturing company. It manufactures three lines of tractors. To make matters worse. Agri Machinery Group had deployed Avalon's ERP systems and faced challenges like inability to upgrade.CASE STUDY ESCORTS AMG’S ERP UPGRADE Introduction Escorts Limited's. EL-AMG had already deployed ERP systems from Avalon. 900 crore in FY 2002-2003). Since the Avalon ERP could not be Web-enabled. shutting down chances of upgrades and making use of the latest technology developments. This was impeding the scope for future growth. and consequently accounts for around almost two-third of Escort's revenues (Rs. As a solution. It used tools from the Oracle 11i suite and now performs its critical operations with better productivity levels. imports and sells various other farm equipment. and enjoy a bug-free software performance. The company could not leverage the benefits of the Internet by offering e-commerce and other Web initiatives. This prompted EL-AMG to look for an alternative enterprise applications solution for its business.

EL-AMG also had to deal with the problems of software bugs. Since the ERP project was very significant for company. It was a headache to incorporate frequent changes in the application. which took charge of applications maintenance. reducing the burden on the systems department. factory planner. A lot of time was spent in planning and deciding upon the right software. EL-AMG. This created a huge backlog of work. These made the company decide to implement a new ERP system. The central systems department. spent most of its time tackling these bugs. which could not be resolved due to lack of proper documentation. Choosing the ERP system In early 2001. 'Pragati'. which could take care of the future growth strategies of the company and provide the needed functionalities. it was named. HR and payroll applications. IT Head. which included i2 SCM. EL-AMG began to look for a new ERP system to replace the existing one. The group wanted an end-user-driven system that would empower the users and allow them to run their own queries. The company feels that the bugs appeared due to over-customization of the product. The company laid down three ground rules for vendors willing to participate."The Avalon ERP system had outlived itself and had become a dead product. and warehouse management software for the spare parts division. The responsibility of running the large amounts of queries and reports was delegated to the central systems department. The product had inadequate documentation. The system was not very user-friendly. after-sales and warranty systems. EL-AMG also had a certain amount of legacy. and Auto-Matrix Exchange for collaboration with vendors. The users were not able to run queries on their own. 70 . which made maintenance very difficult. The company chose Oracle among other vendors keeping in mind the organization's functional and technical requirements. And the entire proceedings were conducted in an elaborate and phased manner to ensure efficiency." said Vinay Mehta. demand planner.

you'll have a hard time convincing users about the benefits." explained Mehta. A team of around 70 members was created during evaluation. The evaluation was finally done on the following criteria: • • • • • • • Functionality The ability to integrate third party software Type of feedback from existing user base (through visits to other company's ERP sites) Presence in India Localization of modules Cost Time taken to implement. If the selection process is not end-user-driven. The rest were from the IT department. The Gartner group was also involved in providing consultancy at each stage. An important highlight in the selection process was the involvement of end users. "This was a key learning from the earlier ERP implementation. so that they accepted the decision easily. which was largely IT-driven. Implementing 'Pragati' 71 . In March 2002.They were: • • • The vendor had to conduct a three-month Business Process Reengineering (BPR) exercise at EI-AMG. The ERP vendor would be the technology implementation partner and handle the sole responsibility of the project. Oracle was chosen for the applications. an Accenture was chosen to conduct the BPR exercise. Almost 80 percent of the members belonged to functional areas. Each member of the team gave ratings to the vendor. we made sure that it was the choice of the end users. In our new ERP implementation. The ERP systems had to integrate seamlessly with the company's legacy software systems.

The area offices are able to connect to the servers located in Plant 2 through a VPN provided by HCL Infinet using a PSTN dial-up.The rollout of Oracle's products began in March 2002. iReceivables. some of which are PCs configured as servers. An important set of exercises during implementation was on data cleansing and migration. Financial Analyzer (OFA). A set of four HP severs (HP-Ux 11i) run the core Oracle application modules. Teleservice. BPR 72 . With the unification of the different divisions. Reporting and MIS systems had different formats and had to be revamped. The company decided upon the 'big bang' approach to implementation in the five locations. Earlier. parts. It went live on Oracle 11i in March 2003. Oracle Purchasing. The Bill of Materials (BOM) systems also had to be re-done during implementation. Oracle Order Management. and vendor codes. all within distances of three Km in Faridabad. Windows 98. Oracle Workflow and Alerts. The other three plants and the R&D locations connect to these servers through 2 Mbps leased lines. The data was taken from legacy system and the coding scheme was revamped. Windows 2000 to Linux and Solaris. Oracle Discrete Manufacturing. These are connected to a SAN box. and Oracle Treasury. standard codes were created for simplification and more efficiency. Purchasing and Manufacturing Intelligence. The servers range from NT. which comprised four manufacturing plants and an R&D setup. The modules implemented were Oracle Financials. Around 40 servers. The company network The heart of the network is at the second plant (Plant 2) in Faridabad. act as a centralized system. EL-AMG is present in five locations. different finance divisions used various items.

"If one goes for an ERP without BPR, there is a chance the company will miss out on a lot of benefits of BPR," said Mehta. The BPR exercise was closely aligned with the ERP implementation, ensuring that 'best practices' were incorporated. Accenture was involved in defining the re-engineered processes and convincing the end users of the future benefits. Oracle's role was to map the processes into their products. The processes involved in re-engineering included finance, procurement, materials, plant maintenance, and quality assurance.

How the new tools helped
A significant benefit of the new Oracle-based systems was the resolution of the problems with present in the earlier Avalon ERP. Due to the bugs, the company could not use its database (Oracle) for generating any meaningful MIS. So, the MIS for the top management was generated through Excel sheets instead of being generated directly through the system. With 11i, the MIS is generated through the system and standard reports are created. Currently, there are around 250 reports generated for the middle management and operational people. The company has also deployed Business Intelligence (BI) tools from Oracle for the top management. While earlier the focus was on the middle management and operational personnel, the present focus is on the top management so that they can perform informed planning and better decision making activities. With the help of the new tools, the company was able to shorten the time taken to close the annual accounts. It was able to close the year end accounts of FY 2002-2003 within two months, an improvement from four months time taken earlier. By next year, the company hopes to bring the time taken down to one week. It is also able to close the accounts each month by the first week of the next month. At any time the company is aware of its inventory status. According to R.K. Jain, Dy. General Manager, AMG (Information Systems), there has been elimination of a lot of non-value added activities as well, translating into benefits for the group.

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ROI
The company feels that it's a little early to calculate ROI, and the results are already visible in the lowered inventory value. According to Mehta, the system has already brought down the value of inventory by around 30 percent. There has been substantial savings in terms of inventory and manpower resources.

The future roadmap
Within the next three months, the company will extend its ERP system to its area offices, which number 25. It will roll out the ERP to 15 nationwide depots. And will implement product data management systems. It will also integrate its R&D systems, designing, and product development systems in the plants in the next few months.

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SYNOPSIS

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2. Ashu Jain Objectives of the study 1 To understand and observe the practical work in escorts. When we reduce the equity and increase the debt. Change in the ratio of debt and equity i.e. in the capital structure of the company changes the earning per share of the company. 3. 6 To have a direct contact with the employees of Escort to learn from them. Findings Through the analysis we found out: 1. Pardeep Kumar Mr. Change in the amount of interest on debentures changes the 76 . 3 To observe the functioning of finance department of escorts. 2 To seek out the difference between theory and practical work. 4 To gain knowledge about different policies of escorts. 5 To develop new skills. it changes the amount of interest on debentures.SYNOPSIS OF THE PROJECT ESCORTS LTD “CAPITAL RESTRUCTURIUNG” Apoorva Bhateja Mr.

77 . He was very king and lenient to me. As a result of increase in the Earning per Share of the company. EPS increases from Rs 9. 4. 2. the goodwill of the company will also increase. He taught me the working style of an organization in the corporate world. Change in PAT finally changes the earning per share of the company. Here we found that when number of equity shares is reduced and the number of debentures is increased. 6. PAT. 5. 2. The company should carefully decide the ratio of debt and equity.05 RECOMMENDATIONS 1. 3.e.profit after tax i. When needed he was strict also. 4. Sir was very cooperative and very helpful to me. He guided me very well throughout the project. 5. 3. The company should choose the value of debt and equity in the capital structure in such a way so that the shareholder’s wealth is maximized.89 to Rs11. MY PERCEPTION ABOUT INDUSTRY GUIDE 1. I learned how to behave professionally.

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