A Project Report on

Acquisitions, Mergers & Expansion of &
Submitted to Submitted by

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Contents
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INTRODUCTION
INDIAN AUTOMOBILE INDUSTRY
The Indian automobile sector is growing at a rate of about 16% per annum and is now going to be a second fastest growing automobile market in the world. In the Indian automobile industry, SUVs today account for only 15 per cent of the total market unlike western countries where it is almost 80 per cent. Small car segment which contributes to more than 60% of the total car sales will remain a key segment in the Indian car market. As of 2006, small cars made up more than twothirds of India's passenger car market. Currently India is the second largest manufacturer of small car, second only to Japan. • India ranks 12th in the list of the world's top 15 automakers. • Entry of more international players. • Concentrated in regions. • Market size estimated to be of Rs.225 Thousand crores ( $45 Billion) • Contributes 5% to the GDP. • Production of four wheelers in India has increased from 9.3 lakh units in 2002- 03 to 23 lakh units in 2007-08. • Targeted to be of $ 145 Billion by 2016. • Exports increased from 84,000 units in 2002-03 to 280,000 units in 2007-08.

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SHARES OF INDIA IN GLOBAL AUTOMOBILE INDUSTRY

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MARKET SHARE BY SEGMENTATION FOR CARS
Market Share (%) Economy Mid Size (2007-2008) Premium Luxury

11.24 27.1

0.17

61.49

CHALLENGES IN INDIA’S AUTO SECTOR.
 Personnel - competition for talent is increasing, attrition rates are increasing, labor reforms are overdue, unions add political risks and staff costs are rising  Socio Cultural - expect un-kept promises and / un-met deadlines, short term thinking and actions  Bureaucracy - slow decision making, hierarchy, political interference, rampant Corruption  Others - delays in Infrastructure, cultural divide in poverty, key reforms are slow in coming and shortage of electrical power.

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The Tata Group, a business conglomerate with a presence in over 80 countries and a work force of around 290,000 people. The Tata Group comprised 98 companies of which 27 were publicly listed. In 2003, the Tata Group had a presence in seven key industry business sectors - materials, engineering, energy, consumer products, chemicals, communications and IT, and services. The group consisted of some 80 companies. The materials business included basic steel products, tubes, bearings, and agri tools. The engineering business included passenger cars, utility vehicles, trucks and buses, construction equipment, industrial machinery and commercial cooling equipment. The energy business included hydroelectric power projects. The consumer products business included the group's tea, coffee, food products, home appliances, watches and clocks, jewellery, garments and home security solution, ceramics, water coolers and air conditioners. The chemical business included agri products like insecticides, fungicides and herbicides. The IT and telecommunications business included the group's software, telecommunications, other IT-related services, and automation and control system offerings. The services business included the group's financial services, mutual funds, hospitality, publishing and export offerings.

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Expansion plan
After years of dominating the commercial vehicle market in India, Tata Motors entered the passenger vehicle market in 1991 by launching the Tata Sierra, a multi utility vehicle. After the launch of three more vehicles, Tata Estate (1992, a stationwagon design based on the earlier 'TataMobile' (1989), a light commercial vehicle), Tata Sumo (LCV, 1994) and Tata Safari (1998, India's first sports utility vehicle). Tata launched the Indica in 1998, the first fully indigenous passenger car of India. Though the car was initially panned by auto-analysts, the car's excellent fuel economy, powerful engine and aggressive marketing strategy made it one of the best selling cars in the history of the Indian automobile industry. A newer version of the car, named Indica V2, was a major improvement over the previous version and quickly became a mass-favourite. A badge engineered version of the car was sold in the United Kingdom as the Rover CityRover, which was a failure and was declared the worst car ever driven on BBC Top Gear show [8]. Tata Motors also successfully exported large quantities of the car to South Africa.The success of Indica in many ways marked the rise of Tata Motors.

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PRESENT AND FUTURE CHALLENGES
The popular myththat Tata Motors have some distinct advantages in comparison to other multi-national competitors especially a cost advantage as labor costs are not true as Tata Motors has 8-9 percent of sales as compared similar percent for most multinational companies. Also employee productivity in Tata Motors is less than 1/3rd (in $million sales / employee) than Toyota. Another advantage in the increasing demand in its own backyard, India due to infrastructure developments and rising GDP. India remains one of the few developing auto markets where domestic brands have managed to keep a large presence, Tata and fellow compatriots account for more than 60% of the passenger vehicle sales and 95% of commercial vehicle sales. There are also favorable Government polices and regulations in place in order to help boost the auto industry. However, Tata has not been able to capitalize on its global presence. Tata relies heavily on its sales in India and has not yet managed to create a foothold in international markets even though it has a number of well reputed subsidiaries. However, Tata Nano may boost its international presence, at least in developing economies. Though it has an advantage in India, thanks to low costs and government policies it soon faces stiff competition from it multinational competitors all eyeing for a share in the ever growing Indian auto sector. Earlier, a policy required majority-owned subsidiaries of foreign car firms to invest at least US$50 million in equity if they wished to set up manufacturing projects in India and mere car assembling operations were not welcomed.An Indian cabinet panel has since announced a new automobile policy that sets fresh investment guidelines for foreign firms wishing to manufacture vehicles in the country. Investments in making auto parts by a foreign vehicle maker will also be considered a part of the minimum foreign investment made by it in an auto-making subsidiary in India. The move is aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts. The policies adopted by Government will increase competition in domestic market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom will make India as a production hub and

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export to nearest market. Thus Tata Motors will have to face tough competition in near future, which might affect its growth negatively. Currently, the presence of Suzuki through its subsidiary, Maruti Suzuki in the Indian market may also be alarming. Maruti has aggressively launched family cars to undermine the Tata models. Tata has continued to be strong in the MUV and SUV sector due to lack of competition and correct pricing. However, Tata now faces stiff competition from fellow compatriot Mahindra Group as well as multinational brand like Toyota and Chevrolet.

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Value Chain
The value chain of the TATA Motors has been given as below:

Value C
The various primary activities of the value chain have been discussed below: 1. Inbound Logistics: The main features of inbound logistics have been discussed below:  Tata Motors believes in establishing long term contract with service providers – transporters and agents.  Talented Personnel have been deployed at regional offices for over seeing the smooth transit of goods. 12

 The company aims at maintaining transparency and monitoring through deployment of IT – all transactions through SAP.  DTL supplies for critical high value items.  Efficient storage facilities – easy storage and retrieval 2. Operations: For the smooth functioning of operations TATA Motors has the following features:

 Capital Equipment Manufacturing division – TATA Motors prides itself in having tooling development capabilities of global standard.  Apprentice Trainee Course – This helps the organization in ensuring stable source of skilled manpower.  Kaizen & TPM team – the two teams strive for continuous methods to improve efficiencies.  Automated manufacturing processes.  Distributed manufacturing – Assembly units at South Africa, Thailand, Bangladesh, Brazil etc.  Maintenance – technical competence.  Capacity Utilization – Mercedes Benz cars make use of Tata Motors paint shop facilities. 3. Outbound Logistics: the following methods form a part of outbound logistics:  Stockyards, all across the country to stock inventory  Long term contracts with transporters– higher volume of business to transporters ensures competitive price.  Regional Sales Office and Vehicle Dispatch Section linked through SAP.  Efficient security system for prevention of any kind of pilferage. 4. Marketing & sales: The important features of marketing and sales are:

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 Structured approach to understanding the requirements of individual customers – QFD’s conducted at regular intervals.  Clear identification of product requirements, leading to development of innovative products – Tata 207 DI, Tata Ace  Pan India presence and global footprint.  Independent teams for addressing the requirements of institutional customers – Defense, State Transport Units  Helping to augment the scarce resources – Fiat selling vehicles through Tata dealerships, in return Tata has access to Fiat’s technology and unutilized capacity.  Quick assessment of the changing market dynamics and consumer preferences – Tata 407 LCV  Large network of dealers – use of technology: DMS. 5. Service: TATA Motors provides the following after sales services:  Easy availability of spare parts throughout the country  Efficient collection of data from field and communication to the respective plants.  Pan India presence, as well as global presence.  Large network of workshops – Dealer workshops and sales workshops  Training facilities – for dealer end and sales personnel

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Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. The company's 24,000 employees are guided by the vision to be "best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics." Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 5.9 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing a new plant at Sanand (Gujarat). The company's dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products 16

to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispano's presence is being expanded in other markets. In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in body-building for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008. Tata Motors is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. The foundation of the company's growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. With over 3,000 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the world have been looking forward to. The Tata Nano has been subsequently launched,

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as planned, in India in March 2009. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. The standard version has been priced at Rs.100,000 (excluding VAT and transportation cost). Designed with a family in mind, it has a roomy passenger compartment with generous leg space and head room. It can comfortably seat four persons. Its mono-volume design will set a new benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than twowheelers being manufactured in India today. The lean design strategy has helped minimise weight, which helps maximise performance per unit of energy consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint. In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile industry, in keeping with its pioneering tradition, by unveiling its new range of world standard trucks called Prima. In their power, speed, carrying capacity, operating economy and trims, they will introduce new benchmarks in India and match the best in the world in performance at a lower life-cycle cost. Tata Motors is equally focussed on environment-friendly technologies in emissions and alternative fuels. . It has developed electric and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing processes, significantly enhancing resource conservation Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.

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Tata Motors is committed to improving the quality of life of communities by working on four thrust areas – employability, education, health and environment. The activities touch the lives of more than a million citizens. The company's support on education and employability is focused on youth and women. They range from schools to technical education institutes to actual facilitation of income generation. In health, our intervention is in both preventive and curative health care. The goal of environment protection is achieved through tree plantation, conserving water and creating new water bodies and, last but not the least, by introducing appropriate technologies in our vehicles and operations for constantly enhancing environment care Tata Motors, previously known as Tata Engineering and Locomotive Co Ltd (TELCO) (Telco to tata motors in july 2003) is one of the largest companies in the Tata Group, and one of India's largest business houses. Tata Motors is India's leading commercial vehicle manufacturer and the third largest passenger car manufacturer. The company is the sixth largest truck manufacturer in the world. Tata Motors, the largest automobile company in India. The history of Tata Motors, earlier Tata Engineering & Locomotive Company Ltd. (Telco), can be traced back to the early 1920s. The Telco plant at Jamshedpur, originally belonged to Peninsular Locomotive Company (Peninsular), which was established in 1923. In 1927, Peninsular was taken over by East India Railway to manufacture passenger carriage underframes for the Indian Railways.

In 1945, Tata Sons purchased the plant from the Government of India and used it to manufacture steam locomotive boilers and other engineering products, under the name Telco. It tied-up with Daimler-Benz in 1954 to produce commercial vehicles (CV) and later manufactured the same independently, after the tie-up ended in 1969. Telco (Tata Engineering and Locomotive Company Ltd.) began production of medium commercial vehicles in 1954. The company started manufacturing heavy commercial vehicles in 1983 and light commercial vehicles in 1986.

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Board of Directors
Mr. Ratan N Tata (Chairman) Mr. Ravi Kant Dr. J J Irani Mr. Nusli N Wadia Mr. S M Palia Dr. R A Mashelkar Mr. Nasser Munjee Mr. Subodh Bhargava Mr. V K Jairath Mr. Ranendra Sen Mr. Carl-Peter Forster Mr. P M Telang

Senior Management Mr. Carl-Peter Forster Mr. P M Telang Mr. R Pisharody Mr. T Leverton Mr. S B Borwankar Mr. S Krishnan Mr. P Y Gurav Mr. Prabir Jha Mr P K Chobe Mr. Vikram Sinha Mr. B B Parekh Mr. U K Mishra Mr. A A Gajendragadkar Mr. N Pinge Mr. R Bagga Chief Executive Officer & Managing Director Managing Director-India Operations President (Commercial Vehicles Business Unit) Head, Advanced and Product Engineering Sr. Vice President (Manufacturing Operations-CVBU) Sr. Vice President (Latin America-Operations) Sr. Vice President (Corp. Finance-Accounts and Taxation) Sr. Vice President, Human Resources Head (Jamshedpur - Plant) Head (Car Plant - PCBU) Chief (Strategic Sourcing) Vice President (ADD and Materials - CVBU) Vice President (Corp. Finance-Business Planning) Chief Internal Auditor Vice President (Legal)

Mr. C Ramakrishnan Chief Financial Officer

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Mr. R Ramakrishnan Vice President - Sales & Marketing(CVBU) Mr. S Ravishankar Mr. Girish Wagh Mr. Atul Renavikar Vice President (Engg. Systems, ERC) Head (Small Car Project) Head (Pantnagar Plant)

Awards
CVBU Pune receives Excellent Energy Efficient Unit award... CVBU Lucknow bags Excellent Energy Efficient Unit-Award for the second time in a... CVBU Pune declared winner of the MPCB Vasundhara Awards 2010... Car Plant Pune won three awards at the 25th Annual Chapter Convention of Quality... Tata Motors IT team bagged an award in IT Services Management category... Tata Motors, CVBU was awarded the coveted Golden Peacock Award... Land Rover double header at the Auto Express 2010 new car awards... TDCV CEO, Dr. Kim Jong-Shik, honoured... Golden Peacock Award for Occupational Health & Safety for the year 2010... CVBU Lucknow bags 11 National Suggestion Summit awards... Sanand makes a mark in the very first year at National Suggestion Summit awards... Pantnagar sweeps National Suggestion Summit awards... Award 200... India CFO Award 2002... Tata Engineering bags INSAAN awards... National Best Training Establishment Award... Envirointernational... Good Corporate Citizen award... Best Company Award at Workskills Competition...

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TATA MOTORS PERCENTAGE OF SHARE IN INDIAN AUTOMOBILE INDUSTRY

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SWOT ANALYSIS
Strengths
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Strong presence in the commercial vehicle market Brand recognition High investment in R&D Wide distribution channels

Weaknesses
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Limited product portfolio in the passenger segment Operations mainly restricted to India

Opportunities
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Increasing demand for cars in India Expansion in international markets

Threats
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Increase in prices of raw materials Intense competition from global players

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OPERATIONS MANAGEMENT AT TATA MOTORS
INTRODUCTION
A comprehensive quality improvement and cost cutting initiative in September 2000, has played an important role in the company's turnaround, from a loss of Rs 500 crores in the year ended March 2001 to a profit of Rs 28 crores in the first quarter of 2002-2003. In 2003, Tata Motors recorded net sales of Rs.9093.2 crores and a net profit of Rs.300 crores. If you introduce a new vehicle, for example, and the management cannot adequately determine what the market wants, the company is in trouble. Theoretically, the top managers of a company should take up the role of that ideal customer. They should be driving their competitors' vehicles, they should be driving the best-of-breed vehicles, and they should be making cost comparisons. "While a top manager should be the ideal customer, he should also be the greatest critic of his company's products. If the CEO compromises, or is only looking at the margins, then even if he is successful, the company's success will be short lived. - Ratan Tata, the Chairman, Tata Group

1) MANUFACTURING
Tata Motors had all along believed in developing strong in house design, engineering, and manufacturing capabilities. Tata Motors performed a large part of its manufacturing activities in-house. It had installed facilities to manufacture engines, gearboxes and transmission mechanisms, body panels, castings and forgings and important components & sub-assemblies. It even manufactured its own machine tools, dies and fixtures, in its machine tools division. Tata Motors owes its leading position in the Indian automobile industry to its strong focus on indigenization. This focus has driven the Company to set up world-class manufacturing units with state-of-the-art technology. Every stage of product evolution-

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design, development, manufacturing, assembly and quality control, is carried out meticulously. Our manufacturing plants are situated at Jamshedpur in the East, Pune in the West and Lucknow in the North.

Jamshedpur:
Established in1945, the Jamshedpur unit was the company's first unit and is spread over an area of 822 acres. It consists of 4 major divisions - Truck Factory, Engine Factory, Cab & Cowl Factories, and the Novus. The divestments in March 2000 hived off the Axle and Engine plants into independent subsidiaries viz. HVAL &HVTL, respectively. The Truck Division boasts of two assembly lines. The main assembly line, measuring 180m in length has 20 work stations with a vehicle rolling out every 8 mins. The other line is dedicated to special purpose vehicles and for meeting the requirements of the Indian Army. Tata Motors, Jamshedpur, plays an active role in serving rural communities surrounding its Works through various community centres. While striving to create a culture for selfhelp amongst the local populace, it has made significant progress in community and social forestry, sustainable development of wastelands, road construction, rural health and education, development of rural industries, water supply and family planning. A signatory to the UN Global Pact, it also takes various initiatives in human rights protection, labour standards, environmental issues, modern effluent treatment facilities, sanitation drives, soil and water conservation programmes, tree plantation drives, etc.

Pune:
The Pune unit is spread over 2 geographical regions- Pimpri (800 acres) and Chinchwad (130 acres). It was established in 1966 and has a Production Engineering Division, which has one of the most versatile tool making facilities in the Indian sub-continent. It houses a Vehicle manufacturing complex which is one of the most integrated automotive manufacturing centers in the country producing a large variety of individual items and

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aggregates. It is engaged in the design and manufacture of sophisticated press tools, jigs, fixtures, gauges, metal pattern and special tools, as well as models for the development of new ranges of automobile products. Its capabilities have enabled Tata Motors to introduce new products and improve existing ones without resorting to imports of dies or fixtures. Four assembly lines have been established, one each for MCVs and HCVs, LCVs, Utility vehicles and one for Passenger Cars (Indica and Indigo). The shops are fully automated ensuring that there is minimal chance for error in the manufacturing processes. After the car is completely assembled, it goes through several checks like wheel alignment, sideslip test, brake test, shower test, and a short test run before it is ready for dispatch. All systems such as materials management, maintenance and other activities are computerized, enabling smooth operations and minimum inventory needs.

Lucknow:
Tata Motors Lucknow is one of the youngest production facilities among all the Tata Motors locations and was established in 1992 to meet the demand for Commercial Vehicles in the Indian market. The plant, rolls out commercial vehicles and is specialized in the designing and manufacturing of a range of modern buses which includes Lowfloor, Ultra Low-floor, CNG & RE Buses. Our plant, rolls out commercial vehicles and is specialized in the designing and manufacturing of a range of modern buses which includes Low-floor, Ultra Low-floor, CNG & RE Buses.

Uttarakhand:
The company has set up a plant for its mini-truck Ace and the passenger carrier Magic (based on the Ace platform) at Pantnagar in Uttarakhand. The plant began commercial production in August 2007. This is the company's fourth plant, after Jamshedpur (commercial vehicles), Pune (commercial vehicles and passenger vehicles) and Lucknow (commercial vehicles).

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NANO Plant:
The company was in the process of constructing a plant in Singur, West Bengal , but due to continued agitations and hostility at Singur, TATA Motors decided to shift the NANO Plant at Sanand in the state of Gujrat on 3rd Oct 2008. The integrated project manufacture of the Nano in Sanand will have an initial capacity of about 250000 cars per annum.

2) PRODUCT DEVELOPMENT
Sumant Moolgaokar, Chairman Tata Motors, from 1970 to 1988, had played an important role in shaping Tata Motors's R&D philosophy. Moolgaokar once commented: "We spend a lot of money, Rs.10 to Rs.12 Crores (US$7 to 8 million at prevailing exchange rates) on R & D. It is our strong point...in a manufacturing industry research and development is a series of mistakes by which you benefit. It gives our people excitement and real knowledge. My singular contribution has been to build a team. We regard our whole operation as one big training facility". Tata Motors’ Engineering Research Centre has over 900 scientists and engineers dedicated to product and process development, technology upgradation and new product introduction. Besides, the Company works with leading international design and styling houses. Tata Motors has over 1400 engineers and scientists in six R&D centers in India, South Korea, Spain and the UK. The company's R&D facilities include India's only crash-test facility and a hemi-anechoic chamber for testing of noise and vibration. The company draws on the expertise of leading international design and styling houses such as the Institute of Development in Automotive Engineering and Stile Bertoni in Italy. TATA Motors starts working on new products that would be required by the market after 3-5 years.

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3) VENDOR MANAGEMENT
In 1997, Tata Motors promoted Tata Autocompsystems Limited (TACO) with the objective of forming joint ventures with international auto component manufacturers and giving a special thrust to vendor development.

4) COST CUTTING
To cut costs, Tata Motors tried innovative techniques such as zero-based costing. The company's engineers re-worked the cost of components all over again. For example, earlier, Tata Motors paid for its forged components on a cost-plus basis as claimed by a vendor. Under the new system, it paid a price depending on the weight of the forging, leading to savings of 25%.

5) QUALITY MANAGEMENT
Tata Motors started a comprehensive quality improvement initiative in September 2000. The initiative played an important role in the company's turnaround, from a loss of Rs.500 crores in the year ended March 2001 to a profit of Rs.28 crores in the first quarter of 2002-03. Every year, about a quarter of Tata Motors' workforce went through training courses, which were rated highly in the Indian engineering industry. Personnel were trained before building workshops. In case of imported machines, engineers and workers were sent to the foreign manufacturer's facilities to receive training well before the arrival of the machine. TATA Motors is focused on Improving Product Quality and upgrading product features.

6) Acquisition for inorganic growth
1993-TATA Cummins Ltd. 1994-TATA Holset Ltd. 1994-Mercedes-Benz India Ltd 1997-Concorde Motors Ltd. 2004- Daewoo commercial vehicles comp. 2008-Jaguar Land Rover

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7) CUT IN ENERGY CONSUMPTION
Energy Cost as % of Manufacturing Cost has come down. This resulted in saving of Rs 10.7 crores in energy during 2003-04.

8) DISTRIBUTION NETWORK
The new subsidiary company TATA Motors had formed, which is the TML distribution company, which will be a central focal point for sales and distribution operations and logistics operations for Tata Motors. 9) The Tata Indigo was declared the best value for money car at the prestigious CNBC Auto Car Auto Awards 2003. Tata Indica had also received the voice of the customer award for the best diesel small car at NFO Automotive India 2002. In October 2003, Tata Motors received the Balanced Scorecard Collaborative Hall of Fame Award for having achieved a significant turnaround in its overall performance. 10) The Bureau Veritas Quality International (BVQI) for ISO 9001:2000 Quality Management System (QMS) as well as ISO 14001:1996 Environmental Management System (EMS) recently certified Tata Motors' passenger car unit, Pune.

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Research Design & Methodology:
Research Design
The research design of this project is exploratory. Though each research study has its own specific purpose but the research design of this project on AIRTEL is exploratory in nature as the objective is the development of the hypothesis rather than their testing. The research designs methods of financial analysis. Through of comparative balance sheet in comparative statement, I am studying on balance sheet of AIRTEL of five year. So taking comparative statement, I am going to analyzed of five years balance sheet of AIRTEL

Methodology
Every project work is based on certain methodology, which is a way to systematically solve the problem or attain its objectives. It is a very important guideline and lead to completion of any project work through observation, data collection and data analysis. The word research is derived from the Latin word meaning to know, it is a systematic and a replicable process which identifies and defines problems, with specified boundaries. It employs well designed method to collect the data and analyses the result. A research methodology defines what the activity of research is, how to proceed, how to measure progress, and what constitutes success. A methodology is a jumbled mess. Different methodologies define distinct schools which wage religious wars against each other. Research methodology also considered as a movement, a movement from the known to the unknown. It is actually a journey of discovery.

According to Clifford Woody,
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“Research

Methodology

comprises

of

defining

&

redefining problems, collecting, organizing & evaluating data, making deductions & researching to conclusions.”

Accordingly, the methodology used in the project is as follows: Defining the objectives of the study Framing of questionnaire keeping objectives in mind (considering the objectives) Feedback from the employees Analysis of feedback Conclusion, findings and suggestions.

Sampling Technique Used:
This research has used convenience sampling technique.

Convenience sampling technique: Convenience sampling is used in exploratory
research where the researcher is interested in getting an inexpensive approximation of the truth. As the name implies, the sample is selected because they are convenient

Selection of Sample Size:
For the survey of departments.

Sources of Data Collection:
Research will be based on two sources: 1. Primary data 2. Secondary data

1) Primary Data:
Survey: Primary data was collected by departmental survey for AIRTEL.

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2) Secondary Data:
Secondary data will consist of different literatures like books which are published, articles, internet, the company manuals and websites of company- www.AIRTEL.com. In order to reach relevant conclusion, research work needed to be designed in a proper way. This research methodology also includes:   Familiarization with the concept of finance and its various merits, demerits. Thorough study of the information collected. Conclusions based on findings.

Statistical Tools Used
The main statistical tools used for the collection and analyses of data in this project are:    Pie Charts Bar Diagrams Line Charts

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Limitations of Study
Technical analysis is a powerful mechanism of determining financial strengths and weaknesses of a firm but, the analysis is based on the information available in the Technical statements. We has also careful about the impact of price level chances, windows-dressing of Technical statements, changes in accounting policies of AIRTEL, accounting concepts and conventions, and personal judgments etc. Due to the following unavoidable and uncontrollable factors the factors, the result might not be accurate. Some of the problems faced while conducting the survey are as follows:   Time and cost constraints were also there. Chances of some biasness could not be eliminated. A majority of respondents show lack of cooperation and are biased towards their own opinions. Some of the important Limitations of Technical analysis are however, summed up as below:   It is only a study of interim reports. Technical analysis is based upon only monetary information and non-monetary factors are ignored.   It does not consider changes in price level. As the Technical statements are prepared on the basis of a going concern, it does not give exact position. Thus accounting concepts and conventions cause a serious limitation to Technicals analysis.  Changes in accounting procedure by a firm may often make Technical analysis misleading.  Analysis is only a means and not an end in itself. We has to make interpretation and draw own conclusion Different people may interpret the same analysis in different ways.

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Introduction
Financial Management is that managerial activity which is concerned with the planning and controlling of the firms financial resources. Financial management focuses on finance manager performing various tasks as Budgeting, Financial Forecasting, Cash Management, Credit Administration, Investment Analysis, Funds Management, etc. which help in the process of decision making. Financial management includes management of assets and liabilities in the long run and the short run. The management of fixed and current assets, however, differs in three important ways: Firstly, in managing fixed assets, time is very important; consequently discounting and compounding aspects of time element play an important role in capital budgeting and a minor one in the management of current assets. Secondly, the large holdings of current assets, especially cash, strengthen firm’s liquidity position but it also reduces its overall profitability. Thirdly, the level of fixed as well as current assets depends upon the expected sales, but it is only the current assets, which can be adjusted with sales fluctuation in the short run. Here, we will be focusing mainly on management of current assets and current liabilities. Management of current assets needs to seek an answer to the following question: 1. Why should you invest in current assets? 2. How much should be invested in each type of current assets? 3. What should be the proportion of short term and long-term funds to 4. What sources of funds should be used to finance current assets? CONCEPT OF WORKING CAPITAL Working Capital Management is the process of planning and controlling the level and mix of current assets of the firm as well as financing these assets. Specifically, Working Capital Management requires financial managers to decide what quantities of cash, other liquid assets, accounts receivables and inventories the firm will hold at any point of time. finance the current assets?

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Working capital is the capital you require for the working i.e. functioning of your business in the short run. Gross working capital refers to the firm’s investment in the current assets and includes cash, short term securities, debtors, bills receivables and inventories. It is necessary to concentrate on the fact that the investment in the current assets should be neither excessive nor inadequate. WC requirement of a firm keeps changing with the change in the business activity and hence the firm must be in a position to strike a balance between them. The financial manager should know where to source the funds from, in case the need arise and where to invest in case of excess funds. The dangers of excessive working capital are as follows: 1. It results in unnecessary accumulation of inventories. Thus the chances of inventory mishandling, waste, theft and losses increase 2. It is an indication of defective credit policy and slack collection period. Consequently higher incidences of bad debts occur which adversely affects the profits. 3. It makes the management complacent which degenerates into managerial inefficiency 4. Tendencies of accumulating inventories to make speculative profits grow. This may tend to make the dividend policy liberal and difficult to copes with in future when the firm is unable to make speculative profits. The dangers of inadequate working capital are as follows: 1. It stagnates growth .It becomes difficult for the firms to undertake profitable projects for non-availability of the WC funds. 2. It becomes difficult to implement operating plans and achieve the firms profit targets 3. Operating inefficiencies creep in when it becomes difficult even to meet day-to-day commitments. 4. Fixed assets are not efficiently utilized. Thus the rate of return on investment slumps. 5. It renders the firm unable to avail attractive credit opportunities etc.

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6. The firm loses its reputation when it is not in position to honor its short-term obligations. As a result the firm faces a tight credit terms. Net working capital refers to the difference between the current assets and the current liabilities. Current liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year and include creditors, bills payable, bank overdraft and outstanding expenses. When current assets exceed current liabilities it is called Positive WC and when current liabilities exceed current assets it is called Negative WC. The Net WC being the difference between the current assets and current liabilities is a qualitative concept. It indicates: • • The liquidity position of the firm Suggests the extent to which the WC needs may be financed by permanent sources of funds It is a normal practice to maintain a current ratio of 2:1. Also, the quality of current assets is to be considered while determining the current ratio. On the other hand a weak liquidity position poses a threat to the solvency of the company and implies that it is unsafe and unsound. The Net WC concept also covers the question of judicious mix of long term and short-term funds for financing the current assets. Permanent and variable working capital: The minimum level of current assets required is referred to as permanent working capital and the extra working capital needed to adapt to changing production and sales activity is called temporary working capital.

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NEED AND IMPORTANCE OF WORKING CAPITAL MANAGEMENT The importance of working capital management stems from the following reasons: 1. Investment in current assets represents a substantial portion of the total investment. 2. Investments in current asset and the level of current liabilities have to be geared quickly to change in sales, which helps to expand volume of business. 3. Gives a company the ability to meet its current liabilities 4. Take advantage of financial opportunities as they arise. A firm needs WC because the production, sales and cash flows are not instantaneous. The firm needs cash to purchase raw materials and pay expenses, as there may not be perfect matching between cash inflows and outflows. Cash may also be held up to meet future exigencies. The stocks of raw materials are kept in order to ensure smooth production and to protect against the risk of non-availability of raw materials. Also stock of finished goods has to be maintained to meet the demand of customers on continuous basis and sudden demand of some customers. Businessmen today try to keep minimum possible stock as it leads to blockage of capital. Goods are sold on credit for competitive reasons. Thus, an adequate amount of funds has to be invested in current assets for a smooth and uninterrupted production and sales process. Because of the circulating nature of current assets it is sometimes called circulating capital.

FACTORS INFLUENCING THE WORKING CAPITAL REQUIREMENT
All firms do not have the same WC needs .The following are the factors that affect the WC needs: 1. Nature and size of business: The WC requirement of a firm is closely related to the nature of the business. We can say that trading and financial firms have very less investment in fixed assets but require a large sum of money to be invested in WC. On the other hand Retail stores, for example, have to carry large stock of variety of goods little investment in the fixed assets.

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2. Manufacturing cycle: It starts with the purchase and use of raw materials and completes with the production of finished goods. Longer the manufacturing cycle larger will be the WC requirement; this is seen mostly in the industrial products. 3. Business fluctuation: When there is an upward swing in the economy, sales will increase also the firm’s investment in inventories and book debts will also increase, thus it will increase the WC requirement of the firm and vice-versa. 4. Production policy: To maintain an efficient level of production the firm’s may resort to normal production even during the slack season. This will lead to excess production and hence the funds will be blocked in form of inventories for a long time, hence provisions should be made accordingly. Since the cost and risk of maintaining a constant production is high during the slack season some firm’s may resort to producing various products to solve their capital problems. If they do not, then they require high WC. 5. Firm’s Credit Policy: If the firm has a liberal credit policy its funds will remain blocked for a long time in form of debtors and vice-versa. Normally industrial goods manufacturing will have a liberal credit policy, whereas dealers of consumer goods will a tight credit policy. 6. Availability of Credit: If the firm gets credit on liberal terms it will require less WC since it can always pay its creditors later and vice-versa. 7. Growth and Expansion Activities: It is difficult precisely to determine the relationship between volume of sales and need for WC. The need for WC does not follow the growth but precedes it. Hence, if the firm is planning to increase its business activities, it needs to plan its WC requirements during the growth period. 8. Conditions of Supply of Raw Material: If the supply of RM is scarce the firm may need to stock it in advance and hence need more WC and vice-versa. 9. Profit Margin and Profit Appropriation: A high net profit margin contributes towards the WC pool. Also, tax liability is unavoidable and hence provision for its payment must be made in the WC plan, otherwise it may impose a strain on the WC.

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Also if the firm’s policy is to retain the profits it will increase their WC, and if they decide to pay their dividends it will weaken their WC position, as the cash will flow out. However this can be avoided by declaring bonus shares out of past profits. This will help the firm to maintain a good image and also not part with the money immediately, thus not affecting the WC position. Depreciation policy of the firm, through its effect on tax liability and retained earning, has an influence on the WC. The firm may charge a high rate of depreciation, which will reduce the tax payable and also retain more cash, as the cash does not flow out. If the dividend policy is linked with net profits, the firm can pay fewer dividends by providing more depreciation. Thus depreciation is an indirect way of retaining profits and preserving the firms WC position.

CASH REQUIRED FOR WORKING CAPITAL
For estimating the actual cash requirement you may follow the following two-step procedure: 1. Estimate the cash cost of various current assets requirement: The cash cost of a current asset is: Value of current asset (-) Profit element, if any, included in the value. (-) Non-cash charges like depreciation, if any, included in the value. 2. Deduct the spontaneous current liabilities from the cash cost of current assets: A portion of the cash cost of current assets is supported by trade credit and accruals of wages on expense, which may be referred to as spontaneous current liabilities. The balance left after such deduction has to be arranged from other sources In 1997, the RBI permitted banks to evolve their own norms for assessment of the Working Capital requirements of their clients.

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CASH FLOW BASED COMPUTATION OF WORKING CAPITAL
 Drawing up cash flow statements (monthly or quarterly) for the past few years The projections drawn up by the entrepreneur may then be jointly discussed  The peak cash deficit is ascertained from the cash budgets.  The promoter’s share for such requirement maybe mutually arrived at by the banker and the borrower with the balance requirement forming the Bank financed part of Working Capital. Cash flow based computation of working capital requirement has been recommended by the RBI for assessment of working capital requirement permitting the banks to evolve their own norms for such assessment However the reluctance to provide the cash budgets thereby revealing additional information to the banks, has led to even larger companies shying away from Cash Budget method of assessing Working Capital. Consequently Cash Budget method is currently prevalent mainly in case of seasonal industries, construction sector as well as other entities whose operations are linked to projects.

clearly indicate the seasonal and secular trend in utilization of working capital.  with the banker as modified in light of the past performance and the banker’s opinions.

WHY DOES A FIRM NEED CASH?
i. ii. iii. Transaction motive: firm needs cash for transaction purpose. Precautionary motive: The magnitude and time of cash inflows and outflows is always uncertain and hence the firms need to have some cash balances as a buffer. Speculative motive: All firms want to make profits from fluctuations in commodity prices, security prices, interest rates and foreign exchange rates .A cash rich firm is in a better position to exploit such bargains. Hence, the firm with such speculative leanings may carry additional liquidity. The firm must decide the quantum of transactions and precautionary balances to be held, which depends upon the following factors:  The expected cash inflows and outflows based on the cash budget and forecasts, encompassing long/short range cash needs of the firm. 41

 The degree of deviation between the expected and actual net cash flow.  The maturity structure of the firm’s liabilities.  The firm’s ability to borrow at a short notice, in case of emergency.  insolvency  The efficient planning and control of cash. The philosophy of management regarding liquidity and risk of

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OPTIMAL CASH BALANCE

Cash balance is maintained for transaction purposes and an additional amount may be maintained as a buffer or safety stock. It involves a trade off between the costs and the risk. If a firm maintains a small cash balance, it has to sell its marketable securities and probably buy them later more often, than if it holds a large cash balance. More the number of transactions more will be the trading cost and vice-versa; also, lesser the cash balance, less will be the number of transaction and vice-versa. However the opportunity cost of maintaining the cash rises, as the cash balance increases.

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KEY OF WORKING CAPITAL

Working capital may be classified in two ways: (a) On the basis of Concept (b) On the basis of time This classification from the point of view of financial manager. On the basis of time, working capital may be classified as:

KINDS OF WORKING CAPITAL

On the basis of Concept

On the basis of time

Gross WC

Net WC

Permanent WC

Temporary WC

Regular WC

Reserve WC

Seasonal WC

Special WC

(A)

On the basis of Concept There are two concept of working capital (i) (ii) Balance sheet Concept Operating Cycle

(i)

Balance Concept There are two interpretation of working capital under the balance sheet concept (a) Gross Working Capital (b) Net Working Capital (a) Gross Working Capital : The gross working capital is the capital invested in total current assets of the enterprises

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(b)

Net Working Capital : The term working capital to the next working capital. Net working the excess of current assets over current liabilities. Net working capital = current assets – current liabilities

(ii)

Operating cycle Concept The gross operating cycle of a firm is equal to the length of the inventories and receivables conversion period. (c) Gross Operating Cycle: = RMCP + WIPCP+ FGCP+ RCP Where RMCP = Raw material conversion period WIPC = work –in -progress conversion period FGCP = Finished Goods conversion period RCP = Receivables conversion period RMCP = Avg. stock of RM / RM Consumption per day WIPC = Avg. Stock of WIP / Total cost of production per day FGCP = Avg. Stock of finished Goods / total cost of sales per day RCP = Avg. Account Receivables / Net Credit sales per day (d) Net Operating Cycle : Gross operating Cycle Period – Payables Deferral period Payable Deferral Period =Avg. payables / Net credit purchases per day

Cash Debtors

Raw material Sales Working capital cycle

Work in progress Finished Goods

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Calculation of working capital Company Vs Tata Motors’ Group

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REFERENCE
1. www.thehindubusinessline.com 2. www.wikipedia.org 3. www. icmrIndia.org 4. www.findarticles.com 5. www.the hindu.com 6. www.financialexpress.com 7. www.ibef.org 8. www.ecch.com 9. www.tatamotors.com 10. www.money.rediff.com 11. www.finance.yahoo.com 12. www.tata.com 13. www.mouthshut.com 14. www.auto.indiamart.com 15. www.Carskerala.com 16. www..surfindia.com 17. www.clickindia.com 18. www.indiacar.net 19. www.economictimes.com 20. www.blog.carhzoo.com

BOOKS
1) CASE FOLIO: ICFAI JOURNALS AND MAGAZINES 2) MARKETING MANAGEMENT; KOTLER

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