Mahindra Project

The Study Of Working Capital Management Of Mahindra Motor
WORKING CAPTAL MANAGEMENT

Every business needs investment to procure fixed assets, which remain in use for a long period. Money invested in these assets is called Long term Funds or Fixed Capital. Business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called Short-term Funds or Working Capital. The Working Capital can be categorized, as funds needed for carrying out day-to-day operations of the business smoothly. The management of the working capital is equally important as the management of long-term financial investment. The goal of Working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required, is bound to collapse without (i) (ii) (iii) (iv) Adequate supply of raw materials for processing; Cash to pay for wages, power and other costs; Creating a stock of finished goods to feed the market demand regularly; and, The ability to grant credit to its customers. All these require working capital. Working capital is thus like the lifeblood of a business. The business will not be able to carry on day-to-day activities without the availability of adequate working capital.
OVERVIEW OF AUTOMOBILE SECTOR IN INDIA

Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. The entry of Suzuki Corporation in Indian passenger car manufacturing is often pointed as the first sign of India turning to a market economy. Since then the automobile sector witnessed rapid growth year after year. By late-90 the industry reached self reliance in engine and component manufacturing from the status of large scale importer. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. With the Indian middle class earning higher per capita income, more people are ready to own private vehicles including cars and two-wheelers. Product movements and manned services have boosted in the sales of medium and sized commercial vehicles for passenger and goods transport. Side by side with fresh vehicle sales growth, the automotive components sector has witnessed big growth. The domestic auto components consumption has crossed rupees 9000 crores and an export of one half size of this figure
Overview Of Automobile Industry

The Indian automobile industry is going through a technological change where each firm is engaged in changing its processes and technologies to sustain the competitive advantage and provide customers with the optimized products and services. Starting from the two wheelers, trucks, and tractors to the multi utility vehicles, commercial vehicles and the luxury vehicles, the Indian automobile industry has achieved tremendous amount of success in the recent years.
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As per Society of Indian Automobile Manufacturers (SIAM) the market share of each segment of the industry is as follows:.
The Automobile sector is one of the fastest growing manufacturing sectors in India. In the 90s the industry witnessed an average growth rate of above 20 percent. Indian Automobile Industry is characterized by a very high percentage (75 per cent) of two wheeler production, ranking second only to Taiwan.
The world leaders in the sector are evincing keen interest in establishing manufacturing facilities for manufacturing and assembling components.
A politically stable and vibrant State, Andhra Pradesh is centrally located with the support of seaports, international airports, assured and reliable power supply, abundant water, broad base of auto component manufacturers, highly trained, skilled and disciplined manpower and is therefore, the preferred location for Automobile industries.
The interest of the state has been duly noted by Global Auto Majors, who have indicated their interest to consider Andhra pradesh for establishing manufacturing facility.
The Government of Andhra Pradesh invites leaders in the industry to set up manufacturing facilities to manufacture vehicles or vehicle components in the State. The ideal places to locate companies in the Auto Sector are the Hyderabad-Zaheerabad, VisakhapatnamKakinada, Krishnapatnam-Tada-Sathiveedu and Vijayawada-Guntur corridors.
The Government is also formulating an Auto Policy, which would give a proper direction to the growth of the sector.
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There are more than 20 auto component manufacturing companies in the State, manufacturing components such as grey-iron castings, precision aluminums castings, leaf springs, oils and lubricants, diesel fuel injection equipment, electronics and auto electronics and auto electrical, front axles, gears, forging, machined components, pressed metal components, pistons, cylinder liners, nozzles, delivery valves, starter motors, alternators, electronic regulators, high pressure die castings, clutch covers, fuel filters ,etc.
Most of these components are presently being supplied to Mahindra motor, TVS Suzuki, Escorts Yamaha, Bajaj and others. Amaron Batteries are manufactured in Chittoor district. Around 119 components manufacturers have been certified for ISO 9000 quality standards and seven companies achieved the QS 9000 quality standard set by government and motors association.
The Market Shares Of The Segments Of The Automobile Industry
The automobile industry had a growth of 15.4 % during April-January 2007, with the average annual growth of 10-15% over the last decade or so. With the incremental investment of $35-40 billion, the growth is expected to double in the next 10 years. Consistent growth and dedication have made the Indian automobile industry the second- largest tractor and two-wheeler manufacturer in the world. It is also the fifth-largest commercial vehicle manufacturer in the world. The Indian automobile market is among the largest in Asia.
OBJECTIVE OF THE STUDY

The study was done primarily with the following objective in mind. To study the brands of Mahindra motor & consumers perception with its competitors. To know why people buy Mahindra motor and why some people prefer other company. To study the features of different brands that give a good idea of various products and services offered by the company. To understand the competitive environment in which the company is operating and is desired to meet customer need and satisfaction. To provide useful information to the company about the product features of various competing companies.
METHODOLOGY
The methodology used in conducting the research work on Mahindra Motor with major emphasis on its sales and marketing strategies involve the following steps: Why I have selected Mahindra Motor only? I have selected Mahindra motor for my summer training because it is the company that is growing day by day. It has maximum market share with comparison to its competitors. And it is the company that gives highest sales and it is also the highest two-wheeler manufacturer. Defining the problem and deciding research objectives: Defining the objective is the most important part of any study process. Proper defining of the problem is a must for proceeding further with the research process. The type of study to be carried out, the questions to be raised, the sampling procedure to be followed, and the data to be collected, all depends on a correct understanding of the problem. Also, by clearly focusing on the real problem, the research job can be simplified and completed with the minimum cost, effort and data. Identified problem or the objectives of the research discussed in the report are: 1. Developing the research plan: In this a plan was developed about how to collect the require information i.e. whom to contact for gathering the relevant data. Data is the foundation of all research. It is the raw material with which a researcher functions.
Therefore, it requires great care to select the sources of data. Data, or facts, may be obtained from several sources. Data sources can either be primary or secondary. A. Secondary data: The sources from which secondary data was collected: Press releases of the company. Newsletters and In-house journals. Brochures and detailed descriptive leaflets Magazines like Business World, Outlook, Auto India, etc. Websites such as www.herohonda.com, www.google.com. These were the sources from which secondary data has been gathered. Most of the information presented in this report was extracted from the above data sources. B. Primary data: Collection of primary data was conducted by visiting the people personally for the preparation of the report. 2. Research approach: It means the way by which the information was collected. Visiting the various places of Patna, getting the questionnaire filled by different individuals. Beside this, frequent visit to the showrooms of the company was of great help to conduct the analysis and research work. 3. Contact methods: Instrument or Data collected Forms: It is the method by which data is gathered. It could be done through various instruments like questionnaires, observations, getting information from the staff members of the agency, contacting to the motor mechanics was sufficient enough to conduct the study.
4. Collection of Information : The primary information was collected by face-to-face and direct interviews with the peoples and the customers. They provide the relevant information regarding the profile of the company as compared to the other company in the Indian market. Most employees suggested visiting companys web site, as it was not possible for them to spare time from their busy schedules. The secondary sources of information were various web sites of the companies, newspapers & magazines such as the times of India, The Hindustan Times, Business world, Auto India, etc. 5. Analyzing the information: The data collected was carefully analyzed. The research and analysis of the information has been done on the basis of various sales and marketing strategies adopted by the company during its tenure. 6. Reporting and conclusions and recommendations: This is the most vital part of the work undertaken. After collection and analysis of data, it was recorded in the form as prescribed. The major part of the report is the findings. The finding also includes charts, tables and diagrams etc. The report also mentioned the limitations of the project undertaken. Then conclusion has been drawn out of the findings and various recommendations have been given at the end of the report. Certain tables on the basis of which the findings were made have been included in the appendices section followed by the bibliography.
SCOPE OF THE STUDY

Mahindra motor is spreading its wings and widening its business horizon to reach and serve customers at new centers in the year ahead. The company services are backed by a highly motivated and technology driven team to achieve customers need, product expertise and geographic reach.
The study is oriented towards the concept of different brands offered by Mahindra motor and its competitors to its customers. The company has endeavored to move fast in providing market solution, which maximize customer needs and convenience, using multiple delivery channels in composing the agency network, service centers, lower service cost and increased efficiency.
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COMPANY PROFILE
Founded in 1945 as a steel trading company, we entered automotive manufacturing in 1947 to bring the iconic Willys Jeep onto Indian roads. Over the years, weve diversified into many new businesses in order to better meet the needs of our customers. We follow a unique business model of creating empowered companies that enjoy the best of entrepreneurial independence and Group-wide synergies. This principle has led our growth into a US $7.1 billion multinational group with more than 112,000 employees in 79 countries across the globe. Today, our operations span 16 key industries that form the foundation of every modern economy: aerospace, aftermarket, agribusiness, automotive, components, consulting services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology, leisure and hospitality, logistics, real estate, and retail. Our federated structure enables each business to chart its own future and simultaneously leverage synergies across the entire Groups competencies. In this way, the diversity of our expertise allows us to bring our customers the best in many fields.
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Our motivation to give our best every day comes from our core purpose: to challenge conventional thinking and innovatively use all our resources to drive positive change in the lives of our stakeholders and communities across the worldto enable them to Rise. Our products and services support our customers ambitions to improve their living standards; our responsible business practices positively engage the communities we join through employment, education, and outreach; and our commitment to sustainable business is bringing green technology and awareness into the mainstream through our products, services, and lightfootprint manufacturing processes. This commitment to sustainabilitysocial, economic, and environmental rests upon a set of core values. They are an amalgamation of what we have been, what we are, and what we want to be. These values are the compass that guides our actions, both personal and corporate. They are:
Good corporate citizenship

We will continue to seek long term success in alignment with the needs of the communities we serve. We will do this without compromising on ethical business standards.
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Professionalism
We have always sought the best people for the job and given them the freedom and the opportunity to grow. We will continue to do so. We will support innovation and well reasoned risk taking, but will demand performance.
Customer first
We exist and prosper only because of the customer. We will respond to the changing needs and expectations of our customers speedily, courteously and effectively.
Quality focus
Quality is the key to delivering value for money to our customers. We will make quality a driving value in our work, in our products and in our interactions with others. We will do it 'First Time Right.'
Dignity of the individual

We will value individual dignity, uphold the right to express disagreement and respect the time and efforts of others. Through our actions, we will nurture fairness, trust, and transparency.
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OUR LEADERSHIP
We have always believed that ethics and good governance coupled with vision and grit are fundamental to being a successful business, and our leadership team embodies these beliefs. Youll find many interesting personalities here; people that have helped shape the evolution of our businesses and continue to guide our destiny. Youll come across achievements and awards that we believe are merely a by-product of the work that we do. Were proud that our people drive change and lead from the front. For over five decades, Keshub Mahindra has enabled Mahindra and its people to rise. He joined Mahindra & Mahindra in 1947 and became
Chairman in 1963. He continues to be involved with the day-to-day activities of the company today and has literally been the backbone of the company. Keshub is a philanthropist who redefined corporate governance by effectively channeling funds into the social sector. From building ethical
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corporate organizations in India to serving on prestigious boards and committees, Keshubs immense contribution to Indian business has established him as an inspirational business leader and an iconic corporate citizen. Over the years, Keshub has been a member of organizations and committees like:
Prime
Ministers Council on Trade & Industry Federation of India (President Emeritus) for Research in Rural & Industrial Development Society
Employers Centre
(Chairman) Keshubs philanthropic leadership includes:

Chairman Vice
Mahindra Foundation
President National Society for Clean Cities Pratham (Indian education initiative, 200308)
Director
And he has been the recipient of a plethora of awards over the years. Here are just a few of them:
Business Rotary Ernst
India Businessman of the year, India (1989) award for Vocational Excellence (1992)
& Young Lifetime Achievement Award (2007)
Keshub is a graduate from the Wharton School, University of Pennsylvania, USA. He currently lives in Mumbai with his wife. daughters and seven grandchildren. They have three
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Anand Mahindra started off at Mahindra in 1981 when he joined Mahindra Ugine Steel Co (MUSCO), a major producer of specialty steels, as Executive Director. Assistant to the Finance
In 1989, he was appointed
President and Deputy Managing Director of the company. While at MUSCO, Anand spearheaded Mahindras growth and diversification into new business areas like real estate and hospitality management. In 1991, he was appointed Deputy Managing Director of Mahindra & Mahindra, the countrys leading producer of tractors and off-road vehicles. He initiated a comprehensive change program to make the company an efficient and aggressive competitor in the new liberalized economic environment in India. In 1997, he was promoted to Managing Director, and in 2003 he also became Vice Chairman. A few of the boards and committees that Anand serves on are:
Harvard
Business School Asia/Pacific Advisory Board
National Sports Development Fund (NSDF), Government of India Council and Executive Committee
India
Council for Sustainable Development
Anand has received a great many awards over the years. Some of these are:
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Knight of the Order of Merit from the President of the French Republic
Harvard Business
Business School Alumni Achievement Award 2008 Leader of the Year 2009 from the Economic Times
He takes a keen interest in education, and apart from being a Trustee of the K.C. Mahindra Education Trust, which provides scholarships to students, he is also on the Board of Governors of the Mahindra United World College of India. Anand frequently shares his views and ideas on economics and business through his writings in various business magazines. You can follow his personal views on Twitter at http://twitter.com/anandmahindra. Anand graduated magna cum laude from Harvard College, USA and earned an MBA from the Harvard Business School, USA in 1981. Anand enjoys world cinema, reading, listening to the Blues, sailing, and tennis. He lives in Mumbai with his wife. They have two daughters.
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MAHINDRA IN AUTOMOBILE
In 1947, we introduced India to the utility vehicle. More than 65 years later, we're still India's premier utility vehicle (UV) company, but we've also grown quite a bit. In addition to making groundbreaking UVs like the Scorpio and Bolero, Mahindra offers cars, pickups, two wheelers, and commercial vehicles that are rugged, reliable, environmentally friendly, and fuel-efficient. Our global presence means you can find Mahindra vehicles on the roadsboth paved and unpavedof Australia, Europe, Latin America, Malaysia, and South Africa. And we're seeking out new terrain every day. Mahindra is also there for you through the construction of excellent components, provision of spares, and commitment to superior service. Our automotive businesses cover all your transportation needs thanks to strategic synergies between our expertise in design, manufacture, and service.
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RODUCT OF MAHINDRA
We designed the Duro to fulfill the transportation needs of the entire family without compromising on features. The Duro gets you and your family to your destination in safety and comfort. It has the longest wheel base among scooters for greater stability on rough roads, and its ergonomically designed with a wider seat and more legroom. It features extra-large brakes and a chrome-plated exhaust fender to protect your legs. And it has a handy grab rail for your co-passenger. The Duro is tough and high-performance. Its robust 125cc engine is paired with a long-lasting battery to give you instant startup and a powerful drive. But no matter how fast you cover ground, the Duros extra-large fuel tank and excellent fuel efficiency mean you wont be visiting the fuel pump too often. With a vibrant choice of colors, sleek and sporty styling, and trendy displays, the Duro delivers high value-for-money family transport. Take a look at the 2010 NDTV Profit Car & Bike Scooter of the Year.
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Affordable and convenient, the Flyte grants you the freedom to go where you want, when you want. The Flyte is designed for convenience, comfort, and style. We added a specially designed fuel tank inlet on the front, so you can stay seated while you refuel. Everything from books to clothes to shopping bags are easy to fit and easy to find in the largest-ever 22 liter dual compartment. And the four-in-one key system multitasks to start the ignition, open the fuel lock, lock the handle, and prevent theft. Driving in city traffic is easy with the Flyte. Equipped with a powerful 125 cc engine and a longer wheelbase to improve stability, its agile even in stopand-start traffic. We developed a superior telescopic suspension system to smooth over potholes and cobblestones. With its sleek lines and the choice of seven different colors, the Flyte is an affirmation of personality and independence.
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The Kine brings young drivers independence. Zip to class and to your friends houses in style with plenty of space for your backpack or kit bag under the seat. Sleek grab rails make it easy to bring along a friend, and the cushy seating keeps you both comfortable. The Kines 71cc engine lets you slip through traffic to get where youre going faster. Generous legroom means youll never feel cramped, even on long commutes. And the streamlined design and fresh body graphics make your Kine peppy and eye-catching. Choose from four funky colorsgreen, lavender, red, and midnight black.
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The Rodeo offers superior performance. Its powerful 125 cc, 4-stroke engine delivers a rush on the open road or in traffic. Its telescopic suspension smoothes rough roads. Its supercharged battery gives you a clearer horn, brighter headlamp, and instant startup. And its packed with features to ensure your comfort and style. We added a specially designed fuel tank inlet on the front, so you can stay seated while you refuel. Your belongings are easy to fit and easy to find in the roomy, illuminated two-level compartment. Need to recharge your cell phone on the go? Do it with the Rodeos inbuilt USB port. Or you can plug in your iPod or mp3 player to listen to your favorite music. The Rodeo represents the best in innovation. Our new four-in-one antitheft key lets you central lock the entire vehicle with just one turn. Once youve locked your Rodeo, a solid shutter blocks the keyhole to prevent hotwiring. And weve enhanced the brake system to give you superior control, even in heavy traffic or monsoon conditions. Check out the Rodeos sporty look. Its athletic lines and graphics give it attitude and its colorful digital display is modern and chic. With its sleek and sporty style, customized color selection, and dynamic reputation, the Rodeo is a statement.
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The Stallio is the result of our ambition to redefine the biking experience in India. Blending world-class Italian design with raw power and specifications to suit Indian biking conditions, the Stallio presents a host of new features that upgrade the customer experience. We integrated design elements from our Italy-based boutique design house, Engines Engineering, with the toughness and power expected from Mahindra. The Stallio keeps good companyEngines Engineering serves names like Ducati, Benelli, and MV Augusta. Its design input has given both Stallio variants timeless style with a modern edge. With eye-catching LED lamps and an inverted arrow visor design, the Stallio makes a statement. The classic kick start variant sports spoke wheels. The pro-touch electric start variant allows you to take off at the touch of a button, even in stop-and-start traffic. Enjoy a full digital display with a speedometer, fuel gauge, tachometer, clock, and distance travelled per trip and the flashy style of cast alloy wheels.
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Both variants are packed with advanced features to enhance the riding experience. The Stallios striking LED light system provides excellent nighttime visibility without generating heat or draining power. The fuel tank cap blends seamlessly with the body of the bike, creating clean lines for a sleek silhouette. With a rugged, double cradle frame and excellent shock absorption, the Stallio can turn corners at high speeds and float over rough roads. Its superior braking system and responsive controls give you sensitive handling even in water and mud. And above all, enjoy peace of mindthe Stallio comes with a four year manufacturers warranty.
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VISION & MISSION STATEMENT

Our Vision
To be amongst most trusted power utility company of the country by providing environment friendly power on most cost effective basis, ensuring prosperity for its stakeholders and growth with human face.
Our Mission
To ensure most cost effective Vehicle for sustained growth of India. To provide clean and green service for secured future of countrymen. To retain leadership position of the organisation in Automobile sector, while working with dedication and innovation in every project we undertake. To maintain continuous pursuit for cost effectiveness, enhanced productivity for ensuring financial health of the organization, to take care of stakeholders aspirations continuously. To be a technology driven, transparent organization, ensuring dignity and respect for its team members.
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To inculcate value system all cross the organization for ensuring trustworthy stakeholders. To continuously upgrade & update knowledge & skill set of its human resources. To be socially responsible through community development by leveraging resources and knowledge base. To achieve excellence in every activity we undertake. relationship with its constitutent associates &
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WORKING CAPITAL MANAGEMENT

Working capital management takes place on two levels: Ratio analysis can be used to monitor overall trends in working capital and to identify areas requiring closer
management. The individual components by of working various capital can be and
effectively strategies.
managed
using
techniques
When considering these techniques and strategies, companies need to recognize that each department has a unique mix of working capital components. The emphasis that needs to be placed on each component varies according to the companies. For example, some companies have significant inventory levels; others have little if any inventory. Furthermore, working capital management is not an end in itself. It is an integral part of the companys overall management. The needs of efficient working capital management must be considered in relation to other aspects of the companys financial and nonfinancial performance.
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COMPONENTS
The term working capital refers to the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities). Current Assets are resources which are in cash or will soon be converted into cash in "the ordinary course of business". Current Liabilities are commitments which will soon require cash settlement in "the ordinary course of business". WORKING CAPITAL = CURRENT ASSETS CURRENT
LIABILITIES In a department's Statement of Financial Position, these
components of working capital are reported under the following headings: Current Assets
Liquid Assets (cash and bank deposits) Inventory
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Debtors and Receivables
Current Liabilities
Bank Overdraft Creditors and Payables Other Short Term Liabilities
Component Capital i.
of
Working Basis of Valuation
Stock of raw material
Purchase cost of raw Materials
ii.
Stock of work in process
At cost or market value, whichever is lower
iii. iv.
Stock of finished goods Debtors
Cost of production Cost of sales or sales value
v.
Cash
Working expenses
Working Capital Cycle

Working capital cycle involves conversions and rotation of various constituents/components of the working capital. Initially cash is converted into raw materials. 29
Cash flows in a cycle into, around and out of a business. It is the business's life blood and every manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't generate surpluses, the business will eventually run out of cash and expire.
The faster a business expands the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good
management of working capital will generate cash will help improve profits and reduce risks. The cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits.
The usage of fixed assets result in value additions, the raw materials get converted into work in process and then into finished goods. When sold on credit, the finished goods assume the form of debtors who give the business cash on due date. Thus cash
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The Study Of Working Capital Management Of Mahindra Motor assumes its original form again at the end of one such working capital cycle but in the course it passes through various other forms of current assets too. This is how various components of current assets keep on changing their forms due to value addition. As a result, they rotate and business operations continue. Thus, the working capital cycle involves rotation of various constituents of the working capital. While managing the working capital, two
characteristics of current assets should be kept in mind viz. (i) short life span, and (ii) Swift transformation into other form of current asset. Each constituent of current asset has comparatively very short life span. Investment remains in a particular form of current asset for a short period. The life span of current assets depends upon the time required in the activities of procurement; production, sales and collection and degree of synchronization among them. A very short life span of current assets results into swift transformation into other form of current assets for a running business. These characteristics have certain implications: i Decision regarding management of the working capital has to
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The Study Of Working Capital Management Of Mahindra Motor be taken frequently and on a repeat basis. ii. The various components of the working capital are closely related and mismanagement of any one component adversely affects the other components too. iii. The difference between the present value and the book value of profit is not significant.
If money moves faster around the cycle (e.g. collect monies due from debtors more quickly) or the amount of money tied up is reduced (e.g. reduce inventory levels relative to sales), the business will generate more cash or it will need to borrow less money to fund
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The Study Of Working Capital Management Of Mahindra Motor working capital. As a consequence, the cost of bank interest can be reduced or additional free money will be available to support additional sales growth or investment. Similarly, if improved terms with suppliers are negotiated e.g. longer credit or an increased credit limit, then free finance to help fund future sales can be effectively created.
Thus.
If you .......
Then ......
You release cash from the cycle
Collect receivables (debtors) faster
Collect receiv ables (debtors) slower
Your receivables soak up cash
Get better credit (in terms of duration or You increase your cash amount) from suppliers resources Shift inventory (stocks) faster Move inventory (stocks) slower You free up cash You cash consume more
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COMPONENTS OF WORKING CAPITAL MANAGEMENT

Inventory Management Inventory includes all types of stocks. For effective working capital management, inventory needs to be managed effectively. The level of inventory should be such that the total cost of ordering and holding inventory is the least. Simultaneously, stock out costs should be minimized. Business, therefore, should fix the minimum safety stock level, re-order level and ordering quantity so that the inventory cost is reduced and its management becomes efficient. Average stock-holding periods will be influenced by the nature of the business. For example, a fresh vegetable shop might turn over its entire stock every few days while a motor factor would be much slower as it may carry a wide range of rarely-used spare parts in case somebody needs them. many large manufacturers operate on a just-in-time (JIT) basis whereby all the components to be assembled on a particular today, arrive at the factory early that morning, no earlier - no later. This helps to minimize manufacturing costs as JIT stocks take up little space, minimize stock-holding and virtually eliminate the risks of
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The Study Of Working Capital Management Of Mahindra Motor obsolete or damaged stock. Because JIT manufacturers hold stock for a very short time, they are able to conserve substantial cash. JIT is a good model to strive for as it embraces all the principles of prudent stock management. Factors to be considered when determining optimum stock levels include:
What are the projected sales of each product? How widely available are raw materials, components etc.?
How long does it take for delivery by suppliers? Can you remove slow movers from your product range without compromising best sellers?
DEBTORS MANAGEMENT
The objective of any management policy pertaining to debtors would be to ensure that the benefits arising due to the debtors are more than the cost incurred for debtors and the gap between benefits and cost increases profits. An effective control of
receivables helps a great deal in property managing it. Each
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The Study Of Working Capital Management Of Mahindra Motor business should, therefore, try to find out average credit extended to its client using the below given formula
Creditors Management
Creditors are a vital part of effective cash management and should be managed carefully to enhance the cash position. Purchasing initiates cash outflows and an over-zealous purchasing function can create liquidity problems. Thus, the following factors should be considered:
i.
The purchasing authority in the company and whether it is tightly managed or spread among a number of people.
ii.
The purchase quantities should be geared to demand forecasts.
iii.
Order quantities should be used that take into account stock-holding and purchasing costs.
iv.
The cost of carrying stock should be known.
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The Study Of Working Capital Management Of Mahindra Motor v. Dependency on a single supplier should be avoided and facilities like best discounts, credit terms etc. should be used from alternative suppliers. vi. Suppliers returns policy should be considered.
Cash Management Cash is the most liquid current asset. It is of vital importance to the daily operations of business. While the proportion of assets held in the form of cash is very small, its efficient management is crucial to the solvency of the business. Therefore, planning cash and controlling its use are very important tasks.
FINANCIAL RATIO ANALYSIS

INTRODUCTION
Financial ratio analysis calculates and compares various ratios of amounts and balances taken from the financial statements. The main purposes of working capital ratio analysis are:
to indicate working capital management performance; and To assist in identifying areas requiring closer management.
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The Study Of Working Capital Management Of Mahindra Motor Three key points need to be taken into account when analyzing financial ratios:
The results are based on highly summarized information. Consequently, situations which require control might not be apparent, or situations which do not warrant significant effort might be unnecessarily highlighted;
Different
departments
face
very
different
situations.
Comparisons between them, or with global "ideal" ratio values, can be misleading;
Ratio analysis is somewhat one-sided; favorable results mean little, whereas unfavorable results are usually significant.
However, financial ratio analysis is valuable because it raises questions and indicates directions for more detailed investigation.
Working Capital Ratio

Current Ratio Current Assets divided by Current Liabilities
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The Study Of Working Capital Management Of Mahindra Motor The working capital ratio (or current ratio) attempts to measure the level of liquidity, that is, the level of safety provided by the excess of current assets over current liabilities.
Quick Ratio
Liquid Assets divided by Current Liabilities This is another measure of liquidity. It looks at the number of days that liquid assets (for example, inventory) could service daily operating expenses (including salaries).
Stock Turnover Ratio

COST OF SALES DIVIDED BY AVERAGE STOCK LEVEL This ratio applies only to finished goods. It indicates the speed with which inventory is sold-or, to look at it from the other angle, how long inventory items remain on the shelves. It can be used for the inventory balance as a whole, for classes of inventory, or for individual inventory items.
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Debtor Turnover Ratio

There is a close relationship between debtors and credit sales to third parties (that is, sales other than to the Crown). If sales increase, debtors will increase, and conversely, if sales decrease debtors will decrease.
Credit Sales per Period X Days per period Average Debtors The debtor ratio does not solve the collection problem, but it acts as an indicator that an adverse trend is developing. Remedial action can then be instigated.
Creditor Turnover Ratio

It expresses the relationship between credit purchases and the liability to creditors. It can be stated as the number of days that credit purchases are carried on the books. Credit Purchases per Period X Days per period Average Creditors
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Thus Se. No. Ratio Formulae Result Interpretation

On average, the value of the entire stock is turned every x days. There may be a need to break this down into product groups for effective stock management. Obsolete stock, slow moving lines will extend overall stock turnover days. Faster production, fewer product lines, just in time ordering will reduce average days.
(i)
Stock Turnover (in days)
Average Stock * 365/ = x days Cost of Goods Sold
(ii)
Receivables Ratio (in days)
Debtors * 365/ = x days Sales
It takes on an average of x days to collect the due amount of money. If the official credit terms are 45 day and it takes 65 days... then why should be found out? One or more large or slow debts can drag out the average days. Effective debtor management will minimize the days.
(iii)
Payables Ratio (in days)
Creditors * 365/ = x days Cost of Sales (or Purchases)
On average, the suppliers are paid every x days. If better negotiations are done regarding the credit terms this will increase. If paid earlier to the supplier, say, to get a discount this will decline. If there is a deferment in payment to the suppliers (without agreement) this will also increase - but the reputation, the quality of service and any flexibility provided by the suppliers may suffer.
41
ASSUMPTIONS
All calculations have been done taking 365 days in a year. All sales are credit sales. All purchases are credit purchases. For all the years, opening & closing figures have been taken to calculate average debtors, creditors, etc. Wages and salaries are paid at a lag of 1month.
42
Particulars
31st March, 2010
31st 2011
March, 31st March, 2012
CURRENT ASSETS, LOANS & ADVANCES
Inventories
2,49,252
14,59,500
51,48,650
Sundry Debtors
2,36,657
4,96,560
12,20,450
Cash & Bank Balances
77,069
3,89,130
5,07,380
Other Current Assets
11,461
7,820
2,830
Loans & Advances
3,73,321
4,11,800
5,76,470
Total Current Assets
9,47,760
27,64,810
74,55,780
Less LIABILITIES PROVISIONS
CURRENT &
Liabilities
1,55,038
14,40,230
56,40,720
Provisions
17,844
75,170
1,64,420
Total Current Liabilities
1,72,882
15,15,400
58,05,140
Working Capital
7,74,878
12,49,410
16,50,640
43
Evaluation of various components of Working Capital

Major components of Working capital as % of Capital Employed are as follows:
Inventories Debtors -
217.67% 51.60% 21.45% 24.36% -
Cash Bank Loans&Advances -
Total Current Assets 315.20%
Liabilities 238.47% Provisions 6.95% Total Current Liabilities 245.42%
Working Capital Ratios

Current Ratio The Current Ratio is decreasing over the period i.e for 2005 it was 5.48:1; it went down to 1.82:1 in 2006 and has now come down to 1.28:1 in 2007 which is very close to the ideal ratio of 1.33:1. This indicates that there is a perfect balance between current assets &
44
The Study Of Working Capital Management Of Mahindra Motor current liabilities that the company owns. The major reasons for improvement in current ratio are: (i) The total % of debtors in the Current assets of 2007 has decreased to 16.37% from 17.96% in 2005. (ii) Moreover, the percentage of money blocked in cash & bank balance has got reduced from 14.07% in 2006 to 6.80% in 2007. (iii) The liabilities in 2007 have increased as compared to liabilities in 2006 & 2005. This means that the company is now trading at creditors worth.
Working Capital Ratios 6 5 4 3 2 1 0 2010 Year

0.86 0.39 4.04 1.82 1.28 5.48
Current Ratio Quick Ratio
2011
2012
45
The Study Of Working Capital Management Of Mahindra Motor Quick Ratio The quick ratio showed a drastic improvement in 2011 as compared to 2010, but it went below the ideal quick ratio of 1:1 and in 2012 it went further down to 0.39:1. The major reasons for changes in Quick ratio are: (i) The company is blocking huge amount of money in maintaining their inventories i.e 69% of their total investment in current assets. (ii) Provisions have decreased from 4.9% in 2011 to 2.8% in 2012.
46

10 9 8 7 6.87 9.14
Times 6
5 4 3 2 1 0 2008 2009 2010 2011 2012 4.85
Year
Stock Turnover Ratio had changed drastically from 9.14 times in 2005 to 4.85 times in 2006, but still it was way below the ideal of 6 to 7 times, which it achieved in 2007 by coming at 6.87 times.
The major reason for improvement in Stock Turnover Ratio is that the sales have increased because of the trading business as the company has entered in the fields of Automobile Sector.
47
Debtors Turnover Ratio
Debtors Turnover Ratio

30 28.34 25 20 Times 15 13.82 10 5 0 2008 11.15
2009
2010
2011
2012
Year
The Debtors Turnover Ratio has increased drastically from 13.82 times in 2011 to 28.34 times in 2012. The major reason for change in Debtors Turnover Ratio is that the company has entered into the trading business of Mahindra motor products and accessories. As the company is purchasing the products from the Mahindra motor company in cash and distributing the same, with the help of their TDs, by providing a credit of 30 days.
48
Creditors Turnover Ratio
Creditors Turnover Ratio

12 11.4 10 8 Times 6 4 2 0 2008 2009 2010 2011 2012 6.83 7.59
Year
The creditors Turnover Ratio has decreased drastically from 11.4 times in 2010 to 6.83 times in 2011. This shows that the company has been paying off its debts earlier than before. The ratio has increased to 7.59 times in 2012.
49
Working Capital as a % of Capital Employed
Working Capital as a % of Capital Employed

72.00% 70.00% 69.78% 68.00% Percent 66.00% 64.00% 62.00% 60.00% 58.96% 58.00% 2008 2009 2010 2011 2012 63.98%
Year
Working Capital as a % of Capital Employed has increased from 58.96% in 2005 to 63.98% in 2006. It further increased to 69.78% in 2007. Even if we compare the figure of working capital in these years then it is observed that working capital has increased from Rs. 7, 74,878 in 2005 to Rs. 12, 49,410 in 2006 to Rs. 16, 50,640 in 2012. Thus this increase of 32.11% in working capital of 2012 had effect on the overall profitability of the company.
50
Profit After Sales as a % to Sales
PAT as a % to Sales
8.00% 7.00% 6.00% 6.42% 6.89%
Percent 5.00%
4.00% 3.00% 2.00% 1.00% 0.00% 2008 2009 2010 1.19%
2011
2012
Year
Profit After Tax as a % to sales increased from 6.42% in 2005 to 6.89% in 2006. But it showed a drastic fall in 2012 and came down to 1.19%.
51
MAHINDRA MOTOR BALANCE SHEET AS AT 31ST MARCH 2012

PARTICULARS SOURCES OF FUNDS SHAREHOLDERS' FUND Share Capital Reserve & Surplus LOAN FUNDS Secured Loan Unsecured Loan Deferred Tax Liability TOTAL >> APPLICATION OF FUNDS FIXED ASSETS Gross Block Less : Depreciation/Amortisation Net Block Capital Work in Process INVESTMENTS DEFERRED TAX ASSETS CURRENT ASSETS, LOANS & ADVANCES Inventories Sundry Debtors Cash & Bank Balances Other Current Assets Loans & Advances 7 5,148,654,309 1,220,447,390 507,383,049 2,830,564 576,465,133 7,455,780,445 Less CURRENT LIABILITIES & PROVISIONS Liabilities Provisions 8 5,640,727,557 164,408,934 5,805,136,491 6 Schdule As at 31.03.2012 (Rs.)
1 2
50,700,070 1,746,223,282 1,796,923,352
3 4
560,099,122 8,350,486 568,449,608 2,365,372,960
5 513,406,244 231,900,454 281,505,790 140,591,016 245,221,290 46,924,182
52

NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE 9 1,650,643,954 486,729
TOTAL >> SIGNIFICANT ACCOUNTING POLICIES NOTES TO ACCOUNTS 16 17
2,365,372,960 0
53
MAHINDRA MOTOR SCHEDULES TO ACCOUNTS

PARTICULARS INVESTMENTS AT COST LONG TERM INVESTMENTS In Shares of companies (Fully Paid Up) TRADE UNQUOTED (a) In Subsidary Companies 400,000 Equity Shares (Previous Year 400,000 Equity Shares) of Goa Telecommunication & Systems Limited of Rs. 10/-each fully paid up b) In Other Company Nil Equity Shares (Previous Year 16,528,404 Equity Shares) of Teletech Services (India) Limited of Rs. 10/- each CURRENT INVESTMENTS (Refer Note No. 7 of Schedule 16 &Note No. 10 of Schedule 17) OTHER THAN TRADE In Mutual Funds (Unquoted) In Equity Shares of Companies (Quoted) Schdule 6 As at 31.03.2009 (Rs.)
22,820,693
22,820,693
95,470,580 126,930,017
222,400,597
245,221,290 Aggregated value of quoted investment Aggregated value of unquoted investment Market Value of Quoted Investments 126,930,017 118,291,273 147,210,594
54
MAHINDRA MOTOR SCHEDULE TO ACCOUNTS

PARTICULARS CURRENT ASSETS,LOANS AND ADVANCES INVENTORIES (As Taken,Valued & Certified by the Management) Raw Material Finished Goods Work-in- Progress Stores and Spare Parts (Raw Material amounting to Rs.21,398 thousand (PY Rs. 9,271 thousand), Finished Goods amounting to Rs.1,370,420 thousand (PY Rs. 126,106 thousand) & Stores & Spare parts amounting to Rs. Nil (PY Rs 128 thousand ) were in transit at year end.) SUNDRY DEBTORS Debts outstanding for a period exceeding Six Months : Considered Good Considered Doubtful Less : Provision for Doubtful Debts Others Debts : Considered Good Considered Doubtful Less : Provision for Doubtful Debts CASH & BANK BALANCES Cash in Hand Cheques & Drafts in Hand Balance with Scheduled Banks: In Current Account In Deposit Account In Margin Account (Under Lien) Saving Account with Post Office (Under Lien) OTHER CURRENT ASSETS Export Incentive & Interest Receivable: Considered Good Schdule 7 As at 31.03.2007 (Rs.)
63,032,800 5,056,387,255 13,840,515 15,393,739 5,148,654,309
3,258,950 25,610,831 28,869,781 ,610,831 3,258,950 1,217,188,440 12,684,858 1,229,873,298 12,684,858 1,220,447,390
1,197,917 33,054,957 472,609,175 350,000 171,000 507,383,049
2,830,564
55

Considered Doubtful Less Provision For Doubtful Export Incentives LOANS AND ADVANCES (Unsecured Considered good unless otherwise stated) Advances Recoverable in cash or kind or for value to be received: Considered Good Considered Doubtful 3,243,220 6,073,784 3,243,220 2,830,564
73,556,762 4,865,530 78,422,292
Less Provision For Doubtful Advances Security Deposits: Considered Good Considered Doubtful Less Provision For Doubtful Deposits Advance Tax (Net) Loans and Inter Corporate Deposits Balance with Custom & Excise Authorities Due from Subsidiary Company
4,865,530 73,556,762
10,845,599 180,000 11,025,599 180,000 10,845,599 268,626,625 9,203,187 214,232,960 576,465,133
56
Operating Cycles in Mahindra Motor over the last 3 years
Particulars Working Capital (Rs 000)
2010 7,74,878
2011 12,49,410
2012 16,50,640
Raw Material Conversion Period
11.15 days
35 days
40 days
Work-in- Progress Conversion Period
2.94 days
7 days
10 days
Finished Goods Conversion Period
37.74 days
26.27 days
17 days
Debtors Conversion Period
56.66 days
26.4 days
12.87 days
Gross Operating Days
96.4 days
82.67 days
79.87 days
Creditors Conversion Period
46.17 days
45.84 days
45 days
Net Operating Days
50.23 days
37.13 days
34.87 days
No. of Operating Cycles in a Year.
7.26
9.83
10.47
57
58
STRENGTHS
S A
WOT
NALYSIS
Ability to understand customers needs and wants Recognized and established brand name Effective advertising capability Its after sells service Technology Maintenance cost is low Resell value is high Companys name is synonymous with fuel-efficient bikes and connectivity
WEAKNESSES
R&D is not close to the Hero manufacturing plant Hero is vulnerable in the joint venture because Honda Motor Company has so Much power Brand name of Hero itself has no influence in the automobile industry.
OPPORTUNITIES
Global expansion Expansion of target market (include women)
59
Become Indias leader in the scooter market Financial help easily available Relatively low rate of interest and the discount of prices offered by the dealers and manufacturers lead to the increasing demand for twowheeler vehicles Large market for the high performance segment which is increasing with the upliftment of the lifestyle of people.
THREATS
Honda Motorcycles and Scooters India can take away market share and cause joint venture to go sour market share and cause joint venture to go sour. Bajaj Motors is a strong competitor. The big giant like Harley-Davidson will introduce soon in Indian market. FDI announced in Automobiles is 100%. Petrol price increases Pollution norms Aluminum and steel price increases
60
FINDINGS
It is clear from the report that the Mahindra motor Motors is facing cutthroat competition; hence the companys manager has to be fast and smart so as to understand the customers needs. They have to come up with various new techniques or schemes to be able to cater to different categories of people. Customers are becoming more wise day by day and they are now willing to know all the in and out of the things happening around them. This has led to increased customer awareness. We can analyze that if the brand is reputed that doesnt win the customers delight unless its provided same value-added features or else we can say competitive advantage. For gaining a competitive advantage it has to continuously compare the product and services with the competitors and find the weak area of the rivals for gaining competitive advantage. Surveys revealed that awareness of Mahindra motor Motors is low among its target segment for creativity awareness. The company has to take some keen step for promotional activity. The company should regularly send the sales person who have good communication skill to the customers so that they should be aware about the product and services in market and know the quality of the services offered by the company.
61
While Mahindra motor has strong foothold in the industry, the company should look into the areas of weakness. In this connection, It is suggested that the company can look into the following areas: In order to expand its business it should introduce innovative schemes for young generations, better financial schemes, etc. The company should expand its service centers. The must move towards the rural areas to expand its sale.
ECOMMENDATION
62
CONCLUSION:
The report has highlighted the importance of providing the highest customer satisfaction and how it affects the sales. Though in the month of December, the sales were down, by developing competitive strategies and by delivering high class products and services, Popular Vehicles and Services were able to keep their sales momentum. The report emphasizes the importance of customer loyalty to develop the business. The study which we conducted on the Two wheeler automobile sector is a very important topic of automobile sector. After deep research, analysis and getting information about companies as formulated that the four wheeler automobile companies achieved success in the market. Throughout the study we found the four wheeler manufacturer having very new and modern technology in their bikes, they have a good market share in India, many of Automobile companies like Bajaj, TVS Motor, Yamaha etc are also giving large competition. Concluding the performance of the company related to two wheeler sector in India, getting their market share and growth and what are services they are providing after sales. Mahindra motor has managed to put in spectacular performance going from strength despite increase in competition; the company's sales
63
have witnessed an uptrend, registering an average growth of 54% in the three years under review. Mahindra motor has managed to achieve this because its strong brand image and proven product quality underpinned the performance growth in recent years. Apart from the strong brand "Pulsar" the company's performance across the spectrum of the Passenger Bikes market helped it exploit the growing demand for Large CC Bikes..
64
LIMITATIONS OF THE STUDY

As said a basic research was conducted at the company to enable the company to assess how far the customers are satisfied with product and services of Mahindra motor. During the course of the study the following limitations were observed: The method will be unsuitable if the number of persons to be surveyed is very less as it will be difficult to draw logical conclusions regarding the satisfaction level of customers. Interpretation of data may vary from individual depending on the individual understanding the product features and services of the company. The method lacks flexibility. In case of inadequate or incomplete information the result may deviate. It is very difficult to check the accuracy of the information provided. Since all the products and services are not widely used by all the customers it is difficult to draw realistic conclusions based on the survey.
65
I.M. Pandey, Financial Management, 8th Edition www.mahindra.com www.treasury.govt.nz/publicsector/workingcapital/further.asp www.planware.org/workingcapital.htm www.wikipedia.org
IBLIOGRAPHY
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The Study Of Working Capital Management Of Mahindra Motor

WORKING CAPTAL MANAGEMENT

The Study Of Working Capital Management Of Mahindra Motor

OVERVIEW OF AUTOMOBILE SECTOR IN INDIA

Overview Of Automobile Industry

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Market Shares Of The Segments Of The Automobile Industry

The Study Of Working Capital Management Of Mahindra Motor

OBJECTIVE OF THE STUDY

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

SCOPE OF THE STUDY

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

Good corporate citizenship

The Study Of Working Capital Management Of Mahindra Motor

Dignity of the individual

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

(Chairman) Keshubs philanthropic leadership includes:

& Young Lifetime Achievement Award (2007)

The Study Of Working Capital Management Of Mahindra Motor

In 1989, he was appointed

Business School Asia/Pacific Advisory Board

Council for Sustainable Development

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

VISION & MISSION STATEMENT

The Study Of Working Capital Management Of Mahindra Motor

The Study Of Working Capital Management Of Mahindra Motor

WORKING CAPITAL MANAGEMENT

management. The individual components by of working various capital can be and

The Study Of Working Capital Management Of Mahindra Motor

LIABILITIES In a department's Statement of Financial Position, these

Liquid Assets (cash and bank deposits) Inventory

The Study Of Working Capital Management Of Mahindra Motor

Debtors and Receivables

Bank Overdraft Creditors and Payables Other Short Term Liabilities

Working Basis of Valuation

Stock of raw material

Purchase cost of raw Materials

Stock of work in process

At cost or market value, whichever is lower

Stock of finished goods Debtors

Cost of production Cost of sales or sales value

Working Capital Cycle

The Study Of Working Capital Management Of Mahindra Motor

Collect receivables (debtors) faster

Collect receiv ables (debtors) slower

Your receivables soak up cash

The Study Of Working Capital Management Of Mahindra Motor

COMPONENTS OF WORKING CAPITAL MANAGEMENT

receivables helps a great deal in property managing it. Each