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CHAPTE R NO.
1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.11 1.12 1.13 2 2.1 2.2 2.3 2.4 3 3.1 4 4.1 4.2 4.3 4.4 5 5.1 6 6.1
TOPIC
PAGE NO.
1-28 1 2 3 5 8 14 18 19 23 25 26 27 28 31-36 31 34 35 36 37 37 38-45 38 41 44 45 46-47 46 48-50 48
SECTION - I Bajaj Company Information Bajaj Autos Philosophy Management and Profile
Liquidity and Solvency Ratios Management Efficiency Ratios Profitability Ratio Market Value Ratio.
SECTION - V
Bajaj Auto Limited makes scooters for commuters. The company manufactures and sells small motorcycles, scooters, and three-wheeler vehicles. Motorcycle and scooter models include Avenger, Discover, Kristal, Platina, and Pulsar. The three-wheelers are used for both passenger transportation and light delivery. Bajaj's technology partner, Kawasaki Heavy Industries, has helped the company bring a number of bikes to the Indian market -- including the Kawasaki Bajaj Eliminator -- India's first heavy cruiser. Nearly 3 million units of Bajaj's products are annually distributed to more than 50 countries. Bajaj Auto was founded in 1945. The development is an ominous sign for the joint venture as more than a year has passed. With a lot of short showy by Mr. Bajaj and Mr. Carlos Ghosn, chairman of Renault and Nissan. The formal deal was supposed to be signed in November last year but was pushed back. This development is likely to make the combine miss 2011 deadline for launching the car. The latest set of differences over branding has the potential to further delay the launch, affecting the ambitions of both Bajaj and Renault. A successful launch is important for Bajaj to reposition itself as a complete automobile company rather than a motorcycle manufacturer. On the other hand, India is crucial to Renault's plans of driving sales and expanding global market share in the backdrop of declining growth in the western world.
Management
Rahul Bajaj
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Chairman
Madhur Baja Rajiv Bajaj Sanjiv Bajaj Pradeep Shrivastava Rakesh Sharma R C Maheshwari S Sridhar Abraham Joseph Eric Vas C P Tripathi Kevin Dsa K Srinivas N H Hingorani S Ravikumar
Vice Chairman Managing Director Executive Director President (Engineering) CEO (International Business) CEO (Commercial Vehicles CEO (Two Wheelers) President (Research & Development) President (New Projects) Vice President (Corporate) Vice President (Finance) Vice President (Human Resources) Vice President (Commercial) Vice President (Business Development)
PROFILE:
Founder Year of Establishment Industry Business Group Listings & its codes Presence Jamnalal Bajaj 1926 Automotive - Two & Three Wheelers The Bajaj Group BSE Code: 500490; NSE -
Code:
BAJAJAUTO Distribution network covers 50 countries. Dominant presence in Sri Lanka, Bangladesh,
Columbia, Guatemala, Peru, Egypt, Iran and Joint Venture Registered & Office Indonesia. Kawasaki Heavy Industries of Japan Head Akurdi Pune-411035 India Tel.:+(91)-(20)-27472851 Works Fax: +(91)-(20)-27473398 Akurdi, Pune 411035
Bajaj 431136
Nagar,
Waluj
Aurangabad
E-mail Website
The rapid fire winning of awards by Bajaj Auto for almost all its product range from the entry level Boxer, to the newly launched Wind 125 as well as for the DTS-i technology - signals the changing face of Bajaj and its endeavor to offer technologically superior products across the entry, executive and premium Segments. The winning of awards, which started as a trickle in 2001 has now become a deluge.
Product
Bajaj Discover 135 Pulsar
Award
Bike of the Year 2009 Ranked First in 'TOP 30 AUTOMOBILE BRANDS OF INDIA' Bike of the Year 2008 Bike of the Year 2008 Award for motorcycle up to 125cc 2008 Bike of the Year 2008 Bike of the Year 2008 IMOTY Award-Indian Motorcycle of the Year 2007 Bike of the year 2007 Man of the year 2005
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Award Body
NDTV Profit Car India and Bike India Awards 4Ps Power Brand Awards
XCD 125 DTS-Si XCD 125 DTS-Si XCD 125 DTS-Si Pulsar 220 DTS-Fi Pulsar 220 DTS-Fi Pulsar 220 DTS-Fi Pulsar DTS-Fi Mr. Rajiv Bajaj
Business Standard Motoring CNBC-TV18 Auto car Auto Awards NDTV Profit Car India and Bike India Awards Overdrive NDTV Profit Car India and Bike India Awards All Auto Mags-Overdrive, Auto Car, BS, Bike Top Gear CNBC-TV18 Auto car Auto Awards Auto car Professional
Mr. Rajiv Bajaj Bajaj CT 100 Bajaj Discover DTS-i Bajaj Discover DTS-i Bajaj Wind 125 Bajaj Wind 125 Bajaj Pulsar DTS-i DTS-i Technology BAJAJ AUTO Bajaj Boxer AT KTEC Bajaj Pulsar 150 DTS-i
Man of the year 2005 Motorcycle Total Customer Satisfaction Study 2005 Bike of the Year 2005 Indigenous Design of the Year Bike of the Year 2004 Two Wheeler of the Year 2004 Bike of the Year 2004 Auto Tech of the Year 2004 Bike Maker of the Year 2004 BBC World Wheels Award for Best Two Wheeler under Rs.30,000/BBC World Wheels Award for Best Two Wheeler between Rs.45,000/to Rs.55,000/BBC World Wheels Award for Best Two Wheeler between Rs.55,000
Bike India TNS Automotive Overdrive Overdrive Business Standard Motoring CNBC AUTOCAR AUTOAWARDS 2004 ICICI Bank Overdrive Awards 2004 ICICI Bank Overdrive Awards 2004 ICICI Bank Overdrive Awards 2004 BBC World Wheels BBC World Wheels
Bajaj Pulsar 180 DTS-i Bajaj Pulsar Bajaj Pulsar Bajaj Pulsar Bajaj Pulsar Bajaj Eliminator Bajaj Eliminator
/-to Rs.70,000/BBC World Wheels Viewers Choice BBC World Wheels Two Wheeler of Year 2003 Motorcycle Total Customer Satisfaction Study 2003 Bike of the Year 2003 Bike of the Year 2002 Most Exciting Bike of the Year2002 Bike of the Year 2002 Most Exciting Bike of the Year2001 NFO Automotive ICICI Bank OVERDRIVE Awards 2003 Business Standard Motoring Overdrive Overdrive Overdrive
Products Motorcycles
Two-wheeler sales of Indian players are dominated by the domestic market and, within it, by motorcycles. After growing at a sharp clip from the late 1990s, motorcycle sales witnessed a 7.8% drop in volume in 2007-08, due to falling domestic demand as a result of rising interest rates and many private sector banks reducing their retail lending exposures. 2008-09 saw a modest increase in motorcycle sales of 4%, driven largely by growth in cash sales. Even so, sales of motorcycles (both domestic and exports) in 2008-09 has been lower than what it was in 2006-07, before the slowdown hit this sector. Chart A depicts the data from 1998-99. Chart A: Sales of two-wheelers (million units)
Despite the slight uptick in the industrys sales volume, Bajaj Auto did not maintain volume growth, for reasons that will be discussed below. From 1.66 million motorcycles in 2007-08, the companys domestic sales fell by23% to 1.28 million units in 2008-09. Some of this was compensated by a 31% increase in exports to 631,383 units. But it was not enough Consequently, Bajaj Autos market share (domestic and exports, combined) fell from 32.7% in 2007-08 to 28% in 2008-09. Table 1 gives the data. Table 1: Motorcycle sales, domestic and exports (in numbers) Year ended Sales 31 March 2003 2004 2005 (nos. Sales growth 31.3% 14.9% 20.9%
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BAL
Motorcycles: Domestic Sales for the Industry The company classifies motorcycles into three segments, based on consumer categories and approximate price points. These are: Motorcycles of Bajaj can be categorized as: a) Entry segment: These are typically 100 cc motorcycles at a price point in the neighborhood of Rs.35, 000. Bajaj Auto is in this segment through the Platina. Here, Bajaj Auto has been a major player and, despite an overall market degrowth, accounted for 34% of this segment in India in 2008-09.
b)
Executive segment: This largely comprises 100 cc to 135 cc motorcycles, priced between Rs.40, 000 to Rs.50, 000. In this segment with two brands: XCD and Discover.
c)
points in excess of Rs.50, 000. We are present here with our flagship brand, the
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Pulsar, and our cruiser, the Avenger. We dominate this space, with a domestic market share in excess of 47%. If the domestic motorcycle market is segregated as above, it becomes clear that industry sales showed significant ups and downs in 2008-09.
135,887 two- and three-wheelers sold Highest-ever sale of motorcycles in any month - 82,913 numbers sold Cumulative production of the Pulsar crossed 1,00,000 numbers this month; a total of 18,412 Pulsars have been sold during this month Highest-ever three-wheeler sales in any month - 20,676 numbers sold Highest-ever exports in any month - 12,768 two- and three-wheelers.
2 Wheeler
The company sold 135,887 two- and three-wheelers in October 2009, including a record sale of 82,913 motorcycles. The motorcycle growth is propelled by the sale of over 51,000 Boxers, which reinstates this product's dominance in the entry-level segment.
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During the month, the company launched the Boxer AR. This product is targeted at the semi-urban and rural markets and comes with the new 7.7bhp, 91kmpl highperformance K-Tec engine, reinforced frame, stronger shock absorbers and rugged styling. The company has sold over 12,000 numbers in the very first month of its launch. In addition, on 28 October 2009, the Chakan plant crossed the milestone of a cumulative production of 100,000 Pulsars. This was achieved within the first 12 months of the launch of the product. The company's plans to enhance capacities for this model are under way.
Sales figures 2 Wheelers and 3 Wheelers. The summarized performance for the year is given in the table below: Particulars
Total Motorcycles Total 2-Wheelers 3-Wheelers Total 2&3 Wheelers Out of the above Exports
Apr-Oct 09
4,95,608 7,40,183 1,14,877 8,55,060 53,097
Apr-Oct 09
3,40,069 6,76,111 93,836 7,69,947 23,085
Growth y-o-y%
45.8 9.5 22.4 11.0 130.0
consequently the production of the Pulsars is being progressively increased to 50,000 units per month. 3. Aiding this volume build-up would be the launch of the fastest Pulsar yet in June 2009, also expected to be the fastest motorcycle made in India. 4. Stagnant commercial vehicle sales continue to reflect subdued economic conditions.
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5. Exports have almost normalized after the dip in January-March 2009 and are expected to gradually exhibit positive year-on-year growth.
Three-wheelers
The companys domestic sales of three-wheelers in 2008-09 were 12% lower compared to the previous year, and stood at 135,473 units. Export demand grew at 2% to 139,056 units (see Table 2 above). However that was not sufficient to prevent a decline in the companys total three-wheeler sales which fell by 5.4% to 274,529 units in 2008-09. Given that total industry sales shrank by 1.6% in 2008-09 over the previous year, while Bajaj Autos fell by 5.4%, the companys market share dropped by 2.3 percentage points to 55.1%. At this market share however, Bajaj Auto remains the leading three-wheeler player in India. Table gives the data.
2007-08
375,180 263,598 70.3% 130,826 26,714 20.4% 506,006 290,312 57.4%
2008-09
415,411 264,332 63.6% 82,382 10,197 12.4% 497,793 274,529 55.1%
Rate of growth
10.7% 0.3% (6.7%) (37.0%) (61.8%) (8.0%) (1.6%) (5.4%) (2.3%)
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Plant
Bajaj Autos vehicle manufacturing capacity stands at 3.96 million units comprising 3.6 million two-wheelers and 360,000 three-wheelers. The newest plant at Pantnagar (Uttarakhand) has a capacity to produce 900,000 two-wheelers. Bajaj Auto Ltd took possession of 250 acres of land at Chakan, allotted for its fourwheeler project. Bajaj Auto along with captive process vendors will invest Rs. 1750 crores. An additional investment of Rs. 250 crores by vendors, in the existing facilities is envisaged, for supplying components to the new Plant requirement. The investment of Bajaj Auto will be entirely funded by internal accruals. Bajaj Autos new plant would be providing direct employment for about 1000 persons. The commercial production at this plant is expected to commence by early 2009. The plant is being set up with a capacity to manufacture 500,000 vehicles per annum. Bajaj Auto's plant-wise capacities (in units): Plant Waluj Chakan Pantnagar Total
Report
As mentioned in last year's Annual Report, the company's first plant at Akurdi was shut down as a vehicle assembly unit from September 2007. The reason for doing so
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was the higher cost of manufacturing, which placed this location at a disadvantageous position compared to the other facilities of Bajaj Auto. On 25 July 2008, 2,331 workmen from Akurdi responded to a voluntary retirement scheme (VRS) offered by the company. The overall cost of this VRS was Rs.3.67 billion.
Distribution of Products across plants Plant Waluj Chakan Pantnagar Products Boxer, Platina, XCD and all threewheelers Pulsar, Avenger and Discover Platina, Platina 125 and XCD
Source: Bajaj Annual Report
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Order Tracking-Taking a daily account of the order received from various dealers and Regional Offices (RO). Orders from dealers are punched in by dealer themselves. Orders are followed up in the system only if the credit limit is not crossed. This credit limit is preset into the system depending upon the dealer and his/her track record.
Packaging-Packaging in factory is outsourced to third party vendor. These vendors are generally from the Transport & Logistics partners.
Dispatching Goods-Goods need to be dispatched via third party vendor TCI. State corporations and other private players are also part of the vendor list.
Generating Invoice & Waybill-These documents need to be generated and dispatched to the respective dealer.
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The representation below depicts the location of the various member groups of Bajaj Auto in India.
For distribution Bajaj Auto has extensively used the mix of Depot & CNF Agents. This is completely dependent upon the distance of the dealers location from the manufacturing unit. For example, due to the extensive distance between the manufacturing plant from West Bengal and the North-East, there exists a depot at Kharagpur with a capacity for housing 8000 two-wheelers. There are similar depots in Rajasthan, Punjab and Southern India. In our conversation with the management of the Bajaj Auto showroom, they declined to divulge further details of the locations of the depots and the total number of depots in the country.
Exports:
The company continues to be the country's largest exporter of two- and threewheelers. During 2008-09, Bajaj Auto' international sales achieved an all-time high of
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772,519 units of two- and three-wheelers - representing a growth 25% over the previous year. The growth was driven by the export of two-wheelers, which increased by 31% over 2007-08 to achieve sales of 633,463 units in 2008-09. Table : Bajaj Auto's exports (in numbers):
Product
Total two-wheelers Three-wheelers Total vehicles
2007-08
482,026 136,315 618,341
2008-09
633,463 139,056 772,519
Growth in %
31 2 25
Source: Bajaj
Annual Report
The total value of exports was Rs.26.4 billion, representing a growth of 29%.The business continues to enjoy a healthy geographical spread. Growth in 2008-09 was primarily driven by expanding Bajaj Auto's footprint in Africa and the Middle East, where the region's share rose from 30% of the export business in 2007-08 to 43% in 2008-09. The share of South Asia (excluding India) stands at 27%; South-East Asia at 11%; and Latin America at 19%.The focus is on building the Pulsar brand throughout Indonesia. As a part of the company's policy to be closer to the markets in which it operates, Bajaj Auto has offices in Monterrey (Mexico), Dubai and Colombo (Sri Lanka) in addition to its subsidiary PT BAI in Indonesia.
These three components are: 1. Forwarding, Freight and Packaging - This is the largest component of all. It includes the transportation charges of the goods from factory to the dealers, packaging of the two wheelers and three wheelers in container etc. 2. Advertising - The advertising charges include all forms of advertising, i.e. TV ads, print ads, hoarding and billboards etc. 3. Sales Promotion - The sales promotion expenses includes the discounts which the company offers from time to time. It also includes other offers and gift vouchers. This component, as per our understanding, should also include the incentives. However, through our interaction with the Bajaj dealers, we came to know that the company does not provide any incentives, and the achievements by the dealers are reflected in the grading system for dealers for each region. Then again, it may not be the same case for Hero Honda and therefore this component may include incentives if applicable.
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The above graph shows the market spend for Bajaj Auto. It has taken the data for three years to see the trend in the spending. As seen from the graph, the expenditure for forwarding, freight and packaging has been increasing over the years and especially for the year 2008-09. This may be due to the fact that in the last 2 years:
Bajaj sales from the export market increased by 31% whereas the domestic sales fell by around 23%. Hence, the transportation costs etc. shoot up due to the exports.
Bajaj focused more on executive and premium bikes which are transported in small lot sizes and the packaging etc are more sophisticated thus resulting in high forwarding, freight and packaging costs.
The advertising costs for the year have sharply fallen in the year 2008-09. It is mainly due to the recession that the company has cut down on these costs. The major saving
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was done on the print ads and hoardings. The sales promotion expenses have fallen in year 2007-08 and again increased in year 2008-09. The increase in year 2008-09 is because Bajaj has forayed into premium bikes, which is a new segment in India, and was backed by heavy sales promotions to boost the sales.
The above graph shows the percentage breakup of the three components. The highest cost is the forwarding, freight and packaging, followed by advertising expenditure and sales promotion expenditure.
The graph shows the advertising and sales & expenditure costs as a percentage of sales.
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From the above graph it can clearly make out that Bajaj Auto relies more on its sales & distribution. Hence, it can be safely concluded that Bajaj Auto focuses more on the push factor for its sale.
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During the year under review, company continued to invest substantially in R & D
facilities resulting in enhancement of its infrastructure for design, prototyping & testing.
company, were launched during this year. These were Platina 125 DTS-is, sporting an enhanced style and XCD 135 DTS-i(Digital Twin Spark ignition), an up market product.
Company continues to focus on expanding its design & testing teams, which has
o
in
The company has through internal efforts, designed & launched a sub 100 cc
The company has launched Caliber 115 motorcycle, which has received
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The company has upgraded the Boxer series with various new vehicle
features. The Boxer CT/AR series has a newly developed K Tech engine which is popular among customers.
with Kawasaki Heavy Industries Ltd. The product has been designed keeping in view the global market as well as domestic market.
has a dominant presence in the countries of Sri Lanka, Columbia, Bangladesh, Central America, Peru and Egypt, and is looking to increase its share in the African market. The company has commissioned an assembly unit in Nigeria with the help of its distributor, to cater to the growing demand in the African markets. It already has an assembly plant in Indonesia and is looking at setting up a plant in Manaus, a Free Trade Zone, in Brazil by 2010-11, after delaying the decision for six years. A distributor of Bajaj Auto has a plant in Egypt. They are also planning to set up plants at Columbia and Iran.
Vendors Bajaj Auto has a consolidated base of 180 vendors supplying components to all Bajaj Autos plants. A large number of vendors are located either near Pune or Aurangabad. Those that are far are encouraged to tie up with third party logistics providers, who along with local vendors supply multiple deliveries daily to Chakan & Waluj plant. Bajaj Auto has extended the TPM (Total Preventive Maintenance) to
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vendor as well. Around 60% by value of Bajaj vehicle is outsourced. Virtually no components are imported & 70% of Bajaj Autos requirements are sourced from within the state of Maharashtra. To improve quality, Bajaj Auto has also begun actively assisting its suppliers in finalizing joint ventures with counterparts in Japan, Italy, Taiwan & Spain. Dealers- Bajaj Auto has a network of 422 dealers and over 1,300 authorized service centers. The company plans to increase the number of dealers to 500 by this financial year. A large number of these new dealerships are planned in semi-urban & rural areas. During the financial year 2007-08, the company extended BASS (Bajaj Auto Service Standard) to standardize the workshops of 250 dealers & 50 authorized service centers. These programmers included a uniform external & internal look. This initiative has improved work hygiene, promoted consistent & better service quality, & greater productivity. Faster turnaround of serviced vehicles coupled with higher spare parts sales in converting such workshops into independent profit centers for the dealers.
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Bajaj Auto offers a number of services to its business partners. They include:
Training in sales, service and spare parts management based on the Bajaj distribution system. Active support for setting up manufacturing facilities overseas including transfer of technical know-how. Assistance in setting up an assembly plant for assembly of vehicles from complete knocked down (CKD) kits. Selecting of machinery and equipment and training of technical personnel, all in a phased manner as required by the regulations in the recipient country. Active support in setting nation-wide dealer network, also involving identification and recommending suitable partner who would assist the distributor in Business growth.
Name
Bombay Stock Exchange Ltd, Mumbai (BSE) National Stock Exchange of India Ltd. (NSE)
Address
1st Floor, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai 400 001 Exchange Plaza Bandra-Kurla Complex, Bandra (E) Mumbai 400 051
Source: Bajaj Annual Report
Low
NSE High
Source: Bajaj Annual Report * Equity shares of the company were listed at BSE and NSE on 26 May 2008 and hence there are no stock quotes for the period up to 25 May 2008.
Distribution of shareholdings
Table 3 gives details about the pattern of shareholdings among various categories as on 31 March 2009 and 3 April 2008, while Table 3A gives the data according to size classes as on 31 March 2009. Distribution of shareholdings across categories: Categories 31 March 2009 No. of % to total shares 71,786,036 16,327,478 181,775 19,980,919 8,316,122 4,926,547 110,397 capital 49.61 11.28 0.13 13.81 5.75 3.41 0.08
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3 April 2008 No. of % to total shares 72,747,805 16,454,136 768,698 20,266,586 8,707,469 1,123,175 251,704 capital 50.28 11.37 0.53 14.01 6.02 0.78 0.17
Promoters Friends and associates of promoters GDRs** Foreign Institutional Investors Public Financial Institutions Mutual Funds Nationalized & other
Source: Bajaj Annual Report **Under the deposit agreement, the depository exercises the voting rights on the shares underlying the GDRs as directed by the promoters of the company.
All this is part of a renewed thrust by the company to focus on two key requirements of the market which, over the years, have pretty much remained constant for either fuel-efficient commuter bikes or sporty, powerful products. The Discover has now been positioned to fulfill the former need in a segment where Hero Honda reigns supreme while the Pulsar has established itself in the sporty slot, with monthly sales of over 40,000 units.
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Bajaj Auto Ltd has announced that the company may launch a small car in the year 2010 in India. The second largest two wheeler maker in India will enter the small car segment in partnership with French car giant Renault and Nissan. The small car prototype was unveiled today and the company wants to promote the vehicle as economical and affordable car. The Bajaj Autos car will be expensive as it will meet safety and emission norms. The standard version will come with an air conditioner. Bajaj Auto has said in a statement that the car will offer a mileage of 34 kilometer per litter. Bajaj will launch the car in Petrol and Diesel variants. Bajaj has plans to manufacture the small car at its facility in Chakan near Pune.
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Bajaj Auto, which is yet to sign a joint venture agreement with its partners, Renault and Nissan. The ULC project was conceived as a three-way alliance where Bajaj would hold 50 per cent equity with Renault and Nissan accounting for 25 per cent each. Bajaj-Renault-Nissan will miss its 2011 deadline on its ultra-low-cost car project. Bajaj Auto managing director Rajiv Bajaj has ordered that the work done so far on the project be scrapped and has demanded major modifications on design, positioning and other details, according to a person familiar with the development.
Advantage of RE600:
The RE 600 is specially conceived and developed for cargo movement in congested cities & towns.
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It has the lowest turning radius for high maneuverability even on narrow roads, has twin front suspension. A spacious cabin for comfortable long hrs of drive. It has high torque for quick pick-up even with heavy loads and has ease of frequent and quick start-stop cycles. Making it the best suited vehicle for in-city operations. The RE 600 has thus created a new category in the small commercial vehicle segment.
speed gearbox. It generates 30 PS at 10,500 rpm. Its 6-speed transmission makes it a versatile performer. Kawasaki is Bajajs reliable technical partner since mid 80s and promised to assist Bajaj in all technical aspects with providing the necessary service training and parts back-up while Bajaj auto will handle the distribution and marketing department.
Bajaj Auto announced on Wednesday that it is exiting the scooter segment altogether, bringing the curtains down on its iconic product line. The company had stopped making the Chetak, once the worlds largest selling scooter, almost three years ago, and according to its MD Rajeev Bajaj, it will stop production of its non-starter Kristal series by end of the current fiscal. This is a definite watershed moment, because its almost like detaching ourselves from what constitutes middle class India, and the set of values that constituted middle
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class India, says Santosh Desai, MD and CEO of Future Brands and a marketing and advertising expert.
In the General Budget 2008-09 proposals, Shri P. Chidambaram has announced reduction in the excise duty in the growth and employment driving sectors.
The budget announcements are not likely to have any major impact on the The continued focus on rural development and change in exemption limit in The increase in funds allotted towards irrigation by 75 per cent in 2009-10 will On buses and their chassis, excise duty reduced from 16 p.c. to12 p.c.
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automobile sector.
Excise duty reduced on small cars from 16 p.c. to 12 p.c. and on hybrid cars On two wheelers and three-wheelers, duty reduced from 16 p.c. to12 p.c. Retention of the excise duty on 2 wheelers, 3 wheelers, small cars and diesel Reduction in excise duty applicable to large cars of engine capacity 2000 cc
and above from 20% + Rs 20,000 per vehicle to 20% + Rs 15,000 per vehicle. Lowering the excise duty on large cars.
Current Assets = Debtors + Cash/Bank + Marketable Non Trade Investments + Stock + Loans & Advances + Prepaid Expenses. Current Liability = Creditors + Bank Overdraft + O/S Expenses. The ideal ratio is 2:1
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Current Ratio
0.88 times. 0.92 times.
2008 2009
1780.67 2401.45
2019.29 2602.35
Analysis:-Current ratio is higher in 2009 as compared to 2008. There is decreased all current assets except other receivables which increased in 2009. The net current assets increased by Rs.238.62 cr. in 2009 and at same time current liabilities increased by Rs.200.9 cr. in 2009. It means Bajaj Auto Ltd., has sufficient current assets to pay current liabilities. Short term solvency of the company is satisfactory.
Current Assets = Debtors + Cash/Bank + Marketable Non Trade Investments + Loans & Advances. Current Liability = Creditor + O/S Expenses It is also known as Liquid Ratio or Acid Test Ratio. It measures the ability of the firm to convert its current assets quickly into cash in order to meet its current liabilities. Since stock cannot be converted into cash immediately & prepaid expenses can never be converted into cash they are not considered. Bank overdraft facility is available for long period of time hence it is also not included. The ideal ratio is 1:1.
Year
Quick Assets
Quick Liabilities
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Quick Ratio
Companys Financial Analysis: Bajaj Auto Ltd. (Rs. in cr.) (Rs. in cr.)
2008 2009
331.38 495.52
2019.23 2602.35
Analysis:-We have seen that the company had a higher current ratio in 2009 and was able to meet its short term obligations as compared to 2008. Where as the quick ratio identifies the role played by the inventories in this context. Therefore the ratio shows that in year 2009 it has increased as compared to 2008 due to the fact that the quick assets is increased by Rs.164.14 cr. only and current liabilities have increased by Rs.583.12 cr. The company is able to meet its short term obligations.
(iii)
____DEBT____ Equity
The Debt equity ratio is an important tool to appraise financial structure of a firm. It reflects relative contribution of creditors and owners of business in its financing. Debt/Borrowed Funds = Debenture + Long Term loan + Redeemable Preference shares. Equity = Equity share capital + Preference shares other than redeemable + Reserves and surplus Losses and Fictitious assets.
Year
2008 2009
Debt
(Rs. in cr.)
Equity
(Rs. in cr.)
1334.34 1570.00
1587.59 1869.69
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Analysis:This ratio says that both year 2008 and 2009 as same. In 2009 increased debt by Rs.236 cr. That is increased in Debenture, Long Term loan, Redeemable Preference shares. And equity means Equity share capita, Preference shares other than redeemable, Reserves and surplus, Losses and Fictitious assets increased by Rs.282.1 cr. in 2009 tear.
(A)
This ratio finds how efficient the management is in their decision-making & utilization of the production capacity & other resources. (i) Inventory Turnover Ratio.
Year
2008 2009
Sales Turnover
(Rs. in cr.)
9856.66 9310.24
349.61 338.84
28.19 27.47
Analysis:The inventory turnover ratio in the year 2008 was 28.19 which indicate that 28.19 times in a year the inventory of the firm is converted into receivables or cash. However, in 2009, the inventory turnover ratio slightly decreased to 27.47. This was due to the fact that the Bajaj Auto Ltd. in 2009 invested more then 0.72 times the inventory in 2008.
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The ratio is indicative of the time lag between credit sales and cash collection. This helps to find out the efficiency of the Collection/ Receivables department & analyze the credit policy of the firm & whether it is properly implemented.
Year
Receivables
(Rs. in cr.)
Sales
(Rs. in cr.)
DSO
1099.68 1567.09
9856.66 9310.24
DSO in year 2008 was 40.72 days which has now increased to 61.44 days which shows that the company is more defective in collecting receivables now in comparison of previous year, even the sales has decreased by Rs.546.42 cr. on the other hand receivables increased which resulted high days sales outstanding.
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(iii)
It measures the efficiency of the company in managing and utilizing its assets.
Year
Sales
(Rs. in cr.)
Fixed Assets
(Rs. in cr.)
2008 2009
8827.15 8700.17
4906.42 5752.26
1.79 % 1.51 %
Analysis:According to the calculations above the productivity of fixed assets in year 2009 is not better than it was in previous years. In 2008, it was 1.79% and now it has been slightly decreased to 1.51%. This change was brought about by decreased in total sales by Rs.126.98 cr., where as the fixed assets increased only by Rs.845.84 cr.
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PROFITABILITY RATIO
Year
NPAT
(Rs. in cr.)
Net sales
(Rs. in cr.)
Profit Margin
2008 2009
755.95 656.48
8827.15 8700.17
8.56 % 7.55 %
Analysis:The profit margin has decreased from 8.56% in 2008, to 7.55% in 2009. According to the figures, company has been successful in decreasing their Sales by Rs.126.98 cr. in 2009 but the increases in net income available common stock holders was 111% which leaded to a decrease in the profit margin.
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(B)
Year
2008 2009
PER
0.19 0.22
10 10
52.25 45.37
Analysis:It can be seen from calculations that in year 2009 the ratio is more than doubled from 0.19 to 0.22. This was due to the fact that the price per share over the year has same with Rs.10 per share where as book value per share increased by just Rs.109.73 to Rs.129.23.
SECTION - V Recommendations
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The impression of Bajaj in the minds of the public is that it is a moped & a three-wheeler company, & it is a very orthodox & unhappening image in the minds of the youth. It should use a powerful brand ambassador & individual whom the youth can relate with.
It should aggressively market itself as a motorcycle company & move from its traditional mindset (Rahul Bajaj had once stated that he had only one department in his company the dispatch department & that he did not require a marketing department.)
Bajaj should aggressively push sales of higher margin products & launch new products in niche segments.
Bajaj should also try & push for tie-ups & Joint Ventures in foreign market & try & increase its export base. (E.g. Tata Motors tie-up with Rover for marketing of India & Joint Venture with Senegal government for manufacturing trucks & commercial vehicles.)
Bajaj should look for possible mergers & acquisitions. (E.g. Maharashtra Scooters) & try & improve its distribution network & provide it with products in niche segments & help increase production capacity & provide economies of scale.
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Bajaj should evaluate the process of backward integration as it has huge cash reserves surplus. This process would help it in acquiring inputs continuously at lower cost & at regular intervals.
Increase its dealer network to tap rural growing markets by going in for tie-ups & offering better margins to dealers.
The key to Bajaj real success lies in Research & development. How it is able to use value analysis & value engineering by adding new features to its existing product line & how it is able to come out with new product for different niche markets. Analysis of different alternatives like outsourcing, inhouse, purchase & tie-up should be evaluated.
SECTION - VI
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Particulars
2007-08 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accumulative Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Differed Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets 144.68 144.68 0.00 0.00 1,442.91 0.00 1,587.59 6.95 1,327.39 1,334.34 2,921.93 2,994.68 1,726.07 1,268.61 34.74 1,857.14 349.61 275.31 54.74 679.66 1,099.68 1.33 1,780.67 0.00 1,185.19 834.04 2,019.23 -238.56 0.00 2,921.93
2008-09 144.68 144.68 0.00 0.00 1,725.01 0.00 1,869.69 0.00 1,570.00 1,570.00 3,439.69 3,350.20 1,807.91 1,542.29 106.48 1,808.52 338.84 358.65 135.68 833.17 1,567.09 1.19 2,401.45 0.00 1,378.20 1,224.15 2,602.35 -200.90 183.30 3,439.6
The company has maintained proper records showing full quantitative details and situation of fixed Assets.
Particulars including
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According to the records of the company, the company has been regular in depositing undisputed statutory dues including Provident Fund, Investor.
Education and Protection Fund, Employees State Insurance, Income Sales Statutory dues with the appropriate authorities.
Tax,
Tax, Wealth Tax, Service Tax, Customs Duty, Excise duty and other
The company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under of the Companies Act, 1956.
The company, in our opinion, has maintained proper records and contracts with respect to its investments wherein timely entries of transactions are made.
The company has not defaulted in repayment of dues to banks. The company has not borrowed any sums from Financial Institutions nor through debentures.
The company has, not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other investments.
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