INDUSTRY

An industry is the manufacturing of a good or service within a category. Although

industry is a broad term for any kind of economic production, in economics and urban
planning, industry is a synonym for the secondary sector, which is a type of economic
activity involved in the manufacturing of raw materials into goods and products.

“Industry” means any systematic activity carried on by co-operation between an

employer and his workmen for the production, supply or distribution of goods or services
with a view to satisfy human wants or wishes (not being wants or wishes which are
merely spiritual or religious in nature), whether or not any capital has been invested for
the purpose of carrying on such activity; or such activity is carried on with a motive to
make any gain or profit.

CLASSIFICATION OF INDUSTRIES

There are four key industrial economic sectors: the primary sector, the secondary
sector, the tertiary sector, the quaternary sector, and the quinary sector. The
economy is also broadly separated into public sector and private sector, with industry
generally categorized as private. Industries are also any business or manufacturing.

Primary sector: These industries are involved in the extraction or production of raw
materials such as mining, farming, fishing, forestry, coal mining, oil drilling, gold mining
etc.

Secondary sector: The secondary sector of the economy includes those economic sectors
that create a finished, usable product. These industries are involved in the processing of
raw materials such as refining, construction, and manufacturing. This sector generally
takes the output of the primary sector and manufactures finished goods for export, or sale
to domestic consumers.

Tertiary sector: These are the service industries, e.g. Transport, dentists, doctors, and so
on. The capital required for a manufacturing business (secondary sector) is usually
prohibitively large.

Quaternary sector: A relatively new type of knowledge industry focusing on

technological research, design and development such as computer programming, and
biochemistry. It focuses on the latest technology. Examples of ‛Quaternary Industries‛ are
designing new computers/writing computer software, Researching new medicines and
medical equipment.

Quinary sector: The sector comprises of health, education, culture, research, police, fire
service, and other government industries not intended to make a profit. The quinary
sector also includes domestic activities such as those performed by stay-at-home parents
or homemakers. These activities are not measured by monetary amounts but make a
considerable contribution to the economy.
INDUSTRY LIFECYCLE

The stages of evolution through which an industry progresses as it moves from

conception to stabilization and stagnation represent an industry lifecycle. An industry has
a beginning, with technological innovation; a period of rapid growth; maturity and
consolidation; and finally decline and possibly death. The stages of industry lifecycle
include fragmentation, shake-out, maturity and decline.

Developmental Stage: The first stage of the industry life cycle is developmental or
formative stage. This is the stage when the new industry develops the business. At this
stage, the new industry normally arises when an entrepreneur works out how to bring the
new products or services into the market. The growth prospects are usually high.
Competition is likely to enhance during the development of this stage as other
entrepreneurs become acquainted with the market potential. High risks can be seen in this
phase given that there is insecurity as to whether or not consumers will generally
acknowledge the product, and which firms will continue to exist.

Shake-out or growth stage: Shake-out is the

second stage at which a new industry emerges.
Consumer recognition extends the market as
the leaders develop the product more. The risk
in this stage reduces because of increased
consumer acceptance and customer loyalty
starts to come about. Competitors start to
realize business opportunities in the emerging
industry.

Maturity: Maturity is the third stage in the

industry lifecycle. This is by and large the most extended stage in the life cycle and can
last for a good number of years. The competition in the industry is rather aggressive
because there are many competitors and product substitutes. The growth rate slows down
and becomes stable at a level that is sustainable over a long period of time, as a result of
competition and shrinking profit margins. Some companies may shift some of the
production overseas in order to gain competitive advantage.

Decline: Decline is the final stage of the industry lifecycle during which a war of slow
destruction between businesses may develop and those with heavy bureaucracies may
fail. In addition, the demand in the market may be fully satisfied or suppliers may be
running out. Some companies may leave the industry if there is no demand for the
products or services they provide, or they may develop new products or services that
meet the demand in the market. In such cases, this will create a new industry.

AUTOMOBILE INDUSTRY
The automobile industry in India is the ninth largest in the world with an annual
production of over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth
largest exporter of automobiles, behind Japan, South Korea and Thailand.

Following economic liberalization in India in 1991, the Indian automotive industry has
demonstrated sustained growth as a result of increased competitiveness and relaxed
restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti
Suzuki and Mahindra and Mahindra, expanded their domestic and international
operations.

Since the first car rolled out on the streets of Mumbai (then Bombay) in 1898, the
Automobile Industry of India has come a long way. During its early stages the auto
industry was overlooked by the then Government and the policies were also not
favorable. The liberalization policy and various tax relief by the Govt. of India in recent
years has made remarkable impacts on Indian Automobile Industry. Indian auto industry,
which is currently growing at the pace of around 18 % per annum, has become a hot
destination for global auto players like Volvo, General Motors and Ford.

A well developed transportation system plays a key role in the development of an

economy, and India is no exception to it. With the growth of transportation system the
Automotive Industry of India is also growing at rapid speed, occupying an important
place on the canvas of Indian economy. The face of the Indian automobile market has
changed tremendously since the turn of the millennium and will change even further
since Nano.

Today Indian automotive industry is fully capable of producing various kinds of vehicles
and can be divided into 03 broad categories: Cars, two-wheelers and heavy vehicles.

Segment Know-how
Among the two-wheeler segment, motorcycles have major share in the market. Hero
Honda contributes 50% motorcycles to the market. In it Honda holds 46% share in
scooter and TVS makes 82% of the mopeds in the country.

40% of the three-wheelers are used as goods transport purpose. Piaggio holds 40% of the
market share. Among the passenger transport, Bajaj is the leader by making 68% of the
three-wheelers.

Cars dominate the passenger vehicle market by 79%. Maruti Suzuki has 52% share in
passenger cars and is a complete monopoly in multi purpose vehicles. In utility vehicles
Mahindra holds 42% share.

In commercial vehicle, Tata Motors dominates the market with more than 60% share.
Tata Motors is also the world's fifth largest medium & heavy commercial vehicle
manufacturer.
INDIAN AUTOMOBILE HISTORY

During the 1920s, cars exhibited design refinements such as balloon tires, pressed-
steel wheels, and four-wheel brakes.

An embryonic automotive industry emerged in India in the 1940s. Following the

independence, in 1953, the Government of India and the private sector launched efforts to
create an automotive component manufacturing industry to supply to the automobile
industry. However, the growth was relatively slow in the 1950s and 1960s due to
nationalisation and the license raj which hampered the Indian private sector. After 1970,
the automotive industry started to grow, but the growth was mainly driven by tractors,
commercial vehicles and scooters. Cars were still a major luxury. Japanese manufacturers
entered the Indian market ultimately leading to the establishment of Maruti Udyog. A
number of foreign firms initiated joint ventures with Indian companies.

In the 1980s, a number of Japanese manufacturers launched joint-ventures for building

motorcycles and light commercial-vehicles. It was at this time that the Indian government
chose Suzuki for its joint-venture to manufacture small cars. Following the economic
liberalisation in 1991 and the gradual weakening of the license raj, a number of Indian
and multi-national car companies launched operations. Since then, automotive
component and automobile manufacturing growth has accelerated to meet domestic and
export demands

The automobile industry has changed the way people live and
work. The earliest of modern cars was manufactured in the
year 1895. Shortly the first appearance of the car followed in
India. As the century turned, three cars were imported in
Mumbai (India). The dawn of automobile actually goes back to
4000 years when the first wheel was used for transportation in
India. In the beginning of 15th century Portuguese arrived in
China and the interaction of the two cultures led to a variety of
new technologies, including the creation of a wheel that turned
under its own power. By 1600s small steam-powered engine
models was developed.

The actual horseless carriage was introduced in the year

1893. One of the highest-rated early luxury automobiles was
the 1909 Rolls-Royce Silver Ghost that featured a quiet 6-
cylinder engine, leather interior, folding windscreens and
hood, and an aluminum body. It was usually driven by
chauffeurs and emphasis was on comfort and style rather
than speed.
The year 1957 brought powerful high-performance cars such as
Mercedes-Benz 300SL. It was built on compact and stylized lines,
and was capable of 230 kmh (144 mph). This was the Indian
automobile history, and today modern cars are generally light,
aerodynamically shaped, and compact.

GROWTH

In India there are 100 people per vehicle, while this figure is 82 in China. It is
expected that Indian automobile industry will achieve mass motorization status by
2014. The Indian automobile industry is often described as the sunrise Industry.

The Automobile Industry is one of the fastest growing sectors in India. The increase in
the demand for cars, and other vehicles, powered by the increase in the income is the
primary growth driver of the automobile industry in India. The introduction of tailor
made finance schemes, easy repayment schemes has also helped the growth of the
automobile sector. India, in auto sector, is turning to be a sourcing base for the global
auto majors. The passenger car and the motorcycle segment are set to grow by 8-9 per
cent in coming couple of years. The industry is striving to maintain the growth
momentum picked up in 2002-03.

 India has become one of the international players in the automobile market
 In the year 2006-07, the Indian Automobile Industry produced 2.06
million four wheelers and 9 million two and three wheelers
 The four wheelers include passenger cars, multi-utility vehicles, sports
utility vehicles, light, medium and heavy commercial vehicles, etc
 The three wheelers include mopeds, motor-cycles, scooters, and three
wheelers
 India ranks 2nd in the global two-wheeler market
 India is the 4th biggest commercial vehicle market in the world
 India ranks 11th in the international passenger car market
 India ranks 5th pertaining to the number of bus and truck sold in the world
 It is expected that the Automobile Industry in India would be the 7th
largest automobile market within the year 2016

Sales incentives, introduction of new models as well as variants coupled with easy
availability of low cost finance with comfortable repayment options continued to drive
demand and sales of automobiles. As the players continue to introduce new models and
variants, the competition may intensify further. It is not only meeting the growing
domestic demands, but also gradually increasing its penetration in the international
markets. It has been continuously restructuring itself and absorbing newer technologies in
order to align itself to the global developments and realize its potentialities. Among the
car companies that are investing in India are US automakers General Motors and Ford,
Germany's BMW and DaimlerChrysler AG, France's Renault, Japan's Suzuki, Toyota and
Honda, and South Korea's Hyundai.

Automobile industry in India also received a boost from stringent government auto
emission regulations over the past few years. This ensured that vehicles produced in India
conformed to the standards of the developed world.

With the growing automotive market, customers are always looking for newer designs.
Automobile designing has, therefore, become as important as fuel efficiency or the safety
and ergonomics of a vehicle. The setting up of indigenous auto designing capabilities
through a national automobile design institute is, therefore, essential for the growth of
Indian auto Industry

There is also a boom in auto ancillary companies. India is an attractive outsourcing

destination for global auto companies because of its strong engineering skills and low
costs. Sourcing parts from India is 10-20% cheaper for US auto makers and about 50%
cheaper for their European counterparts. The auto component sector has also posted
significant growth of 20 per cent in 2003-04, to achieve a sales turnover of Rs.30, 640
crore. There is a potential for higher growth due to outsourcing activities by global
automobiles giants. Today, this sector has emerged as another sunrise sector.

CONTRIBUTION

In India, automotive is one of the largest industries showing impressive growth over the
years and has been significantly making increasing contribution to overall industrial
development in the country. It plays a pivotal role in country's rapid economic and
industrial development. It caters to the requirement of equipment for basic industries like
steel, non-ferrous metals, fertilizers, refineries, petrochemicals, shipping, textiles,
plastics, glass, rubber, capital equipments, logistics, paper, cement, sugar, etc. It
facilitates the improvement in various infrastructure facilities like power, rail and road
transport.

On the canvas of the Indian economy, auto industry occupies a prominent place. The
automotive industry has a strong multiplier effect and is capable of being the driver of
economic growth. A sound transportation system plays a pivotal role in the country's
rapid economic and industrial development. The well-developed Indian automotive
industry ably fulfils this catalytic role by producing a wide variety of vehicles: passenger
cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps,
scooters, motorcycles, mopeds, three wheelers, tractors etc.

Indian automobile industry; manufacturing cars, buses, three wheelers, two wheelers,
commercial vehicles, heavy vehicles, provides employment to a large number of
workforce. The abolition of license raj in 1991 opened the doors for international
automobile manufacturers. A number of leading global automotive companies entered
into joint ventures with domestic manufacturers of India and thus started the large-scale
production of automobiles in India. The automobile sector is one of the core industries of
the Indian economy, whose prospect is reflective of the economic resilience of the
country.

The automotive industry comprising of the automobile and the auto component sectors
has made rapid strides since delicensing and opening up of the sector to FDI in 1991. The
Auto Component industry is today considered as the sunrise industry with huge growth
prospects. This industry is also expected to drive the growth of the engineering sector in
view of its strong downstream and upstream linkages with many other segments of the
engineering sector like raw materials, capital goods, intermediate products etc.
Government has also liberalized the norms for import of technology and that appears to
have benefited the automobile sector. The industry had an investment of about Rs.
50,000 crore in 2002-03 which has gone upto Rs. 80,000 crore by the year 2007. The
contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 5%
in 2006-07. The industry is also making a contribution of 17% to the kitty of indirect
taxes of the Government.

The Indian automotive industry has already attained a turnover of Rs. 1, 65,000 crore (34
billion USD) and has provided direct and indirect employment to 1.31 crore people in the
country. Endowed with several advantages like low cost and high skill manpower;
globally competitive auto-ancillary industry; established testing and R & D centers;
production of steel at lowest cost; etc., the industry provide immense investment
opportunities. This has instilled confidence in auto manufacturers to face international
competition as well as improve quality standards of vehicles with safety norms in the
wake of rapidly increasing traffic.

MARUTI SUZUKI
Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a subsidiary of
Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting
for over 50 per cent of the domestic car market. More than half the numbers of cars sold
in India wear a Maruti Suzuki badge. The company offers full range of cars- from entry
level Maruti 800 & Alto to stylish hatchback Ritz, A star, Swift, Wagon R, Estillo and
sedans DZire, SX4 and Sports Utility vehicle Grand Vitara. Since inception, it has
produced and sold over 7.5 million vehicles in India and exported over 500,000 units to
Europe and other countries. The turnover for the fiscal 2008-09 stood at Rs. 203,583
Million & Profit after Tax at Rs. 12,187 Million.

The company was born as a government company, with Suzuki as a minor partner, to
make a people's car for middle class India. Over the years, the product range has
widened, ownership has changed hands and the customer has evolved. What remains
unchanged, then and now, is its mission to motorize India.

The parent company, Suzuki Motor Corporation, has been a global leader in mini and
compact cars for three decades. Suzuki's technical superiority lies in its ability to pack
power and performance into a compact, lightweight engine that is clean and fuel efficient.
Right from inception, Maruti brought to India, a very simple yet powerful Japanese
philosophy 'smaller, fewer, lighter, shorter and neater'

The company takes great pride in sharing that customers have rated Maruti Suzuki first
once again in Customer Satisfaction Survey conducted by independent body, J.D.Power
Asia Pacific. It is 10th time in a row.

FINANCIAL STATEMENTS
Balance Sheet

Balance Sheet of Maruti Suzuki India ------------------- in Rs. Cr. -------------------

Mar '07 Mar '08 Mar '09
Sources Of Funds 12 mths 12 mths 12 mths
Total Share Capital 144.50 144.50 144.50
Equity Share Capital 144.50 144.50 144.50
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 6,709.40 8,270.90 9,200.40
Revaluation Reserves 0.00 0.00 0.00
Networth 6,853.90 8,415.40 9,344.90
Secured Loans 63.50 0.10 0.10
Unsecured Loans 567.30 900.10 698.80
Total Debt 630.80 900.20 698.90
Total Liabilities 7,484.70 9,315.60 10,043.80
Mar '07 Mar '08 Mar '09
Application Of Funds 12 mths 12 mths 12 mths
Gross Block 6,146.80 7,285.30 8,720.60
Less: Accum. Depreciation 3,487.10 3,988.80 4,649.80
Net Block 2,659.70 3,296.50 4,070.80
Capital Work in Progress 238.90 736.30 861.30
Investments 3,409.20 5,180.70 3,173.30
Inventories 713.20 1,038.00 902.30
Sundry Debtors 747.40 655.50 918.90
Cash and Bank Balance 114.80 324.00 239.00
Total Current Assets 1,575.40 2,017.50 2,060.20
Loans and Advances 1,072.60 1,173.00 1,809.80
Fixed Deposits 1,308.00 0.00 1,700.00
Total CA, Loans & Advances 3,956.00 3,190.50 5,570.00
Deferred Credit 0.00 0.00 0.00
Current Liabilities 2,288.60 2,718.90 3,250.90
Provisions 490.50 369.50 380.70
Total CL & Provisions 2,779.10 3,088.40 3,631.60
Net Current Assets 1,176.90 102.10 1,938.40
Miscellaneous Expenses 0.00 0.00 0.00
Total Assets 7,484.70 9,315.60 10,043.80
Contingent Liabilities 2,094.60 2,734.20 1,901.70
Book Value (Rs) 237.23 291.28 323.45

Profit and loss account (income statement)

Profit & Loss account of Maruti Suzuki
------------------- in Rs. Cr. -------------------
India
Mar '07 Mar '08 Mar '09
Income
Sales Turnover 17,358.40 21,200.40 23,381.50
Excise Duty 2,552.00 3,133.60 2,652.10
Net Sales 14,806.40 18,066.80 20,729.40
Other Income 338.10 494.00 491.70
Stock Adjustments -200.70 336.30 -356.60
Total Income 14,943.80 18,897.10 20,864.50

Raw Materials 10,863.00 13,958.30 15,983.20

Power & Fuel Cost 97.40 147.30 193.60
Employee Cost 288.40 356.20 471.10
Other Manufacturing Expenses 392.40 523.30 716.10
Selling and Admin Expenses 483.26 521.48 751.06
Miscellaneous Expenses 239.44 287.62 303.44
Preoperative Exp Capitalized -14.30 -19.80 -22.30
Total Expenses 12,349.60 15,774.40 18,396.20
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Operating Profit 2,256.10 2,628.70 1,976.60
PBDIT 2,594.20 3,122.70 2,468.30
Interest 37.60 59.60 51.00
PBDT 2,556.60 3,063.10 2,417.30
Depreciation 271.40 568.20 706.50
Other Written Off 0.00 0.00 0.00
Profit Before Tax 2,285.20 2,494.90 1,710.80
Extra-ordinary items 33.40 76.60 37.90
PBT (Post Extra-ord Items) 2,318.60 2,571.50 1,748.70
Tax 705.30 763.30 457.10
Reported Net Profit 1,562.00 1,730.80 1,218.70
Total Value Addition 1,486.60 1,816.10 2,413.00
Preference Dividend 0.00 0.00 0.00
Equity Dividend 130.00 144.50 101.10
Corporate Dividend Tax 21.90 24.80 17.20
Per share data (annualized)
Shares in issue (lakhs) 2,889.10 2,889.10 2,889.10
Earning Per Share (Rs) 54.07 59.91 42.18
Equity Dividend (%) 90.00 100.00 70.00
Book Value (Rs) 237.23 291.28 323.45

TATA MOTORS
Tata Motors Limited is India's largest automobile company, with consolidated revenues
of Rs.70, 938.85 crores (USD 14 billion) in 2008-09. It is the leader in commercial
vehicles in each segment, and among the top three in passenger vehicles with winning
products in the compact, midsize car and utility vehicle segments. The company is the
world's fourth largest truck manufacturer, and the world's second largest bus
manufacturer.

The company's 23,000 employees are guided by the vision to be "best in the manner
in which we operate best in the products we deliver and best in our value system
and ethics."

Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of
India. The company's manufacturing base in India is spread across Jamshedpur
(Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand)
and Dharwad (Karnataka).

Tata Motors, the first company from India's engineering sector to be listed in the New
York Stock Exchange (September 2004), has also emerged as an international
automobile company. Through subsidiaries and associate companies, Tata Motors has
operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land
Rover, a business comprising the two iconic British brands that was acquired in 2008.

It was Tata Motors, which developed the first indigenously developed Light
Commercial Vehicle, India’s first Sports Utility Vehicle and, in 1998, the Tata Indica,
India's first fully indigenous passenger car. Within two years of launch, Tata Indica
became India’s largest selling car in its segment. In 2005, Tata Motors created a new
segment by launching the Tata Ace, India's first indigenously developed mini-truck.

In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and
the world have been looking forward to. The Tata Nano has been subsequently
launched, as planned, in India in March 2009 and has won the prestigious Indian Car of
the Year (ICOTY) award.

In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile
industry, in keeping with its pioneering tradition, by unveiling its new range of world
standard trucks called Prima. In June 2009, the exciting new range of premium luxury
vehicles from Jaguar and Land Rover were introduced for the Indian market.
 FINANCIAL STATEMENTS

Balance Sheet

Balance Sheet of Tata Motors ------------------- in Rs. Cr. -------------------

Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 385.41 385.54 514.05
Equity Share Capital 385.41 385.54 514.05
Share Application Money 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 6,458.39 7,428.45 11,855.15
Revaluation Reserves 25.95 25.51 25.07
Networth 6,869.75 7,839.50 12,394.27
Secured Loans 2,022.04 2,461.99 5,251.65
Unsecured Loans 1,987.10 3,818.53 7,913.91
Total Debt 4,009.14 6,280.52 13,165.56
Total Liabilities 10,878.89 14,120.02 25,559.83
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Application Of Funds
Gross Block 8,775.80 10,830.83 13,905.17
Less: Accum. Depreciation 4,894.54 5,443.52 6,259.90
Net Block 3,881.26 5,387.31 7,645.27
Capital Work in Progress 2,513.32 5,064.96 6,954.04
Investments 2,477.00 4,910.27 12,968.13
Inventories 2,500.95 2,421.83 2,229.81
Sundry Debtors 782.18 1,130.73 1,555.20
Cash and Bank Balance 535.78 750.14 638.17
Total Current Assets 3,818.91 4,302.70 4,423.18
Loans and Advances 6,208.53 4,831.36 5,909.75
Fixed Deposits 290.98 1,647.17 503.65
Total CA, Loans & Advances 10,318.42 10,781.23 10,836.58
Deferred Credit 0.00 0.00 0.00
Current Liabilities 6,956.88 10,040.37 10,968.95
Provisions 1,364.32 1,989.43 1,877.26
Total CL & Provisions 8,321.20 12,029.80 12,846.21
Net Current Assets 1,997.22 -1,248.57 -2,009.63
Miscellaneous Expenses 10.09 6.05 2.02
Total Assets 10,878.89 14,120.02 25,559.83
Contingent Liabilities 5,196.07 5,590.83 5,433.07
Book Value (Rs) 177.59 202.70 240.64
Profit and loss account (income statement)

Profit & Loss account ------------------- in Rs. Cr. ------------------

Mar '07 Mar '08 Mar '09

Income
Sales Turnover 31,089.69 33,123.54 28,538.20
Excise Duty 4,425.44 4,355.63 2,877.53
Net Sales 26,664.25 28,767.91 25,660.67
Other Income 1,114.38 734.17 921.29
Stock Adjustments 349.68 -40.48 -238.04
Total Income Expenditure 28,128.31 29,461.60 26,343.92

Raw Materials 19,879.56 20,891.33 18,801.37

Power & Fuel Cost 327.41 325.19 304.94
Employee Cost 1,367.83 1,544.57 1,551.39
Other Manufacturing Expenses 872.95 904.95 866.65
Selling and Admin Expenses 1,505.23 2,197.49 1,652.31
Miscellaneous Expenses 1,051.49 964.78 1,438.89
Preoperative Exp Capitalized -577.05 -1,131.40 -916.02
Total Expenses 24,427.42 25,696.91 23,699.53
Mar '07 Mar '08 Mar '09
12 mths 12 mths 12 mths
Operating Profit 2,586.51 3,030.52 1,723.10
PBDIT 3,700.89 3,764.69 2,644.39
Interest 455.75 471.56 704.92
PBDT 3,245.14 3,293.13 1,939.47
Depreciation 586.29 652.31 874.54
Other Written Off 85.02 64.35 51.17
Profit Before Tax 2,573.83 2,576.47 1,013.76
Extra-ordinary items -0.07 0.00 15.29
PBT (Post Extra-ord Items) 2,573.76 2,576.47 1,029.05
Tax 660.37 547.55 12.50
Reported Net Profit 1,913.46 2,028.92 1,001.26
Total Value Addition 4,547.86 4,805.58 4,898.16
Preference Dividend 0.00 0.00 0.00
Equity Dividend 578.07 578.43 311.61
Corporate Dividend Tax 98.25 81.25 34.09
Per share data (annualized)
Shares in issue (lakhs) 3,853.74 3,855.04 5,140.08
Earning Per Share (Rs) 49.65 52.63 19.48
Equity Dividend (%) 150.00 150.00 125.00
Book Value (Rs) 177.59 202.70 240.64
LIQUIDITY RATIOS:

It measures the ability of the firm to meet its short-term obligations that is capacity of the
firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the
short-term financial solvency of a firm.

1. Current ratio

Current ratio is the relationship between current assets and current liabilities. It is a
measure of general liquidity i.e. analysis of short-term financial position. A current ratio
of 2:1 is the standard ratio of liquidity for a firm.

The higher the current ratio the greater is the margin of safety. The larger the amount of
current assets in relation to current liabilities, the more is the firm’s ability to meet its
current obligations.

Current Ratio = Current Asset

Current Liabilities

Maruti Mar Mar Mar TATA Mar

Suzuki '07 '08 '09 Motors '07 Mar '08 Mar '09
Total Total
Current 1575. 2017. 2060. Current 3818.9
Assets 4 5 2 Assets 1 4302.7 4423.18
Current 2288. 2718. 3250. Current 6956.8 10040.3
Liabilities 6 9 9 Liabilities 8 7 10968.21
Current Current
Ratio 0.69 0.74 0.63 Ratio 0.55 0.43 0.40

Interpretation:

The short-term solvency position of the Maruti and Tata is not sound as the ratio in all
the years is below the standard of 2:1.
 2. Quick Ratio

Quick ratio is the relationship between quick assets and current liabilities. It measures the
firm’s capacity to pay off current obligations immediately and is a more rigorous test of
liquidity.

A high quick ratio indicates that the firm is liquid and has the ability to meet its current
obligations in time and on the other hand a low quick ratio represents that the firm’s
liquidity position is not good.

A standard of 1:1 is considered satisfactory.

Quick Ratio = Quick Assets

Current liabilities

(Quick assets = current assets – inventory)

Mar Mar
Maruti Suzuki '07 Mar '08 '09 TATA Motors Mar '07 Mar '08 Mar '09
Total Current 1575. 2060. Total Current
Assets 4 2017.5 2 Assets 3818.91 4302.7 4423.18
1,038.0 2,500.9
Inventories 713.2 0 902.3 Inventories 5 2,421.83 2,229.81
Current 2288. 3250. Current 10040.3
Liabilities 6 2718.9 9 Liabilities 6956.88 7 10968.21
Quick Assets 0.38 0.36 0.36 Quick Assets 0.19 0.19 0.20

Interpretation:

The quick ratio in of both the companies does not reveal good liquidity position as it
is below the standard of 1:1. This means that the liquid assets are not sufficient to
provide a cover to current liabilities.
PROFITABILITY RATIOS

The primary objective of a business is to earn profits. Profitability ratios are a test of
efficiency and a measurement of control.

1. Gross Profit Ratio

This ratio indicates the extent to which selling prices of goods per unit may decline
without resulting in losses on operations of a firm. It measures profitability of the firm
through the relationship between gross profit and sales. It reflects the efficiency with
which the firm produces its products.

The gross profit ratio should be adequate to cover the operating expenses of the firm.
Higher the ratio better is the profitability.

Gross profit margin or ratio = Gross profit X 100

Net sales

Maruti Mar Mar Mar TATA

suzuki '07 '08 '09 Motors Mar '07 Mar '08 Mar '09
2588.8 3130.8
Gross Profit 2 4 2433.4 Gross Profit 3473.89 3511.15 2627.24
14806. 18066. 20729. 26664.2 28767.9
Net Sales 4 8 4 Net Sales 5 1 25660.67
Gross profit Gross profit
ratio 17.48 17.33 11.74 ratio 13.03 12.21 10.24

Interpretation:

The gross profit ratio has declined for both the companies in the year 2009 compared
to the previous year’s which shows that the profitability of the firms has declined.
 2. Net Profit Ratio

It measures the relationship between net profit and sales of a firm. It indicates
management’s efficiency in manufacturing, administrating, and selling the products.
It also indicates the firm’s capacity to face adverse economic conditions such as price
competition, low demand etc.

Higher the ratio better is the profitability.

Net profit margin or ratio = Earning after tax X 100

Net Sales

Maruti Mar Mar Mar

Suzuki '07 '08 '09 TATA Motors Mar '07 Mar '08 Mar '09
1561.9 1739.7 1218.7
Net Profit 8 3 4 Net Profit 1913.46 2028.92 1001.26
14806. 18066. 20729. 26664.2 28767.9
Net Sales 4 8 4 Net Sales 5 1 25660.67
Net profit Net profit
ratio 10.55 9.63 5.88 ratio 7.18 7.05 3.90

Interpretation: The ratios show a steep decline over the 3 years which shows the weak
profitability position of both the companies.

3. Operating Profit Ratio

The operating profit ratio establishes the relationship between the operating profit and net
sales of the firm and is used to measure the operating efficiency of the firm.

Higher the ratio better is the operating efficiency.

Operating profit ratio = Operating profit X 100

Net sales

Maruti Mar Mar Mar TATA

Suzuki '07 '08 '09 Motors Mar '07 Mar '08 Mar '09
Operating Operating
Profit 2256.1 2628.7 1976.6 Profit 3228.7 3028.02 1701.27
14806. 18066. 20729. 26664.2 28767.9
Net Sales 4 8 4 Net Sales 5 1 25660.67
Operating Operating
profit ratio 15.24 14.55 9.54 profit ratio 12.11 10.53 6.63
 Interpretation: The ratio has fallen down considerably in case of both the firms which
show that the operating efficiency of the firm is not satisfactory.

4. Networth Ratio or Return on investment Ratio(ROI):

ROI is the relationship between net profits and proprietors funds. It is used to measure the
overall efficiency of a firm. It indicates the extent to which the earnings of a firm can be
maximized.
As the ratio reveals how well the resources of a firm are being used, higher the ratio,
better are the results.

ROI= Net Profit after tax X 100

Shareholder funds

Maruti TATA
Suzuki Mar '07 Mar '08 Mar '09 Motors Mar '07 Mar '08 Mar '09
Net PAT 1562 1730.8 1218.7 Net PAT 1913.46 2028.92 1001.26
Shareholders Shareholder
funds 6853.9 8415.4 9344.9 s funds 6869.75 7839.5 12394.27
Networth 22.78994 20.56705 13.04133 Networth 27.85341 25.88073
ratio 4 6 8 ratio 5 2 8.0784104

Interpretation:
The efficiency of the firm has deteriorated considerably in the year 2009 as the ROI has
come down from the year 2007.

5. Return on Capital Employed Ratio(ROCE):

ROCE establishes the relationship between profits and capital employed. It is the primary
ratio to measure the overall profitability and efficiency of a business. It represents the
long-term funds supplied by creditors and owners of the firm.

A higher percentage of ROCE will satisfy the owners that their money is profitably used.

Return on capital employed = Profits before Tax X 100

Capital employed

Mar Mar Mar Mar Mar

Maruti Suzuki '07 '08 '09 TATA Motors '07 '08 Mar '09
Profit Before 2285. 2494. 1710. Profit Before 2573.8 2576.4
Tax 2 9 8 Tax 3 7 1013.76
6853. 8415. 9344. 6869.7
Networth 9 4 9 Networth 5 7839.5 12394.27
ROCE 33.34 29.65 18.31 ROCE 37.47 32.87 8.18
Interpretation:

A very low percentage in the year 2009 as compared to 2007 indicates that there is a
decline in the profitability position of the both the firms.

LEVERAGE or CAPITAL STRUCTURE RATIOS

Financing firm’s assets is a very crucial problem in every business and as general rule
there should be a proper mix of debt and equity capital in financing the firm’s assets.
Leverage ratios are calculated to test the long term financial position of a firm. These
ratios are based on the relationship between borrowed funds and owner’s capital.

1. Debt-Equity Ratio:

Debt-equity ratio measures the relative claims of outsiders and the owners against the
firm’s assets. It indicates the extent to which debt financing has been used in a business.
The purpose is to get an idea of the cushion available to outsiders on the liquidation of
the firm.

A ratio of 1:1 is considered to be satisfactory. A low ratio is considered as favorable.

Debt equity ratio = Outsider Funds (Total Debts)

Shareholder Funds or Equity

Mar Mar Mar Mar Mar

Maruti Suzuki '07 '08 '09 TATA Motors '07 '08 Mar '09
4009.1 6280.5
Total Debt 630.8 900.2 698.9 Total Debt 4 2 13165.56
6853. 8415. 9344. 6869.7
Networth 9 4 9 Networth 5 7839.5 12394.27
Debt to Debt to
Equity Ratio 0.09 0.11 0.07 Equity Ratio 0.58 0.80 1.06

Interpretation: The debt-equity ratio in all the years is favourable as it is below the
standard of 1:1.This shows that the long term solvency position of the firm is satisfactory.
 2. Fixed Assets to Networth Ratio:

The ratio of fixed assets to Networth indicates the extent to which shareholder’s funds are
sunk into the fixed assets.

If the ratio is more than 100%, it implies that owner’s funds are not sufficient to finance
fixed assets. 60 to 65 per cent is considered to be satisfactory ratio.

Fixed assets to net worth ratio = Fixed Assets X 100

Net Worth

Mar Mar Mar Mar Mar

Maruti Suzuki '07 '08 '09 TATA Motors '07 '08 Mar '09
2659. 3296. 4070. Net Block/ 3881.2 5387.3
Fixed assets 7 5 8 fixed asset 6 1 7645.27
6853. 8415. 9344. 6869.7
Networth 9 4 9 Networth 5 7839.5 12394.27
Fixed assets Fixed assets
to net worth to net worth
ratio 38.81 39.17 43.56 ratio 56.50 68.72 61.68

Interpretations:

In 2009, the ratio has increased which shows that there are sufficient funds for financing
fixed assets as well as working capital for Maruti. Similarly in case of Tata, the ratio has
been below 100% which indicates there are sufficient funds to finance the fixed assets.
 3. Proprietary Ratio:

This ratio establishes the relationship between shareholder’s funds to total assets and is
used to determine the long-term solvency of a firm.

Higher the ratio or the share of the shareholder’s in the capital of the company better is
the long-term solvency position of the company.

Proprietary ratio = Networth

Total assets

Maruti Mar Mar Mar TATA

Suzuki '07 '08 '09 Motors Mar '07 Mar '08 Mar '09
6853. 8415.
Networth 9 4 9344.9 Networth 6869.75 7839.5 12394.27
7484. 9315. 10043. 10878.8 14120.0
Total Assets 7 6 8 Total Assets 9 2 25559.83
Proprietary Proprietary
ratio 91.57 90.34 93.04 ratio 63.15 55.52 48.49

Interpretations:

In case of Maruti the shareholders funds being 90% of total assets in 2008 has gone up to
93% of total assets in 2009, it proves that the long-term solvency position of the firm is
satisfactory. Whereas in case of Tata, the ratio has fallen down which indicates that the
long-term solvency position of the firm is deteriorating.
FINDINGS

• The Indian automotive industry has provided direct employment and contributed
to the GDP.
• The short-term solvency position of the companies is not sound and is
deteriorating at a constant rate.
• The long-term position of the companies is quite satisfactory. The firms are
making losses in the core activities of the business. So they should try to increase
the sales.
• The funds of shareholders are employed efficiently.
• The efforts to maximize earnings seem to be unproductive. The overall efficiency
of the companies has deteriorated considerably.
• The firms are witnessing sharp decline in profitability and are also facing severe
problem of non-availability of working capital.

SUGGESTIONS

• The firms need to improve their short-term financial position.

• The borrowed debt should be invested properly so as to maximize the earning
capacity.
• The firms have sufficient funds to finance the fixed assets. They can use these
funds to finance working capital also so as to improve the short-term financial
position.
• Instead on depending on the debt financing, the company should focus on internal
equities.
• Like Nano, the firms shall try to introduce such products at lower price ranges
which will be a good sign of growing competition.
• A healthy competition is prevailing in the automobile industry. Maruti and Tata
are facing tough competition from others companies like Toyota, Hindustan
Motors, and Mahindra etc. The firms should try to make competitive strategies to
increase the sales and profits.
 • Modern-age design tools should be used by automobile manufacturers to develop
better products in a shorter timeframe, as well as further reduce overall costs.
• The Indian auto component industry which is the supply chain for the automobile
vehicle manufactures in India needs to be supported especially the Small and
Medium Enterprises, (SME).

CONCLUSION

The face of the Indian automobile market has changed tremendously since the turn of the
millennium and will change even further since Nano.

De-licensing in 1991 has put the Indian automobile

industry on a new growth track, attracting foreign auto
giants to set up their production facilities in the country
to take advantage of various benefits it offers. The
industry has progressively witnessed the formation of
global alliances seeking the benefits of scale, market
access and technology which is strengthening the
evolution of the Industry in our country.

IT plays an important role in reducing the cost of developing a vehicle, and India is
emerging as a research and development (R&D) hub for the auto industry.

Amid the economic crisis, the Indian auto industry managed to stay positive. Even as
global auto majors went into reverse gear in 2009, the Indian industry largely bucked the
trend, launching new models for the domestic market and registering significant growth
in exports.

With the Nano, Tata has challenged the global auto industry and created an absolutely
new segment with this car. Low cost, design innovation and economies of scale are now
becoming the hallmark of the Indian automobile industry.