CASE STUDY

PRESENTATION
ON
Divya handtools pvt . Ltd
( CONCEPTS OF VALUE &
RETURN )
BY -:
AISHWARYA ANAND A-
01
Nishi lakra a-
24
RITESH KUMAR A-
30
 CONTENTS
q Introduction of the related
industry
q SWOT Ananlysis
q Summarization of the case study
q Problems
q Questions and Alternative solutions
q Conclusion
 HANDTOOLS INDUSTRY

Hand tools are those types of non-powered tools
which are designed for use by experts as well as in
Do-It-Yourself (DIY) projects, like home repairs,
general maintenance, woodworking, building,
mechanics and gardening. The hand tool industry is
facing new challenges related to worldwide
business globalization and the invention and use of
electronic business .

Every single manufacturer, irrespective of its size
and importance in the market, should watch the
movements in its business environment , in order
The hand tools are available in varies shapes, sizes and
designed for specific purposes.
 CHARACTERSTICS
OF THE INDUSTRY
qA LABOR INTENSIVE INDUSTRY : A source of
employment to many, hand tools industry is basically
labor intensive in nature, whose development is of
great importance for a competitive as well as a self-
reliant industrial structure. The manufacturers of
hand tools produce a comprehensive range of of
hand tools, right from carpentry and plumbing tools
to striking and cutting tools.


qEFFECTIVE CONTRIBUTOR TO THE ECONOMY :

Adding positively to the income of a country, hand
tools industry has contributed to economy in terms
 CONSUMPTION PATTERNS OF
HAND TOOLS


This depends on the following factors
-:


qPrice sensitivity
qSupply chain dynamics
qRationalization
qProduct quality, design and safety
qService
q
 MARKET SEGMENT

Generally speaking, hand tools
products are applied in the following
market segments:


qHouseholds
qProfessionals (e.g. carpenters, plumbers,
craftsmen, toolmakers etc).

 FACTORS TO CONSIDER FOR THE
GROWTH OF THE HAND TOOL
INDUSTRY

Hand tool industry is a growing one. Developed countries like EU,
USA have already been manufacturing and exporting hand tools since a
long time. Developing countries like India, China, Japan are coming up.
Some factors that are to be considered for the overall development of
the industry are as follows:



Manufacturing centers should be equipped with the latest hand tool
manufacturing technology.

For small, medium scale entrepreneurs in the developing areas, credit

should be made available to them at lower rates of interest.

This industry is usually a part of hand and power tool industry as a whole.
Hence, steps should be taken to built up a Hand Tool Industrial Estate,
exclusively for the Hand Tools Units, in all countries.
 SWOT ANALYSIS
STRENGTH :


 Competitive Price.
 Distribution Network.
 Innovative Design of the Products which can
increase Efficiency.
Direct delivery capability.
Ø
Weakness:



 Limitation of Product Line.

 Large capital oriented.
 Reliability of data, plan predictability
 Cash flow.

Opportunities:

 Market Development.
 Technology Development and Innovation.
 New market.
 Business Product Development.
 Partnership Agencies and Distribution.

Threats :
 Political Effect.
 Environmental Effect.
 IT Development.
 Market Demand.
 New Technologies, Service and Ideas.

 SUMMARY OF THE CASE
STUDY
qDHPL is a small-sized firm manufacturing hand
tools.
qManufacturing plant is situated in Faridabad.
qThe company’s sale Rs.100 crores , net profit 7.6
crores .
qTo extend the further profitability there are two
investment proposals.


1st , is to expand manufacturing capacity &
the estimated cost of new equipment is Rs. 25
crores. It’s having an expected economic life of 10
years.

2nd is to replace an old machine to reduce
 qIf the company accepts both projects , then it
has to raise external fund of Rs.20 crores .
Internal funds are available of Rs.10crores.
qTwo options of borrowing fund:-

1st : company can borrow funds from State
Bank of India , at 14% p.a. rate of interest for
10 years . For which it has to pay equal annual
instalments of interest & repayment of principal .

2nd : A large Financial Institution has
offered to lend money at low rate if
interest(13.5%p.a) .
qThe financial institution has made another offer
i.e. it can lease the equipment for the
capacity expansion and for replacing old
 PROBLEM

Company wants to increase its
profitability.

To extend the profit company has two
options one is to buy new equipment , other is
to replace the old equipment . To fulfill both
options company has to take loan from
outside.Now the problem is that , from where
company should take loan for witch company
has to pay less rate of interest.

Q :- What is the minimum amount of saving
from the replacement that would justify
the expenditure ?

Ans :- S=50000000 ,N=10 ,I =0.14,R=?

S=R[(1+i)n-1] =50000000=R[(1+0.14)10-1]

I 0.14


Let X=(1.14)10 ,then logX=10log1.14=0.569

X=antilog0.569 =3.707

50000000= R(3.707-1)

0.14

R =12585888.43

Qg :-What is the annual installment of the
SBI loan AnS :-
S=200000000,n=10,i=0.14,R=?

S= R[(1+i)n-1] ,200000000=R[(1+0.14)10-1]

I 0.14

Let X=(1.14)10, logX=10log1.14=0.569

X=antilog0.569=3.707

200000000=R[3.707-1]

0.14

R=10343554




Q :- Calculate the quarterly installment of
the financial institution loan ?

Ans :-S=200000000, n=40,i=0.0337,R=?
S=R[(1+i)n-1], , S=R[(1+o.o337)40-1]

I 0.0337

LetX=(1+0.0337)40,logX=40log0.0337=2.1104

X=antilog2.1104=1.289

200000000= R[1.289-1], R= 200000000(.337)

0.o337 0.289

R=23321799

Q :- Should the company borrow from the
SBI or the financial institution ?

Ans :-The company should borrow from
Financial institution because in the
financial institution, company has to pay
quarterly interest and due to the
payment it has to pay less interest and
the interest rate is also low from SBI.

Q :- Would you recommend borrowing from
the financial institution or get the
equipment on lease ?

Ans :-As per the case ,we will recommend
borrowing from financial institution; because
the annual lease rent is 52million which is very
high value it’ll be better to borrow from
financial institution. In the case if company
borrow then it has to pay less interest & less
amount as compare to take it on lease.
 CONCLUSION

The conclusion is that if the company
wants to extend its profit it has to take loan
from outside to buy new equipment or to
replace the equipment. If the company decide
to buy new equipment then it should take loan
from the financial institution. It will be
beneficial for the company.
THANK YOU