INTRODUCTION Indian automobile Industry: Commercial Vehicle industry has grown in line with the expectation at the rate

of 12.3% on a year on year basis for 2010-11. We expect an overall growth of around 10% in 20011-12 which is much lower than in 2010-2011. This slowdown in growth is mainly due to high base, in spite of a strong focus by the government towards core sectors like infrastructure and improving competitiveness of private business. With the opening up of trade under the GATTi rules will help to push the demand of the industry. India economy is growing at a fast rate of 8.5% in 2010-11 with major growth coming from the industry and service sector like most other developed economies. It seems that the Indian economy, which was earlier, a rural centric, agricultural driven economy, is turning into an urban-centric, industry and service based economy. Structural reforms started in 90s, including private participation and privatization in order to address to India infrastructural development. The Golden Quadrilateral Project and the other highways and road construction programs being implemented by National Highway Authority of India have had a significant and positive impact in transport and commercial vehicle industry. The focus area of the government will continue to remain on road up gradation. The Medium & Heavy Commercial Vehicles Sector: Commercial Vehicles (CV) broadly fall into two categories-- light commercial vehicle segment (LCVii) and medium & heavy commercial vehicle segment (M&HCViii). HCVs are used for long distance transportation of people, agriculture produce, capital equipment and some industrial raw materials. Growth in this sector is dependent on the general economic trend,
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development of infrastructure projects, transport economics, availability of freight, replacement period of vehicles, availability of credit and favorable government policies. Since the industry competes with the railways for several categories of cargo, railway performance is an important determinant of commercial vehicle sales. Historically, demand in the Rs. 27000 cr M&HCV industry has been cyclical, 3-4 years of growth followed by 2-3 years of stagnant sales and recession, with around 6% CAGR over the last decade1. INTRODUCTION: Finance is regarded as the life blood of a business enterprise. In themodern oriented economy, finance is one of the basic foundations of all kinds of economics activities. Finance statements are prepared primarily for decisionmaking. They play a dominant role in setting the frame work and managerial conclusion and can be drawn from these statements. However, the information provided in the financial statement is of immense use in decisionmaking through analysis and interpretation of financial statements. As said earlier finance is said to be life blood of any business. Every business under taking needs finance for its smooth working. It has to raise funds from the cheapest and risky source to utilize this in most effective manner. So every company will be interested in knowing its financial performance. The project entitled Financial performance Analysis of Ashok Leyland Industry Ltd throw light on over all financial performance of the company. The Ashok Leyland is an Public Limited Company. Founded in 1948,it is an automobile industry and the company is one of India's leading manufacturers of commercial vehicles, such as trucks and buses, as well as emergency and military vehicles. the company is based in Chennai, India., its also
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makes spare parts and engines for industrial and marine applications.11500 employees are working in this company, it sells about 60,000 vehicles and about 7,000 engines annually.It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle segment with a market share of 28%, With passenger transportation options ranging from 19 seaters to 80 seaters, Ashok Leyland is a market leader in the bus segment. The company claims to carry over 60 million passengers a day, more people than the entire Indian rail network. The company concentrates on the 16 ton to 25 ton range of trucks. Entire truck range starting from 7.5 tons to 49 tons HISTORY The origin of Ashok Leyland can be traced to the urge for self-reliance felt by independence of India, Pandit Jawaharlal Nehru, Indias first Prime Minister, persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture. The company began in 1948 as Ashok Motors, toassemble Austin cars. The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by British Leyland. Early products included the Leyland Comet bus which was a passenger body built on a truck chassis, sold in large numbers to many operators, it built a reputation for reliability and ruggedness. This was mainly due to the product design legacy carried over from British Leyland. The 5, 00,000 vehicle they have put on the road have considerably eased the additional pressure placed on the road transportation in independent India. The company long term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up. Access to international technology and a US$200 million investment programmed created a state-of-the-art manufacturing base to roll out international class

products. This resulted in Ashok Leyland launching the' Cargo' range of trucks based on European Ford Cargo trucks GOALS :The companys plans is to acquire smaller car manufacturers in Chinaand in other developing countries. Ashok Leyland bought a majority stake inthe Czech basedAvia. Called Avia Ashok Leyland Motors s.r.o., this will give Ashok Leyland a channel into the competitive European market. According to the company, the joint venture sold 518 LCVs in Europe despite tough economic conditions. The company will expand its product offers into construction equipment. The company says negotiation is progressing on land acquisition, and the production plans are in place. Aside from the full expansion planned for the company, Ashok Leyland is alsopaying close attention to the environment. They are one of the companies showing the strongest commitment directions, to Ashok environmental Leyland maintains protection, an R&D group utilizinge that aims co different to friendly processes in their various plants. Even as they thrust into

uncover ways to make their vehicles more fuel efficient and reduce emissions CURRENT STATUS The company has also maintained its profitable track record for 60years. The annual turnover of the company was USD 1.4 billion in 2011-12.Selling 54,431 medium and heavy vehicles in 2011-12, Ashok Leyland is Indias largest exporter of medium and heavy duty trucks. Ashok Leyland has also entered into some significant partnerships, seizing growth opportunities offered by diversification and globalization with Continental Corporation for automotive infotronics; with Alteams in Finland for high pressure die casting and recently, with John Deere for construction equipment. PARENT Hinduja group Ennore Foundaries Limited Automotive Coaches and Components Limited Gulf-Aashly Motors Limited Ashley Holdings Limited
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Following the independence of India, Pandit Jawaharlal Nehru, Indias first Prime Minister, persuaded Mr Raghunandan Saran, an industrialist, to enter automotive manufacture. The company began in 1948 as Ashok Motors, to assemble Austin cars. The company was renamed and started manufacturing commercial vehicles in 1955 with equity participation by British Leyland. Today the company is the flagship of the Hinduja Group, a British-based and Indian originated transnational conglomerate. Early products included the Leyland Comet bus which was a passenger body built on a truck chassis, sold in large numbers to many operators, including Hyderabad Road Transport, Ahmedabad Municipality, Travancore State Transport, Bombay State Transport and Delhi Road Transport Authority. By 1963, the Comet was operated by every State Transport Undertaking in India, and over 8,000 were in service. The Comet was soon joined in production by a version of the Leyland Tiger. In 1968, production of the Leyland Titan ceased in Britain, but was restarted by Ashok Leyland in India. The Titan PD3 chassis was modified, and a five speed heavy duty constant-mesh gearbox utilized, together with the Ashok Leyland version of the O.680 engine. The Ashok Leyland Titan was very successful, and continued in production for many years. Over the years, Ashok Leyland vehicles have built a reputation for reliability and ruggedness. This was mainly due to the product design legacy carried over from British Leyland. Ashok Leyland had collaboration with the Japanese company Hino Motors from whom the technology for the H-series engines was bought. Many indigenous versions of H-series engine were developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms in India.
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These engines proved to be extremely popular with the customers primarily for their excellent fuel efficiency. Most current models of Ashok Leyland come with H-series engines.

An Ashok Leyland bus run by theChennai Metropolitan Transport Corporation In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO Fiat SpA, part of the Fiat Group and Europe's leading truck manufacturer. Ashok Leylands long-term plan to become a global player by benchmarking global standards of technology and quality was soon firmed up. Access to international technology and a US$200 million investment programme created a state-of-the-art manufacturing base to roll out international class products. This resulted in Ashok Leyland launching the 'Cargo' range of trucks based on European Ford Cargo trucks. These vehicles used Iveco engines and for the first time had factory-fitted cabs. Though the Cargo trucks are no longer in production and the use of Iveco engine was discontinued, the cab continues to be used on the 'ecomet' range of trucks. In the journey towards global standards of quality, Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO 14001certification for all vehicle manufacturing units in 2002. In 2006, Ashok Leyland became
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the first automobile company in India to receive the TS16949 Corporate Certification.Editors note: This is part of a series of articles peeking into clean car industries and car manufacturers of China, India, South Korea and Germany. Among many other goals, Ashok Leyland aims to expand its operations to penetrate into overseas markets. Included in the companys plans is to acquire smaller car manufacturers in China and in other developing countries. In October 2006, Ashok Leyland bought a majority stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this will give Ashok Leyland a channel into the competitive European market. According to the company, in 2008 the joint venture sold 518 LCVs in Europe despite tough economic conditions. Furthermore, the company will expand its product offers into construction equipment, following a joint venture with John Deere. Newly formed in June 2009, the John Deere partnership is a 50/50 split between the companies. The company says negotiation is progressing on land acquisition, and the production plans are in place. The venture is scheduled to start rolling out wheel loaders and backhoe loaders in October 2010. Aside from the full expansion planned for the company, Ashok Leyland is also paying close attention to the environment. In fact, they are one of the companies showing the strongest commitment to environmental protection, utilizing eco-friendly processes in their various plants. Even as they thrust into different directions, Ashok Leyland maintains an R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce emissions. In fact, even before laws were placed on car emissions, Ashok Leyland was already producing low-emission vehicles. Back in 1997, they have already released buses with quiet engines and low pollutant emission based on the
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CNG technology. In 2002 it developed the first hybrid electric vehicle. Ashok Leyland has also launched a mobile emission clinic that operates on highways and at entry points to New Delhi. The clinic checks vehicles for emission levels, recommends remedies and offers tips on maintenance and care. This work will help generate valuable data and garner insight that will guide further development. When it comes to the development of environmentally friendly technologies, Ashok Leyland has developed Hythane engines. In association with the Australian company Eden Energy, Ashok Leyland successfully developed a 6-cylinder, 6-liter 92 kW BS-4 engine which uses Hythane (H-CNG,) which is a blend of natural gas and around 20% of hydrogen. Hydrogen helps improve the efficiency of the engine but the CNG aspect makes sure that emissions are at a controlled level. A 4-cylinder 4-litre 63 KW engine is also being developed for H-CNG blend in a joint R&D program with MNRE (Ministry of New and Renewable Energy) and Indian Oil Corporation. The H-CNG concept is now in full swing, with more than 5,500 of the technologys vehicles running around Delhi. The company is also already discussing the wide-scale use of Hythane engines with the Indian government. Hythane engines may be expected in the near future, but these may not be brought to the United States as yet. Ashok Leylands partnership with Nissan is also focusing on vehicle, power train, and technology development listed under three joint ventures. With impressive investment, the joint ventures will focus on producing trucks with diesel engines that meet Euro 3 and Euro 4 emission standards. In the coming years, Ashok Leyland also has some hybrid trucks and buses in store for its market. The buses and trucks are set to feature a new electronic shift-by-wire transmission technology as well as electronic8

controlled engine management for greater fuel efficiency. Ashok Leyland focuses on improving fuel efficiency without affecting automotive power, and the vehicles will have a 5% improvement on fuel efficiency. Ashok Leyland is also developing electric batteries and bio-fuel modes. Ashok Leyland Ltds March quarter results were expected to be impressive, as its monthly vehicle output reports had indicated a 138% jump in volumes. But what impressed was its net profit growth of 317%, to Rs223 crore, over the year-ago period, even as sales rose by 139%. Ashok Leylands operating profit margin rose to 13% compared with 10.5%. Higher volume growth, a better product mix due to higher sales of multi-axle vehicles and tractor trailers, and cost reduction were key reasons for margin expansion. its estimate for volume growth in 2011 is conservative, at 15% compared with over 30% in FY2010. Around 1,200 buses under the Jawaharlal Nehru National Urban Renewal Mission scheme are yet to be delivered of the 5,098 ordered. Besides, it has orders on hand from state transport undertakings for another 2,000 buses. The firm is investing to increase its capacity, with Rs1,200 crore proposed for expansion plans over the next two years; mainly to increase output of engines and new generation cabs. Besides, it plans to invest Rs800 crore in joint ventures. Analysts believe that its Uttarakhand plant is expected to deliver 22,000-25,000 vehicles in fiscal 2011, in its first full year of operation. The company has also steadily gained market share, from 21-22% in the first quarter of 2010 to 28-29% in the fourth quarter. One concern is that it is not yet a strong player in the eastern market. Besides, the southern market, traditionally its stronghold, has grown by only 15% in volume terms in 2010. The rest of India (mainly north and west) grew by 40% during the year.

An Ashok Leyland-Nissan joint venture produced light commercial vehicles (LCVs) from the former's Hosur facility near Bangalore as well as from Renault-Nissan's car plant near Chennai. Current status

Inter-city luxury bus Ashok Leyland is the second technology leader in the commercial vehicles sector of India. The history of the company has been punctuated by a number of technological innovations, which have since become industry norms. It was the first to introduce multi-axled trucks, full air brakes and a host of innovations like the rear engine and articulated buses in India. In 1997, the company launched the countrys first CNG bus and in 2002, developed the first Hybrid Electric Vehicle. The company has also maintained its profitable track record for 60 years. The annual turnover of the company was USD 1.4 billion in 2011-12. Selling 54,431 medium and heavy vehicles in 2008-09, Ashok Leyland is India's largest exporter of medium and heavy duty trucks. It is also one of the largest private sector employers in India - with about 12,000 employees working in 6 factories and offices spread over the length and breadth of India. The company has increased its rated capacity to 105,000 vehicles per annum. Also further investment plans including putting up two new plants one in Uttarakhand in North India and a bus body building unit in middle-east
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Asia are fast afoot. It already has a sizable presence in African countries like Nigeria, Ghana, Egypt and South Africa. Ashok Leyland has also entered into some significant partnerships, seizing growth opportunities offered by diversification and globalization with Continental Corporation for automotive infotronics; with Alteams in Finland for high pressure die casting and recently, with John Deere for construction equipment. As part of this global strategy, the company acquired Czech Republicbased Avia's truck business. The newly acquired company has been named Avia Ashok Leyland Motors s.r.o. This gives Ashok Leyland a foothold in the highly competitive European truck market. In 2010 Ashok Leyland acquired a 26% stake in the British bus manufacturer Optare, a company based on the premises of a former British Leyland subsidiary C.H.Roe. In December 2011 Ashok Leyland increased its stake in Optare to 75.1%. The Hinduja Group also bought out IVECO's indirect stake in Ashok Leyland in 2007. The promoter shareholding now stands at 51%. Leyland has a state of the art research and development center at Vellivoyal Chavadi which is located near Chennai. Nissan Ashok Leyland In 2007, the company announced a joint venture with Japanese auto giant Nissan (Renault Nissan Group) which will share a common manufacturing facility in Chennai, India. The shareholding structures of the three joint venture companies are:

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Ashok Leyland Nissan Vehicles Pvt. Ltd., the vehicle manufacturing company will be owned 51% by Ashok Leyland and 49% by Nissan

Nissan Leyland

Ashok

Leyland

Powertrain

Pvt.

Ltd.,

the

powertrain

manufacturing company will be owned 51% by Nissan and 49% by Ashok

Nissan Ashok Leyland Technologies Pvt. Ltd., the technology development company will be owned 50:50 by the two partners.

Dr. V. Sumantran, Executive Vice Chairman of Hinduja Automotive Limited and a Director on the Board of Ashok Leyland is the Chairman of the Powertrain company and he is on the Boards of the other two JV companies. The venture, once it takes off, will be one of the largest investments made in automotive field in the country iBUS Ashok Leyland announced iBUS in the beginning of 2008, as part of the future for the country's increasingly traffic-clogged major cities. Its Rs 60lakh, iBus, a feature-filled, low-floor concept bus for the metros revealed during the Auto Expo 2008 in India, a vehicle for a first production run of pilot models should be ready by the end of this year. The start of full production is scheduled for 2009. Developed by a team of young engineers, the lowfloored iBus will have the first of its kind features, including anti-lock braking system, electronic engine management and passenger infotainment. The executive class has an airline like ambience with wide LCD screens, reading lights, audio speakers and, for the first time, Internet on the move. A GPS system enables vehicle tracking and display of dynamic route information on LCD screens, which can also support infotainment packages including live
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data and news. The bus will probably be equipped with an engine from the new Neptune family, which Ashok Leyland also introduced at this exhibition, which are ready for the BS4/Euro 4 emission regulations and can be upgraded to Euro 5. U-Truck Ashok Leyland, announced sale of vehicles on the new U-Truck platform from November,2010 with the rolling out of the first set of 10 models of tippers and tractor trailers in the 16 49-tonne segment.Further, another 15 models are set to enter the market in the next 12 months. Dost DOST is a 1.25 ton light commercial vehicle (LCV) that is the first product to be launched by the Indian-Japanese commercial vehicle joint venture Ashok Leyland Nissan Vehicles. Dost is powered by a 55 hp high-torque, 3-cylinder, turbo-charged Common Rail Diesel engine and has a payload capacity of 1.25 Tonnes. It is available in both BS3 and BS4 versions. The LCV is being produced in Ashok Leyland's plant in Tamil Nadu's Hosur. The LCV is available in three versions with the top-end version featuring air-conditioning, power steering, dual-colour of a beige-gray trim and fabric seats. With the launch of Dost Ashok Leyland has now entered the Light Commercial Vehicle segment in India

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Ashok Leyland Defence Systems

An Indian road-mobile launcher with a ballistic missile Ashok Leyland Defence Systems (ALDS) is a newly floated company by the Hinduja Group. Ashok Leyland, the flagship company of Hinduja group, holds 26 percent in the newly-formed Ashok Leyland Defence Systems (ALDS). The newly floated company has a mandate to design and develop defence logistics and tactical vehicles, defence communication and other systems.]Ashok Leyland is the largest supplier of logistics vehicles to the Indian Army. It has supplied over 60,000 of its Stallion vehicles which form the Army's logistics backbone. Facilities

The company has seven manufacturing locations in India: Ennore and Hosur, Tamil nadu (Hosur - 1, Hosur - 2, CPPS) Alwar, Rajasthan Bhandara, Maharashtra Pantnagar, Uttarakhand Ashok Leyland's Technical Centre, at Vellivoyalchavadi (VVC) in the outskirts of Chennai, is a state-of-the-art product development facility, that apart from modern test tracks and component test labs, also houses India's one and only Six Poster testing equipment
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The company had an Engine Research and Development facility in Hosur, which was shifted to VVC, Chennai.

The company has signed an agreement with Ras Al Khaimah Investment Authority (RAKIA) in UAE for setting up a bus body building unit in the Middle East.

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REVIEW OF LITERATURE AND PROBLEM STATEMENT Ahlgrim, D'Arcy and Gorvett, 1999, Parameterizing Interest Rate Models, Casualty Actuarial Society Forum, Summer 1-50. Uses simulation to develop future scenarios for various applications. Wilkies Provides a review of historical interest rate movements from 1953-1999, summarizes the key elements of several interest rate models and describes how to select parameters of the models to fit historical movements. Ait-Sahalia, 1999, Do Interest Rates Really Follow Continuous-Time Markov Diffusions? University of Chicago Working Paper Examines whether interest rates follow diffusion process (continuous time Markov process), given that only discrete-time interest rates are available. Based on the extended period 1857 to 1995, this work finds that neither short-term interest rates nor long-term interest rates follow Markov processes, but the slope of the yield curve is a univariate Markov process and a diffusion process. Casualty Actuarial Society Financial Analysis Committee (CASFAC), 1989, A Study of the Effects of Asset/Liability Mismatch on Property/Casualty Insurance Companies, Valuation Issues, 1-52. Discusses the potential impact of an asset-liability mismatch for property-liability insurers. By mismatch, this article means that anticipated cash flows from existing assets and liabilities will not
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precisely offset each other. Several mismatch scenarios are evaluated, and it is found that both potential risk and reward are greater, the greater the mismatch. Chan, Karolyi, Longstaff, and Schwartz, 1992, An Empirical Comparison of Alternative Models of the Short-Term Interest Rate, Journal of Finance, 47: 1209-1227. CKLS estimate the parameters of a class of term structure models using the generalized method of moments technique and the time series of monthly interest rate data from 1964-1989. They find that the volatility of interest rates is extremely sensitive to the level of the rate. Fama, 1984, The Information in the Term Structure, Journal of Financial Economics 13, 509-528. Examines the ability of forward rates to forecast future spot rates. Based on data for 1974 and subsequent, he finds evidence that very short-term (one-month) forward rates can forecast spot rates one month ahead. Data prior to 1974 indicate that this predictive power extends five months into the future. PROBLEM STATEMENT In last research. It was found that some parameter related to interest model risk and rewards are not studied but concern research will be helpful to find out these parameters.

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OBJECTIVES OF THE STUDY The main objectives of the analysis of financial statements will be: 1. To Study the earning capacity of the firm, 2. To gauge the financial position and financial performance of the firm. 3. To determine the long term liquidity of the funds as well as solvency, 4. To determine the debt capacity of the firm.

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RESEARCH METHODOLOGY Research Methodology is a way to systematically solve the research problem. It may be understood as a science of study how research is done systematically. This research on working capital will be referred to as exploratory research in which problems and findings are generated from the calculations. RESEARCH DESIGN Research design provides the give that holds the research project together. A research design is used to structure the research to slow how all of the major parts of the research project research design is some statement or specification of procedure for collecting and analysing the information required for the solution of some specific problem. It provides a scientific frame work for conducting some research investigation. SOURCES OF DATA DATA COLLECTION 1. PRIMARY DATA 2. SECONDARY DATA 1. PRIMARY DATA- The primary data refers to the data which is collected directly. It is collected by observations, interviews etc. it is generally more accurate. It is costly in the terms of time. One needs to be very careful while collecting this form of data. Here primary data is collected from the employees of Seagullarotech. The data related to financial statements and processes is collected from finance department. Some production data is collected from various departments.
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2.SECONDARY DATA - Secondary data refers to the data which is already collected by somebody. It is generally collected from websites, magazines, journals etc. here data is collected from annual report of company for financial analysis COLLECTION OF DATA The data will be collected through secondary data. TOOLS OF ANALYSIS Collected data will be analysed a basis of % mean & on the help of tables.

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DATA ANALYSIS AND INTERPRETATION

In recent years, the Governments thrust on infrastructure and Supreme Courts ban on overloading of trucks have been the growth impetus for the commercial vehicle industry. In 2006-07, the M&HCV segment clocked sales of 294,266 vehicles, a strong growth of 34% year on year. The export market contributed 22% to these numbers. We can see the trend from the table and graph:

20 06-07 9 6752

M&HCVs production Trends (no. of vehicles) 20 20 200 20 07-08 12 0502 6123 08-09 16 807 Table: 1 9-10 214 295 10-11 219 4266 11-12

20 29

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Graph: 1 The medium & heavy commercial vehicle sector has two different segments. One is passenger vehicle segment and other is goods carrier segment: Goods Carrier Segment: In goods carrier segment, the market share of has increased by 1% from the year 2004-05 to 2005-06.

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Graph: 2

Graph: 3 Passenger Car Segment: In passenger carrier segment, the market share has increased by 5.3% from the financial year 2004-05 to 2005-06.

Graph: 4
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Graph: 5 Passenger Carrier Segment and Goods Carrier Segment: In May 2007, M&HCV passenger carrier segment registered strong 40% growth in sales YOY. However, the M&HCV goods carrier segment registered a sharp 14.2% decline. This segment is very sensitive to interest rates as more than 95% vehicles are financed. Interest rates have almost doubled to 13-14% from 7.5-8% last year. There are continuing concerns on input cost increases due to commodity price movements, together with cost increases due to improvements in product designs and up gradation to meet emission norms. In the near future, competition in this sector is likely to intensify with the entry of more multinationals. Development of new infrastructure projects, coupled with movement of construction material in the upcoming mega SEZs, enforcement of rated payload regime and with stricter emission norms, will keep the growth in demand intact. The potential of demand for replacements is high as well, with over 35% of existing fleet over 10 years old.

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Ashok Leyland: Ashok Leyland (ALL), a flagship company of the Hinduja group, is India's second-largest commercial vehicle manufacturer, with 26% market share in M&HCVs. The company also manufactures vehicles for defense & special applications and engines for industrial use; gen-set, marine requirements and automobile spare parts. It also makes double-decker buses in India. The major part of the revenues comes from the M&HCV segment. The company is systematically de-risking from the domestic trucks industry through aggressive exports, defense supplies, engines and castings have helped to build a robust business, with a more than five decade unbroken dividend record. However, its labor force has been a cause for concern, as management tries to negotiate higher productivity levels to reduce the costssales ratio. The Present: ALL has a total market share of 27.9% in the M&HCV segment. For FY07, ALL reported robust volume growth of 35% YoY to 83,101 vehicles. Sales rose 37% YoY in FY07 and profits grew 35% YoY. Exports grew by 23.5% over 05-06 sales with a sale of 6,025 vehicles. Ashok Leyland was late in implementing vehicle price increases, as industry leader Tata Motors shied away from hiking prices. As a result, Ashok Leyland, in spite of gaining market share in domestic M&HCVs by 0.8% in FY07, saw its margins reduce. The ambitious CAPEX program of Rs 5 bn over the next four years, the largest ever by Ashok Leyland, has come at a time of weak demand and rising interest rates and this might affect the profitability next year. The Future: With a strong GDP numbers for next few quarters and NHAI road development programs, commercial vehicles sector in India is poised for strong growth in the years to come. Along with this, Supreme Court order on
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overloading of trucks will also fuel demand for loading commercial vehicles in the country even though rising interest cost would impact sales volume in the short term. To take advantage of the market growth, ALL is setting up two manufacturing units at a cost of Rs 250 crore. One will make engines for heavy commercial vehicles and the other Gearboxes. It is also introducing a VRS to cut down the work force at its plant at Ennore in Tamil Nadu from 5,000 to 4,250. The company is also planning to make the H-series engines at the Ennore plant with a total planned capacity of 40,000 engines at a cost of Rs.150 cr. and the commercial production will start by 2007. ALL is expanding its CV facilities and is setting up a new facility in Uttaranchal to avail tax benefits. Increased competition from the entry of foreign truck majors like Man, Navistar and Isuzu may impact its market share and demand high investment in technology. On long-term basis, ALL is implementing derisking strategies whereby one-third of its sales would accrue from noncyclical businesses; these include defense, exports and auto engine and spare parts. This success of this strategy would stabilize the companys top line. Future prospects of Commercial vehicle Industry: Indian market: The growing requirements of next-generation customers and stricter emission legislations will necessitate the introduction of sophisticated vehicular products with India-specific solutions. In the developed economies, a demand growth in this segment is mainly influenced by replacement rather than fresh demand. As a result, major multinationals are more likely to concentrate on the growth coming out of the developing economies. Competition is likely to intensify in the coming year.

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The demand outlook for 2007-08 is mixed. While an increase in interest rates could stunt demand, increased infrastructure investments by the Government could encourage growth. In view of this, Indias CV industry is likely to report moderate growth during the current year. Export market: Since Indian CV manufacturers have set ambitious export targets, they are likely to enter unexplored territories beyond the traditional SAARC, Middle East and African markets over the next few years. Going forward, ALL plans to achieve stable growth by significantly ramping up its non-cyclical businesses (spare parts, exports and defense supplies) and increasing their share in total revenues to 35 per cent, from a level of 27 per cent in 2006iv. In order to boost exports, it plans to enter new markets in Africa, Middle East, Turkey, CIS and ASEAN region, and further strengthen its defense portfolio. Africa and the Middle East markets are expected to be the major drivers of its exports. The company has planned investments of more than US$ 120 million in 2007 and 2008 to expand its existing production capacity for vehicles from 77,000 units to 100,000 units v. Goals, strategies and future plans: Ashok Leyland has drawn up aggressive plans to increase annual capacity and sales to over 180,000 vehicles (medium and heavy duty vehicles) in four / five years, as mentioned earlier. The Company is optimistic of a wider export presence through organic and inorganic growth; it is developing new models to address growing customer requirements in the existing market and new territories. With the Indian transportation model maturing towards developed market practices hub and spoke transport model the up-to-3.5-tonne GVW segment grew at a 55% CAGR between 2001-02 and 2006-07. In line with this, the Company is exploring options to enter the LCV segment.
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Following the withdrawal of IVECO 2 as an equity partner in the holding company, Ashok Leyland is pursuing a policy of self reliance. The Company has initiated extensive technical developments in the areas of vehicle, engine, transmission and cabin, among others. A Future Vehicle Development Program for modular vehicle development has been launched. After upgrading its H-series engine platform (with the help of a European engine consultancy organization) to meet the Bharat Stage (BS) III regulation, the Company is now upgrading the platform to meet Euro 4 (BS IV) emission requirements. It has also commenced the independent development of a new engine platform to meet future requirements. The Company is in the process of employing advanced simulation techniques in product development to adapt rapidly to changing market requirements. It also expects to treble its existing base of 450 engineers in its technical centre over the next three to four years. The Company is also gearing up to offer cost-effective passenger transport solutions in the rapidly changing mass passenger transportation market. Concurrent to these initiatives, the Company is reinforcing its existing allied businesses with a view to de-risking its dependence on the CV business in the unexpected event of a demand downturn in the latter. It is also evaluating new business segments and opportunities. Factors influencing the Commercial Vehicle Industry Demand: There are various factors which have given impetus to the demand of commercial vehicle in India. These factors are mentioned below: Industrial growth Road Infrastructure Development SHIFT from rail to road
2

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 Restriction on overloading Legislation on age of vehicle Emphasis on Mass transportation Retail financing Environmental and safety norms Privatization of state transport undertakings, tax levis and

implementation of WTO. Shareholding pattern:

Promot ers 51% Public & Others Domesti c 12% Instituti Corpor ons ates 19% 2%

Foreign Instituti ons 16%

Graph: 6 Recent announcements by the company: The Company proposes to publish the Audited Results for the financial year 2007-08 within a period of 3 months from the end of the last quarter of the financial year. Mr. N Sundararajan Executive Director & Company Secretary, will cease to be the Secretary of the Company as at the end of February 05, 2008 due to his retirement from the services of the Company. The Board of Directors has appointed Mr. A R Chandrasekharan, Executive
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Director as Secretary of the Company/ Compliance Officer of the Company, with effect from February 06, 2008. Net Sales of Rs. 180008.2 lacs for quarter ending on 31-DEC-2007 against Rs. 177759.1 lacs for the quarter ending on 31-DEC-2006. Net Profit / (Loss) of Rs. 12021.7 lacs for the quarter ending on 31-DEC2007 against Rs. 10525.7 lacs for the quarter ending on 31-DEC-2006. Hinduja Group's Ashok Leyland and Nissan Sign Agreement for LCV Partnership. Mr. Subir Raha, Director has ceased to be an Independent Director consequent to his becoming connected with their associate company; however he continues to be a non-executive Director on company's Board. The Board Committee at the meeting held on August 20, 2007 have allotted 14,70,000 shares of Re.1/- each on conversion of 1000 Foreign Currency Convertible Notes. Taking into account the above allotment, the total issued and paid-up capital of the Company as on August 20, 2007 is Rs.133,03,38,317 consisting of 133,03,38,317 equity shares of Re.1 each. Ashok Leyland brings Shriram Transport Finance as strategic partner in Ashley Transport Services.

30

Porter five force model:

Potential Potential entrants entrants

Threat of new entrants

Bargaining power of Suppliers

Industry Industry competitors competitors

Bargaining power of buyers

Suppliers Suppliers

Rivalry Rivalry among among existing existing firms firms

Buyers Buyers

Threat of substitute Product or services

Substitutes Substitutes

Graph: 7
31

Industry Analysis Bases on Porters Five Forces Model: 1. Industry Rivalry: In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect. Industry Concentration: The Concentration Ratio (CR) indicates the percent of market share held by a company. A high concentration ratio indicates that a high concentration of market share is held by the largest firms - the industry is concentrated. With only a few firms holding a large market share, the market is less competitive (closer to a monopoly). A low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. These fragmented markets are said to be competitive. If rivalry among firms in an industry is low, the industry is considered to be disciplined. In case of heavy motor vehicles in India, Tata Motors Ltd. and Ashok Leyland dominate the market and other firms have a very small percentage. So the industry is highly concentrated. High Fixed Costs: When total costs are mostly fixed costs, the firm must produce capacity to attain the lowest unit costs. Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry. The industry is typically capital intensive and thus involves high fixed costs. Slow Market Growth: In growing market, firms can improve their economies. Market growth has been impressive in the last few years (about 8 to 15%), and it will grow further as government has started to pay more attention to road and infrastructure development.
32

 Low Switching Costs: Free switching between products makes it difficult for the companies to capture customers. In this industry switching cost is low as customers can make a choice between Tata motors products and Ashok Leylands products. For those people who are high on brand loyalty and switching between products is rare. Diversity of rivals: Industry becomes unstable as the diversification increases. In this case the diversity of rivals is moderate as most offer products which are close to standard versions and the competitors are also mostly similar in strength. Threat of substitutes: A products price elasticity is affected by the presence of substitutes as its demand is affected by the change in the substitutes prices. The new technologies available also affect the demand of the product. In case of Ashok Leylands products, the threat of substitutes is high. The competition is intense as several players have products in the categories given by Ashok Leyland. Price performance comparison favors heavily towards Ashok Leyland in most product categories. Also the high availability and quality of services offered by Ashok Leyland gives the customer a better trade-off. 3. Buyer Power: It specifies the impact of customers on the product. When buyer power is strong, the buyer is the one who sets the price in the market. In the case of Ashok Leyland, the sales volumes have shown increasing trend over past so many years. The customers are more or less concentrated in cities where big projects are going on or which are industrial hubs of India. The industry is also concentrated in these regions mostly.

33

4. Supplier Power: Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This is done in order to capture profits from the market. Steel is a major input in this industry and so steel prices have a sharp and immediate impact on the product price. Substitute inputs are restricted to non critical or additional components like electronic gadgets and interior design components. The industry being capital intensive switching costs of suppliers is high, other than steel as raw material which is highly price sensitive and the firm may easily move towards a supplier with lower cost. Presence of substitute inputs is also high. 5. Barriers to Entry / Threat of Entry: These are the characteristics that inhibit the entrance of new rivals into the market and in turn protect the profits of the existing firms. Based on the present profit levels in the market, one can expect the entrance of new firms into the market or not. The entrance is however also affected by the start-up costs. Government policies: Governments restrict competition through granting of monopolies and through regulation. The industry in India is witnessing average competition with little government imposed restrictions. Patents and Proprietary knowledge: Competitively advantageous ideas and knowledge are treated as private property when patented. This prevents others from using the knowledge and thus creating a barrier to entry. Patents and other such IP related issues are not very significant in the industry. Asset specificity: It gives the extent to which the assets can be utilized to produce a different product. Firstly, the firm holding such an asset they will resist the efforts of
34

other firms. Secondly, the entrants are reluctant to invest if a firm uses specialized technology. Asset specificity in the segment is low as the production processes are generally standardized. Economies of scale: The Minimum Efficient Scale (MES) is the point at which unit costs are minimized. The greater the difference between the MES and the entry unit cost, greater is the barrier. Economies of scale are becoming increasingly important as competition is driving the profit margins to lower levels. Also being a capital intensive industry economies of scale have important consequences. Corporate Governance Analysis: The study of corporate governance helps to find out where the power of Firm lays i.e. with management or stockholders. 1. The company philosophy: The Board of Directors and the Management of Ashok Leyland commit themselves to: strive towards enhancement of shareholder value through: - Sound business decisions - Prudent financial management, and - High standards of ethics throughout the organization ensure transparency and professionalism in all decisions and transactions of the Company achieve excellence in Corporate Governance by: - Conforming to, and exceeding wherever possible, the prevalent mandatory guidelines on Corporate Governance - Regularly reviewing the Board processes and the management systems for further improvement
35

The Company has adopted a Code of Conduct for members of the Board and Senior Management. All Directors have affirmed in writing their adherence to the above Code. 2. Board of director: 12 directors- have 3 inside director (Mr R J Shahaney as Chairman, Mr. R. Seshasayee as Managing Director and Mr. S R Krishnaswamy representing LIC as shareholder and rest of all are non executive director. As per Corporate Finance by Aswath Damodaran: To judge independence board should not have more than 2 insider directors. Board analysis: Board Size Board Independence Accountability to Stockholders Quality of directors 12 directors low, has 3 inside directors Only 2 non executive director have equity shares (less no) During 2006, 7 board meeting happened Average presence was always more than 75% *Active board Table: 2

36

Societal constraint: As a part of corporate social responsibility, Ashok Leyland believes in the welfare of society at large. Their initiative for social engineering comprises the manufacturing of eco-friendly vehicles, imparting comprehensive training to drivers and addressing their health concerns, pioneering the research and development of alternative fuels and enriching the communitys social health in several ways, which have far-reaching benefits for companys stakeholders. The company is involved in the construction and renovation of community halls, government schools, drilling public bore wells, erecting bus shelters and putting up street lights around its manufacturing units. The company has conducted over hundred medical, blood donation and HIV awareness camps to benefit people residing in the neighboring areas. Career guidance for high school students, skill development for unemployed youth and vocational training for women of self help groups around the companys manufacturing units have been organized with the help of specialists in the respective fields. Ashok Leyland imparts computer training to economically deprived students in Hosur at the Companys Management Development Centre. The selected students are put through a carefully designed 4-module session and certified on successful completion of the course. A batch of 25 students is selected every month and the program aims to cover 300 students every year. Ratio analysis: Ratios are well-known and most widely used tools for financial analysis. A ratio gives the mathematical relationship between one variable and another. Though computation of a ratio involves only a simple arithmetic operation, but its interpretation is a difficult exercise. The analysis of a ratio can disclose
37

relationships as well as basis of comparison that reveal conditions and trends that cannot be detected by going through the individual components of ratio. The usefulness of ratios ultimately depends on their intelligent and skillful interpretation. Ratios are used by different people for various purposes. Ratio analysis mainly helps in valuing the firm in quantitative terms. Two groups of people who are interested in them are creditors and shareholders; creditors are further divided into short term creditors and long term creditors. Short term creditors hold obligations that will soon mature and they are concerned with the firms ability to pay its bills promptly. The short run, the amount of liquid asset determines the ability to clear off current liabilities. These people are interested in liquidity. Long term investors hold bonds or mortgage against the firm and are interested in current payments of interest and eventual repayment of principal. The firm must be sufficiently liquid in the short term and adequate profits for the long term. These persons examine liquidity and profitability. There are several other ratios like earnings ratio, leverage ratio and dividend ratio which fall under the category of ownership ratios and help to analyze the financial health of a company. Liquidity ratio: Liquidity ratios attempt to measure a company's ability to pay off its shortterm debt obligations. There are two ratios current ratio and quick ratio which directly measure liquidity of a firm.

38

Current ratio: The current ratio is the ratio of current assets (cash, inventory, accounts receivable) to its current liabilities (obligations coming due within the next period). A current ratio below 1 indicates that the firm has more cash obligations coming due in the next year than assets it can expect to turn to cash. That would be an indication of liquidity risk. Although traditional analysis suggests that firms maintain a current ratio of 2 or greater, there is a trade off here between minimizing liquidity risk and tying up more and more cash in net working capital. It can be reasonably argued that a very high current ratio is indicative of an unhealthy firm, which is having problems in reducing its inventory. In recent years, firms have worked at reducing their current ratios and managing their working capital better. If we compare current ratio of Ashok Leyland with industry average, we find that liquidity position of the company is better than the industry average, which is good signal for short term and long term investors. YEAR ASHOK LEYLAND INDUSTRY AVERAGE 2003 1.76 1.13 2004 1.44 1.06 2005 1.61 1.18 2006 1.37 1.24 2007 1.29 1.20

Table: 3

39

Graph: 8 Quick ratio: The quick ratio or acid test ratio is a variant of the current ratio. It distinguishes current assets that can be converted quickly into cash (cash, marketable securities) from those that cannot (inventory, accounts receivable). The quick ratio is a more stringent measure of liquidity because inventories, which are least liquid of current assets, are excluded from the ratio. Though there is no standard with which the ratio can be compared, normally ratios are compared with industry figures in the absence of predetermined standards. If we compare Ashok Leylands quick ratio with industry average, we find that liquidity position of the company was very good from 2003 to 2005 but after that it has come below industry standard which may be matter of concern for the company. As inventories are not taken into account in quick ratio, so this decrease in quick ratio shows that company is having more inventory than the healthy
40

standard and that is affecting its liquidity position. It means Ashok Leyland needs to improve on its inventory management system and supply chain management. YEAR QUICK RATIO INDUSTRY AVERAGE 2003 1.22 0.76 2004 0.94 2005 1.19 2006 0.79 0.82 2007 0.73 0.80

0.69 0.86 Table: 4

Graph: 9 Inventory turnover ratio: The inventory turnover or stock turnover, measures how fast the inventory is moving through the firm and generating sales. Inventory turnover can be defined as cost of goods sold divided by average inventory. Higher is the ratio, greater is the efficiency of inventory management. In case of inventory management ratio, industry average is greater than Ashok Leylands ratio, which shows that the company is not managing its

41

inventory efficiently. The company should take some measures to improve its inventory management system. YEAR ASHOK LEYLAND INDUSTRY AVERAGE 2003 8.25 12.88 2004 8.43 12.22 2005 9.24 12.64 2006 7.16 10.66 2007 8.29 11.84

Table: 5

Graph: 10 Debt equity ratio: Debt equity ratio indicates the relative contribution of creditors and owners. It is defined as debt divided by equity. Depending on the types of business and the patterns of cash flows the components in debt to equity ratio will vary. Normally the debt component includes all liabilities including current. The equity component consists of net worth and preference capital. It includes

42

only the preference shares not redeemable in one year. Lower the debt equity ratio, the higher the degree of protection felt by lenders. In the starting, debt equity ratio of Ashok Leyland was higher than the industry average but in the year 2007, it was less than the industry average which is a sign of good financial health of the company. YEAR TOTAL DEBT/EQUITY RATIO INDUSTRY RATIO 2003 0.76 2004 0.48 2005 0.77 0.63 2006 0.49 0.46 2007 0.34 0.46

0.52 0.61 Table: 6

Graph: 11

43

Profitability ratio: These ratios measure the efficiency of the firms activities and its ability to generate profits. Various ratios are discussed below: Gross profit margin: The gross profit margin ratio (GPM) is defined as gross profit divided by net sales. This ratio shows the profits relative to sales after the direct production costs are deducted. It may be used as an indicator of the efficiency of the production operation and the relation between production costs and selling price. Gross profit margin of Ashok Leyland has been better than the industry average. It means that the company is able to generate adequate profit on each unit of sales. YEAR 2003 GROSS PROFIT MARGIN INDUSTRY AVERAGE 8.11 8.57 2004 8.63 8.35 2005 7.06 6.92 2006 7.73 5.83 2007 7.27 6.36

Table: 7

44

Graph: 12 Net profit margin ratio: The net profit margin ratio is defined as net profit divided by net sales. This ratio shows the earning left for shareholders (both equity and preference) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing, and tax management. This is the available tool to identify the sources of business efficiency /inefficiency. Net profit margin ratio of Ashok Leyland has been almost at par with the industry average, so we can say that business efficiency of the company is same as the industry. YEAR NET 2003 PROFIT 4.27 4.5 5.51 4.7 6.29 5.4 6.05 8.8 5.94 5.3 2004 2005 2006 2007

MARGIN INDUSTRY AVERAGE

Table: 8
45

Graph: 13 Asset turnover ratio: Asset turnover ratio is defined as sales divided by average assets. It highlights the amount of assets that the firm used to generate its total sales. The ability to generate a large volume of sales on a small asset base is an important part of the firms profit picture. Idle or improperly used assets increase the firms need for costly financing and the expenses for maintenance and upkeep. By achieving a high asset turnover, a firm reduces costs and increases the eventual profit to its owners. Asset turnover ratio of the Ashok Leyland is pretty decent and it has shown a significant improvement over the period of time. It means company is generating more and more assets on year on year basis.

46

YEAR ASSET TURNOVER RATIO

2003

2004

2005

2006

2007

1.5

2.2

2.1

2.5

2.8

Table: 9

Graph: 14 Earnings per share ratio (EPS): Shareholders are concerned with the earnings of the firm in two ways. One is availability of funds to pay their dividends and the other to expand their interest in the firm with retained earnings. These earnings are expressed on per share basis which is in short called EPS. It is calculated by dividing the net income by the number of shares outstanding. EPS for Ashok Leyland was not too below than the industry average from 2003-2004 but after 2005 it felt down sharply. It has far below than the industry average. It means that the company has issued new shares due to
47

which no. of outstanding shares have increased significantly, which has led to sharp decline in the EPS of the company. YEAR EPS INDUSTRY AVERAGE 2003 10.71 13.52 2004 16.65 19.21 2005 1.94 18.84 2006 2.4 18.03 2007 3.05 22.84

Table: 10

Graph: 15 Dividend per share: The dividend and earnings ratios reflect the annual return to shareholders. Dividends are a decision made by directors on the basis of the proportion of profits they want to distribute and the capital needed to be retained in the business to fund expansion plans. Dividend per share of Ashok Leyland was above industry average from 2003 to 2004. But after 2004, it has reduced significantly as the company has
48

issued new shares, which has led to increase in the no. of shares and subsequently the dividend per share has decreased. YEAR DIVIDEND SHARE INDUSTRY AVERAGE 2003 PER 5 4.2 7.5 6.3 1 5.8 1.2 6.1 1.5 15.2 2004 2005 2006 2007

Table: 11

Graph: 16 Return on equity (ROE): The return on equity (ROE) is an important profit indicator to the shareholders. It is defined as net income divided by average equity. Return on equity has increased significantly from 2003 to 2007. It shows that Ashok Leyland is giving good return over the capital employed by the
49

shareholders. The return on equity measures the profitability of equity funds invested in firm. It is regarded as a very important measure because it reflects the productivity of capital employed in the firm. YEAR ASHOK LEYLAND 2003 17.03 2004 26.37 2005 26.61 2006 28.15 2007 28.86

Table: 12

Graph: 17 Comparative Analysis: This analysis is done to find out whether the company ratios are in limits or not, here the companys ratios are compared across industry or with certain set standards. Hence this analysis will give a useful picture about the companys performance with compared to the industry.

50

This analysis is done by comparing financial statement taking individual item of different financial statement and reporting the changes which is occurred over the time period. Primarily this shows the trend which reveals the direction, velocity and the amplitude of trend 3. Different Types of Comparative Analysis are: Cross Sectional Analysis: To assess whether the financial ratios are within the limits, they are compared with the industry averages or with a good player in normal business conditions if an organized industry is absent. This is called crosssectional analysis in which industry averages or standard players averages are used as benchmarks. Time Series Analysis: Year to Year Change: This analysis is of Year to Year change in different financial ratios of company. This shows how the financial ratios are changing year over year and what trend they are following. This analysis is also done along the Financial Ratio Analysis in earlier part where I have compared companys ratios trend to the industry trend. Index Analysis: When comparison of financial statements covering more than three years is undertaken, the year to year method may become too cumbersome. The best way to understand such longer term trend comparisons is by means of index numbers. The computation of a series of index numbers require the choice of a base year that will, for all items, have an index amount of 100.
3

51

Since such a base year represents a frame of reference for all comparisons, it is advisable to choose a year that is as typical or normal as possible in a business conditions sense. An important use of this method is that one can see how all the variables of a particular statement are changing over a longer period of time. For example, the index number trend series for Ashok Leyland over last five years given below in the table reflects the overall picture at a glance. YEAR 2003 SHARE CAPITAL 100 RESERVE TOTAL 100 TOTAL SHAREHOLDER FUNDS(A+B) SECURED LOANS UNSECURED LOANS TOTAL DEBT (D+E) TOTAL LIABLITIES(C+F) APPLICATION OF FUND/FIXED ASSET GROSS BLOCK LESS:ACCUMULATED DEPRECIATION NET BLOCK (H-I) CAPITAL WORK 100 100 100 100 100 2004 2005 2006 2007 100.00 100.00 102.72 108.37 110.98 112.44 123.01 136.57 109.62 61.51 88.62 69.56 92.48 111.04 84.90 326.90 176.41 132.07 120.94 70.09 82.22 78.59 102.74 134.13 195.04 55.24 92.55 120.46

100 100 100 IN

103.51 106.75 106.80 122.53 110.03 110.75 107.83 109.87 96.93 102.17 105.53 138.56 123.99 184.04 166.07 167.94 93.04 156.33 160.64 60.05

PROGRESS 100 INVESTMENTS 100 CURRENT ASSETS, LOANS & ADVANCES INVENTORIES SUNDRY DEBTORS CASH AND BANK BALANCES LOANS AND ADVANCES TOTAL CURENT ASSETS LESS: CURRENT LIABLITIES & 100 100 100 100 100

123.51 78.28 146.44 119.05 109.19

112.06 113.10 245.15 147.58 147.39

158.88 92.50 75.67 90.68 103.48

118.59 123.22 72.14 221.25 120.84

52

PROVISIONS(S+T) CURRENT LIABLITIES PROVISIONS NET CURRENT ASSETS (M-R) TOTAL ASSETS (J+K+L+U) DuPont Analysis:

100 100 100 100 Table: 13

138.40 151.17 84.37 92.05

140.92 135.92 157.11 129.49

119.32 127.94 83.09 103.50

144.01 39.84 114.32 118.92

Return on Assets:
Return on Average Asset

Net Profit

X
Net Sales

Average Asset Turnover

Net Profit

Net Sales

Avera ge Asset

Net Sales

Total Expense

Average Net Current Asset

Average Fixed Asset

53

Return on Equity:

Return on Equity

Net Profit Margin

Net Sales Net Sales

Average Asset Turnover

Avera ge Assets

Equity Multiplier

Net Profit

Avera ge Assets

Avera ge Equity

Graph: 18 DuPont Analysis: The Du Pont Company of the US developed a system of financial analysis which has got good recognition and acceptance. Du Pont analysis divides a particular ratio into components and studies the effect of each and every component of the ratio. Sales & Net Profit: Sales are means of business that company has done over the period whereas net profit is the sales subtracted from all expenses which leads to sales. Here in the graph, we can see that sales of the company have increased over the period of time and that has led to increase in the net profit. It shows that the company has good management ability to perform the functions of the company. By having a look at the pattern of the graph, we can easily say that the company has performed consistently and can make a prediction that the company will perform in the same way.
54

Graph: 19 Return over Asset: The return over assets (ROA) of a firm measures its operating efficiency in generating profits from its assets, prior to the effects of financing. From the graph below we can see that ROA of the company has increased consistently over the years. It means Ashok Leyland is utilizing its assets in an efficient manner and over the period of time it has improved on its asset utilization efficiency. Return over Equity: The return on equity (ROE) examines profitability from the perspective of the equity investors by relating profits to the equity investors (net profit after taxes and interest expenses) to the book value of the equity investment. Since ROE is based on earnings after interest payments, it is affected by the financing mix the firm uses to fund its projects. ROE of Ashok Leyland has

55

increased over the period of time. It means that the company is giving good returns to its equity investors.

Graph: 20

56

SWOT Analysis of Ashok Leyland: Strengths: Innovation through engineering. Strong R&D department. Customization of vehicles according to the need of customers. Team of skilled and dedicated workers. Industry leadership in setting the quality standards. Weakness: Distribution network is not very good. Doesnt have presence in light commercial vehicle segment. Falling dollar is affecting companys export targets. Opportunities: Industrial growth Road Infrastructure Development SHIFT from rail to road Restriction on overloading Retail financing Privatization Threats: Rising input cost Rising Oil Prices Competition both from international and domestic manufacturers Rising interest rates have reduced the demand for commercial vehicle. of state transport undertakings, tax levis and

implementation of WTO.

57

CONCLUSIONS AND RECOMMENDATIONS The company has performed at par with the industry standards as financial health of the company is very good. There is a lot of growth potential in the commercial vehicle segment because of heavy focus on industrial growth, infrastructure development, restriction on overloading, retail financing, and emphasis on mass transportation. Ashok Leyland has always been a leader in terms of technology and pioneering initiatives. So the company has a lot of scopes to grow. The company can grow in both ways organically and inorganically that depends on the discretion of the company management and shareholders. CONCLUSIONS AND RECOMMENDATIONS The study is carried out to assess the impact of Industrial Parks with special reference to SIPCOT on the industrial and economic growth of Tamil Nadu. Disproportionate Stratified Random Sampling technique was used. Eighty industrial units have researcher were subjected ANOVA to an been covered with the questionnaire. The cc~ntacted majority of the respondents in person. The data appropriate statistical analysis naniely Mean,

Standard deviation, Percentage analysis, Factor analysis, 't' test, 'F' test, and MANOVA. Later, the results of this study were further interpreted with the help of formulated hypotheses and discussed in detail. The researcher extensively reviewed the earlier studies and formulated the following objectives and are presented below : 1. To analyse the impact of Industrial Parks in attracting new industries in Tamil Nadu. 2. To examine the impact of Industrial Parks in creating employment

opportunities directly and indirectly in Tamil Nadu.

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3. To study the impact of Industrial Parks in the growth of ancillary Industries in Tamil Nadu. 4. To evaluate the impact of Industrial Parks in stimulating the latent Entrepreneurial talents in Tamil Nadu. 5. To assess the Impact of industrial Parks in raising the general economic Development of Tamil Nadu. 6. To evaluate the impact of Industrial Parks in the industrialization of backward areas and in minimizing the regional imbalances in Tamil Nadu. 7 . T o offer ccncrete suggestions for the growth and development of Industrial Parks in Tamil Nadu. Recommendation I . Infrastructure, Government assistance and Services have no significant influences s i t h the types of organisations. 2 . Employment pattern differs significantly with the types of organisations. 3. There is no significant difference among the types of organisations in the indirect employment opportunities in the ancillary and vendor industries. 4. Employmznt of women of different cadres differs with the t r p e of organisations. 5. There is no significant influence among the mes of organisations in the case of locally employed people of various cadres.
59

6. Spread effect vanes in terms of the distance from the Industrial Parks. FINDINGS Based on the analysis, the following findings were arrived at: I . Industrial Parks have been developed in the industrially most backward districts and in the backward regions of the other districts. 2. Seventeen lndustrial Parks have been developed in 12-districts. Of this. 7-industrial Parks have been established during 1973-84, while 10Industrial Park have been developed during 1991 -1998. 3. Total area acqulred for all Industrial Parks works out to 20779 acres. Of this, the extent of Industrial Parks located at Perundurai, Sripemmpudur and Gangaikondan occupy more than 2000 acres. The extent of lndustr~al Parks located at Ranipet, Hosur, Cuddalore, Gummidipoondi, Tuticorin, Rurgur and Imngattukottai is between 1000 to 2000 acres. The extent is below 500 acres in Industrial Parks located at Manamadural, Pudukottai and Nilakottai, attributed to lack of demand in these areas. 4. Scrutiny reveals the cost per acre of plots, is above Rs.10 lakhs in Industrial Parks located at Gummidipoondi, Cuddalore, Irunganukottai, Sripemmpudur, Oragadam and Sin~seri. In Industrial Parks located at Ranipet, Hosur, EPIP-Gumnudipoondi, Tuticorin, Perundurai,
60

Gangaikondan, h'ilakonai, Bargur and Cheyyar the plot cost is between Rs.5 lakhs to Rs.10 lakhs. In Manamadurai and Pudukottai Industrial Parks, the plot cost per acre is only Rs.25,000 and Rs.50,000 respectively. This is attributed to the poor demand for plots in these areas. 5. The area sold is 100 per cent at Ranipet (Phase - I and Phase - 11)

and Cuddalore (Phase - I ) . It is 99 per cent at Hosur (Phase - I) and 98 per cent Hosm (Phase - 11). The demand for industrial Plots is very poor in Nilakottai, Cheyyar, Bargur and EPIP - Gummidipoondi lndusmal Parks. 6. Th? decline in sanction and disbursement of term loan from the years 1999-2000 is attributed to the transfer of lending portfolio from SIPCOT to TIlC by the Government of Tamil Nadu. 7. Ready availability of plots with all facilities and labour have significantly and favowably influenced the entrepreneurs. This is followed by the factor of nearness to city 1 town. Availability of raw materials exerts only lesser influence as they can be easily and cheaply transported 6 om the place of availability. 8. In the choice of plots by the entrepreneurs the availability of power, Govemment incentives, proactive policies of the Govemment exert greater influence. Agencies of the Government of India have obtained the lowest mean value. 9. The campaigns of SIPCOT has the highest mean value of 3.79. Atmosnhere of good industrial relations comes second, closely followed by

61

press reports and

advertisements. This signifies that the importance of

SIPCOT's campaigns and good industrial relations in the choice of plots. 10. Infrastructure, Government assistance and Services have no signifcant influence with the types of organisations. l i . 2002, 250 - industrial units have come up in the Industrial Parks. Among 80-sample units, 19-units were started in the study period. This clearly indicates that SIPCOT's Industrial Parks have atkacted substantial number of industrial units in Tamil Nadu. 12. 14,100 direct employment opportunities were created by the 80 sample industrial units. Totally in the 1100 units 92,200 people were employed at the end of the study period. 13,350 indirect employment opporhmities were created by the 80- sample units. 13. The nuniber of managers increased from 581 to 766 under public limited companies 104 to 137 under private limited companies and then 24 to 26 under partnership and proprietary concerns. Thus it is apparent that new industries have improved employment opportunities for managerial cadre. 14. The n ~ ~ m b e r of supervisors in the public limited companies 1100 industrial units are located in SIPCOT Indusmal Parks. During the study period i.e., 1998 to

increased from 1596 in 1998 to 1780 in 2002. In private limited companies from 261 to 366 and in Partnership and proprietary concems the number has increased from 52 to 57. Thus there is an addition of 184 supervisors in public limited companies, 75 in private limited companies and only 5 in partnership and proprietary concems. Thus, the increase in employment of supenisoly category is impressive.

62

15. When the number of skilled labourers directly employed in the public limited companies, is taken into account, it is found that it has increased from 3906 in 1998 to 5283 in 2002 followed by private limited companies from 509 to 630 and in partnership and proprietary concern from 106 to 137. It may be thus noted that number of skilled labourers has registered a gradual increase. 16. Analysis of employment of local people in the three types of organisations indicates that threc types of organisations. ' 7 . Eighty per cent of the respondents of the sample units have informed that Industrial Parks have played a significant role in making them entrepreneurs. This clearly shows that Industrial Parks have stimulated the latent entrepreneurial talents of entrepreneurs in Tamil Nadu. 17. Total exports doubled during 1998-2002 from Rs. 151 crores to Rs.345 crores. In other words, units are able to export finished 7roducts at the rate of Rs.1 crore per day. 18. The total contribution to Govenunent of India comes to Rs.3541.84 crores. This works out to per day contribution of nearly Rs.10 crores. It is noteworthy that 98 per cent of contribution comes from public limited companies. 19. Majority of the Industrial Parks of SIPCOT are situated at the backward areas of Tamil Nadu, 1050 industrial units have been located in the Industrial Parks situated in backward areas and t h ~ s minimises the regional imbalances in Tamil Nadn. 20. Thc total foreign equity brought in during the year 1998 was Rs.592.76 crores which has increased to Rs.612.11 crores in the year 1999. Due to industrial recession the foreign
63

except skilled labour, there

is

significant

difference in the case of local people employed in different cadres in the

equity brought in, has declined to Rs.20.70 crores in the year 2000. Subsequently it has registered a marginal increase of Rs.211.29 crores in the year 2001 but it again declined to Rs.30.03 crores in the year 2002. Totally the value of foreign equity brought in works out to Rs. 1467 crores.

64

Appendix:
PER SHARE RATIOS (RS.) YEAR ADJUSTED EPS DIVIDEND PER SHARE OPERATING PROFIT PER SHARE NET OPERATING INCOME PER SHARE FREE RESERVES PER SHARE 60.5 69.28 8.09 10.01 12.79 52.88 74.86 58.37 93.64 102.26 232.45 290.76 35.9 43.88 55.59 275.7 448.63 407.24 385.23 482.74 27.52 33.21 3.56 4.42 5.18 33.17 48.39 36.44 28.97 39.01 5 7.5 1 1.2 1.5 4.16 6.33 5.83 6.06 15.16 2003 10.71 ASHOK LEYLAND 2004 2005 2006 16.65 1.94 2.4 2007 2003 INDUSTRY AVERAGE 2004 2005 2006 19.12 18.84 18.03 2007 22.83

3.05 13.52

PROFITABILITY
65

RATIOS (%)

ASHOK LEYLAND 200 200 200 200 YEAR OPERATIN G MARGIN GROSS PROFIT MARGIN NET PROFIT MARGIN RETURN ON LONG TERM FUNDS 16.5 4 22.9 6 21.7 6 26.3 2 4.27 5.51 6.29 6.05 8.11 8.63 7.06 7.73 3 11.8 4 4 11.4 2 9.91 5 6 10.0 8

200 7

INDUSTRY AVERAGE 200 200 200 200 200 3 4 5 11.2 6 7

9.32

12

8 9.54

8.42

8.46

7.27

8.57

8.35 6.91

5.82

6.36

5.94

4.49

4.68 5.41

8.8

5.32

25.5 1

31.0 6

26.5 25.3 9 6

21.0 5 25.6

LEVERAGE RATIOS YEAR LONG TERM DEBT / EQUITY TOTAL DEBT/EQUIT Y OWNERS FUND AS % OF TOTAL
66

2003

ASHOK LEYLAND 2004 2005 2006

2007

2003

INDUSTRY AVERAGE 2004 2005 2006

2007

0.76

0.48

0.38

0.24

0.25

0.48

0.54

0.5

0.27

0.26

0.76 56.55

0.48 67.28

0.77 56.49

0.49 66.74

0.34 74.5

0.52 66.93

0.61 63.76

0.63 61.23

0.46 67.98

0.46 68.48

SOURCE FIXED ASSETS TURNOVER RATIO 1.54 1.87 2.18 2.56 2.86 2.21 2.29 2.86 2.95 3.38

LIQUIDITY RATIO YEAR CURRENT RATIO QUICK RATIO INVENTORY TURNOVER RATIO 8.25 8.43 9.24 7.16 8.29 12.88 12.22 12.64 10.66 11.84 2003 1.76 1.22 ASHOK LEYLAND 2004 1.44 0.94 2005 1.61 1.19 2006 1.37 0.79 2007 1.29 0.73 2003 1.13 0.76 INDUSTRY AVERAGE 200 4 1.05 0.69 2005 1.18 0.86 2006 1.23 0.82 2007 1.19 0.79

COMPONENT RATIOS YEAR MATERIAL COST COMPONENT(% EARNINGS) EXPORTS AS PERCENT OF TOTAL SALES IMPORT COMP. IN RAW MAT. CONSUMED LONG TERM ASSETS / TOTAL ASSETS 0.43 0.4 0.34 0.39 0.42 0.51 0.47 0.38 0.42 0.43 5.14 2.91 2.9 2.6 3.35 4.66 2.97 2.73 3.17 2.94 7.59 8.75 12.77 8.81 8.94 7.64 5.8 8.06 9.37 9.01 61.69 71.9 72.67 78.32 75.69 65.86 69.5 73.16 76.25 74.55 2003 ASHOK LEYLAND 2004 2005 2006 2007 INDUSTRY AVERAGE 200 2003 4 2005 2006 2007

67

INDEX ANALYSIS: YEAR 2003 SHARE CAPITAL 100 RESERVE TOTAL 100 TOTAL SHAREHOLDER FUNDS(A+B) SECURED LOANS UNSECURED LOANS TOTAL DEBT (D+E) TOTAL LIABLITIES(C+F) APPLICATION OF FUND/FIXED ASSET GROSS BLOCK LESS:ACCUMULATED DEPRECIATION NET BLOCK (H-I) CAPITAL WORK PROGRESS INVESTMENTS CURRENT 100 100 100 100 100 2004 100.00 110.98 109.62 61.51 88.62 69.56 92.48 2005 100.00 112.44 111.04 84.90 326.90 176.41 132.07 2006 102.72 123.01 120.94 70.09 82.22 78.59 102.74 2007 108.37 136.57 134.13 195.04 55.24 92.55 120.46

100 100 100 IN 100 100

103.51 110.03 96.93 123.99 93.04

106.75 110.75 102.17 184.04 156.33

106.80 107.83 105.53 166.07 160.64

122.53 109.87 138.56 167.94 60.05

ASSETS, 123.51 78.28 146.44 119.05 109.19 112.06 113.10 245.15 147.58 147.39 158.88 92.50 75.67 90.68 103.48 118.59 123.22 72.14 221.25 120.84

LOANS & ADVANCES INVENTORIES 100 SUNDRY DEBTORS 100 CASH AND BANK BALANCES 100 LOANS AND ADVANCES 100 TOTAL CURENT ASSETS 100 LESS: CURRENT LIABLITIES & PROVISIONS(S+T) CURRENT LIABLITIES 100 PROVISIONS 100 NET CURRENT ASSETS (M-R) 100 TOTAL ASSETS (J+K+L+U) 100

138.40 151.17 84.37 92.05

68

140.92 135.92 157.11 129.49

119.32 127.94 83.09 103.50

144.01 39.84 114.32 118.92

69

References
1.

"Lanka Ashok Leyland". Ashok Leyland. http://www.ashokleyland.com/groupcompaniessub.jsp? name=companies&cid=2. Retrieved 2008-09-28. "Established in 1982, this is a joint venture between Ashok Leyland and the Government of Sri Lanka. Equity holding of Ashok Leyland Ltd. in the joint venture is 28%."

2. SME Times News Bureau | 30 Apr, 2010

3. 4.

Leyland, John Deere complete JV formalities , Rs 60 lakh iBus from Ashok Leyland

70

General agreement on tariffs and trade/www.wto.org/english/tratop_e/gatt.htm A vehicle whose loading capacity is less than 7 tonne weight A vehicle whose loading capacity is more than 7 tonne weight Ashok _Leyland_Limited[1].pdf Annual report of Ashok Leyland for 2006-07

ii

iii

iv