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EXECUTIVE SUMMARY
INDUSTRY
PROFILE
INDUSTRY OVERVIEW
Construction Equipment industry recorded about 45% growths in the year 2008-2010,
continuing its similar growth rate during the previous year. During the year, the
countrys economic condition indicated high GDP growth, strong rupee; controlled
inflation and soft interest rates, followed by increased demand for industrial and
consumer product.
After a few ears of sustained growths, the world economy was hit by the subprime
crisis and slowdown dramatically in the year 2008-2009. The Indian economy which
was growing rate of over 8% for over period of five year felt the tremors of the
slowdown quite rapidly in the latter half of the year following the bankruptcy of
Lehman brother in September 2008 causing a drop of almost 3% in the growth rate
the bellwether index of industrial production (IIP) should a marred decline in outputs
also the global financial meltdown had a teaching effect on the financial sector in the
country and the flow of credit to the customers of the construction equipment (CE)
industry showed great sluggishment with the impact to the end customers in the form
of:
COMPANY
PROFILE
COMPANY PROFILE
Tata Hitachi construction machinery company ltd, the leader in construction
equipment in India enhances the operational performance of its customers, leading to
improving their profitability and competitiveness by offering constructive solutions.
Tata Hitachi is a subsidiary company of Hitachi Construction Machinery Co. Ltd.,
which holds 60% share, and Tata Motors Ltd holding the balance 40%. The company
commenced manufacturing of construction equipment in 1961, as a division of
TELCO. In 1984, it entered into a technical collaboration with HCM, Japan for
manufacturing state of the art hydraulic excavators. Tata Hitachi is focused on
capitalizing the opportunity in the domestic arena for which the key market segments
are Excavators, Wheeled Products, Cranes and Others. Tata Hitachi's consistent
growth and success have been built on the foundation of our ability to understand
customers' needs, provide Equipment, and Support solutions that increase profitability
and competitiveness for them. What we call Reliable Solutions. Our capabilities to
deliver Reliable Solutions starts with our comprehensive range of Equipment that
ensures that the customer has exactly the right kind of equipment for all Mining,
Infrastructure, Construction and Agricultural needs.
The construction industry involves heavy use of excavators, wheel loaders, and
backhoe loaders. Tata Hitachi's ranges of excavators starting at 2 tonnes with a
maximum size of 120 tonnes are made in the country.
Tata Hitachi is one of the largest manufacturers of construction equipment in the
country and has three manufacturing plants - at Jamshedpur in Jharkhand, at Dharwad
in Karnataka and at Kharagpur in West Bengal. It also has a full fledged Design and
Development set-up for developing indigenous and collaborated equipments. Hitachi
is actively participating in creating the new R&D facilities at Kharagpur with the aim
to make the new centre a global R&D hub. Our endeavor to provide Reliable
solutions is enabled by our widespread network. Tata Hitachi Dealers provide support
to the customers through parts and expert service. Tata Hitachi takes pride in its
marketing and service network of 230+ touch points that enables it to have one of the
Industry Name
Year of Incorporation
1999
Registered Office
Business Type
Manufacturing
Telephone No
91-0836-6452880
Fax No
91-0836-2486907
Joint Venture
Hitachi, Japan
Bankers
Auditors
Company Secretary
A Azhagesan
Total revenue
1300 crore
Works
Jamshedpur, Dharwad
TELCON-DHARWAD
Initially the manufacturing unit of Telcon was setup only in Jamshedpur but later an
additional plant of Telcon was setup in Dharwad because the availability of land at
lower cost and also transportation cost of the finished goods was reasonable and there
is good market of their product in southern India.
Telco Construction Equipment Company Ltd. Is situated in Belur Industrial Estate in
Dharwad. Telcon was incorporated on 30th March 1999 and commenced its
commercial by the company is 118.75 acres. It is joint venture of Tata group and
Hitachi construction company Ltd.
Joint venture with Hitachi-a world leader in hydraulic excavator technology, Telcon
has access to the very latest and is able to bring excellent products to the discerning
Indian customers. The manufacturing facilities are in accordance with Hitachi
standards and stipulations and the Tata policy of quality ensures that only the best
machines roll out. Telcons facilities located in Dharwad in Karnataka and
Jamshedpur in Jharkhand are strategic locations with proximity to the markets of the
respective products manufactured in each region.
It is the younger of the two facilities having been set-up in 1999 this modern and
highly mechanized facility spread over 118 acres rolls out more than a thousand
machines with less than 50 workers in each shop.
It has fully automated conveyor system, which is designed to cater to high volumes
and is undaunted by the flexibility and fluctuations in the model mix. This gives it the
capability to respond nimbly to customer needs. Systematic workflow and a quality
conscious team ensure that high quality products roll out. The harsh conditions that
prevail on a field site, makes the equipment susceptive to damage and corrosion. So
the machine that rolls out of Dharwad receive an Autophorective Pretreatment, oven
banking, allowed by PU-based painting, a process unique to the Indian Construction
and Earthmoving Equipment industry. This makes the machines corrosion resistant
and gives them a superior finish.
All equipment and key components undergo a rigorous testing routine that ensures
that the equipment is fit for use immediately after commissioning and secures a long
and trouble free life for them.
MISSION:
Be the preferred partner for providing reliable solutions for mining and
infrastructure sectors.
QUALITY POLICY:
Tata Hitachi Construction Machinery Co. Ltd is committed maximizing customers
satisfaction and delight. It will strive to achieve this goal by continues improvement
of its design and development; manufacture; sales and services of its products. It will
also ensure that its product is reliable, safe, environment friendly and cost effective
and its services are of the highest order. Tata Hitachi Construction Machinery Co. Ltd
also has a commitment to words improving the quality life of its employees, both
within and outside its plants and offices, it will strive to achieve this through the
continues improvement of its work practices and community initiative.
Integrity
Credibility
Transparency
2. Customer orientation
3. Ability speed and competitive urgency
4. High performance culture
5. Innovation
6. Meritocracy
7. Team work as well as respect for individual
Hydraulic Excavators,
Mining Shovels,
Backhoe Loaders,
Wheel Loaders,
Vibratory Compactors,
Motor Graders,
Crawler Cranes,
Telcon has the blend of manufacturing world-class machines with cutting edge
technology as well as designed back up system to cater to the support needs of the
customers. Telcon has a wide network of over 50 front offices in the form of Dealer
and Telcon offices across India.
customers as they can avail Spare Parts Support & Breakdown Repairs easily.
In addition, they offer various value added services at Telcons own workshops and
Comprehensive Refurbishing of machines like.
Aggregate Repairs
Solutions.
PRODUCT PROFILE
TELCON Construction Equipment Co., Ltd. engages in the design, manufacture, and
supply of construction equipment. Its products include hydraulic excavators, crawler
cranes, wheel loaders, backhoe loaders, off-highway dumpers, wheeled equipments,
road making equipments, motor graders, skid steer loaders, cane loaders, and truck
loader cranes.
AREA OF OPERATION
The company has used state-of-art technology to manufacture excavators and backhoe
loaders. It enjoys a 90% share of the crawler crane market in India. The only Indian
manufacturer produces 100 tone cranes. These are the largest machines made locally.
The company was the first to introduce mini excavators in India, and its brand EX 60
is the most successful machine to be made in India so far with more than 1300
machines being sold in the last three years. It is the largest manufacturer of hydraulic
excavators in India with over 6000 machines in the market. It offers the widest
available range of hydraulic excavators, eight models ranging from two tonnes to
sixty tonnes in size.
OWNERSHIP PATTERN
Telcon Construction Equipment Company Limited (TELCON) is a 60:40 joint
venture company between Tata Motors (earlier known as TELCO) and Hitachi
Construction Machinery Company Limited (HCM).
This agreement was made with a view to expand the scope of co-
confidence in the fast growing Indian market and their desire to be a part of the
infrastructure building in the county as also to strengthen the relationship with the
Tata Motors.
CUSTOMERS OF TELCON
Major constructors
Builders
Contractors
Land scrapper
COMPETITORS OF TELCON
CATERPILLAR
BEML
ESCORTS
HINDUSTAN MOTORS
VOLVO
INFRASTRUCTRAL FACILITIES
TELCON is constantly raising and introducing new facilities to meet overall needs of
the company. Both the plants at Dharwad and Jamshedpur are equipped with modern
infrastructure facilities.
To give an insight into the infrastructure facilities, following are some of the
important features:
Video conferencing facility was extended to Dharwad plant in order to have better
communication between two plants and the corporate office at Bangalore.
The transmission subassembly operations for the above product were successfully
shifted from Jamshedpur to Dharwad plant.
Telcon won the Best Innovation Award for the Innovation Day organized by
TBEM Eastern Region (For 10T Wheel Loader)
Mini excavator
Mid excavator
Large VM
Large excavator
Large TG
DEPARTMENTA
L STUDY
DEPARTMENTAL STUDY:
1. Planning Department
2. Design Department
3. Supply Chain Department
4. Assembling Department
5. Quality Assurance Department
6. Maintenance Department
7. Finance Department
8. Human Resource Department
1. PLANNING DEPARTMENT
2. DESIGNING DEPARTMENT
Design is the base for any product. Designing is not one time job. It is a continuous
process. As the needs and requirement change, the design must be changed too to
satisfy the new needs of customers. In other words, it is like serving delicacy to the
customers in terms of products. Therefore, design department is the brain of the
organization that gives new ideas and innovations.
Need for design and development department
To face the tough effectively competition.
To provide products to the customers.
With the intension to the improvement and upgrading of the existing range and
customizing it to suit for the Indian environment.
To cope up with the customer needs, as their wants are dynamical.
To increase the quality and efficiency of the machines produced and have a
intension to reduce the cost of production.
To develop new models and proprietary items.
4. ASSEMBLING DEPARTMENT
This department is the backbone of the company. Only assembling of parts takes place
in this department. There are three assembly lines for assembling different types of
excavators. They are
Wheel shop
Main line(Middle)
The contract workers maintain the stores department and bin cards are used for the
stores in all the shops. Tata Hitachi Construction Machinery Co. Ltd also has a Paint
shop, which is the best in Asia in its modernization and automation. The components
are painted before issuing for production. There is also a small paint shop, gear shop
and dispatch area. The machines are given final mal touch at small paint shop and in
dispatch area loading and delivery takes place. Before dispatching, testing is done to
locate defects if any, and to correct the same.
Excavators EX 110
Excavators EX 200
EX 200 is Cummins.
Features:
Chain Wheels
18 attachments
Application:
Digging purpose
Pipe lifting
Stone breaking
Mountain leveling
MINI SHOP
Products
Excavators EX 70
Excavators EX 40
Excavators EX 20
Application
Digging purpose
Pipe lifting
Stone breaking
Mountain Leveling
WHEEL SHOP
Built up Area-4000Sq.mts
Third shop is named as wheel shop because wheels are used in the products
instead of chains.
Product
Backhoe-TATA JD-315
Features
Rubber wheels
Application
Digging
Loading
PAINT SHOP
Built up area-7600Sq.m
Goliath Cranes and under slung cranes are used for loading and unloading.
Process:
Next Epoxy coat is applied to the component. This epoxy coat is usually in
Grey color.
6. MAINTENANCE DEPARTMENT
The main objective of this department is to reduce breakdown hours / time and also
provide all resources for maintaining machines.
Functions
Products
Spare parts like --bearings, valves, gears, electrical items, springs etc.
7. FINANCE DEPARTMENT
Tata Hitachi Construction Machinery Co. Ltd also has a separate finance department
that controls the financial sources of the company. Tata Hitachi Construction
Machinery Co. Ltd has made a very huge investment to build the product. Finance
department plays a very significant role in any organization. Tata Hitachi Construction
Machinery Co. Ltd has made a very huge investment to build the business in the
global market and to sustain any competition by introducing a variety of features in
the product. Tata Hitachi Construction Machinery Co. Ltd believes that if one tries to
eliminate the financial functions, he may have to put an end to the business activities.
The financial department is to attain the desired goals in the stipulated time. Finance
department encourages the effective use of the funds so as to improve the productivity
in the business operation. The main objective of this is to maximize the value of the
firm. Finance function is not merely procurement of funds but something more than
that. Tata Hitachi Construction Machinery Co. Ltd maintains a clear and perfect
accounting system. Finance department records the total activities of the company in
financial terms. The activities of the accounts and finance department can be
segregated below.
Functions
Preparation of fund flow and cash flow statements for every month.
Preparing the new cost reduction and cost control methods and implementing
them
The Accounting is done on TALLY System. The activities of the Department are
classified as:
1. Books of Accounts.
2. Bills Payable.
3. Commercial.
4. Costing and Budgeting.
Books of Accounts: This group looks the fund monitoring; trial balance preparation,
bank reconciliation statement, cash management, books of accounts and also reporting
to head office.
Bills Payable: This group takes care of supplier payment, which includes the
activities like bills checking, bills passing, etc. After comparing the Goods Inward
Notes (GIN) and the suppliers invoice and comparing it with the purchase order the
bill is passed. The data is fed to the computer and continuous updating is made in the
system. There are two sub groups of the bills group viz. Revenue Bills and Capital, to
take care of the respective activities.
Creditor Account
Fixed Assets
Cash Account
Tally Software is used and the accounts are maintained through SAI system. The
company deals with the State Bank Of India, HDFC Bank Ltd, Corporation Bank. The
company prepares the annual report. The auditors concerned with the company are
S.B. Billimoria and Co. for determining the financial results, net sales and other
income, profit before tax, profit after tax and profit for appropriation. The company
for reviewing financial performance and comparison uses current asset ratio,
Inventory turnover ratio, Net profit ratio, Fixed Asset ratio etc.
OBJECTIVES
PRIMARY OBJECTIVE:
To analysis of the Cost Volume Profit and its impacts at TELCON LTD.
SECONDARY OBJECTIVE:
To identify the effect of breakeven point for multiple products and ascertain which
product is as advantages.
To study the level of sales need to achieve a desired target profit and identify
This study was conducted only on overall cost volume profit analysis and not on each
variables. This study to help to forecast profit fairly and accurately as it is essential to
know the relationship between profits and costs.
This study assists in evaluation of performance for the purpose of control and also
assists in formulating policies by showing the effect of different price structure on
costs and profits.
This study predetermined overheads rates are related to a selected volume of
production.
REVIEW OF LITERATURE
Cost volume profit analysis is one of the most hallowed, and yet one of the simplest,
analytical tool in management accounting. In a general sense, it provides a sweeping
financial overview of the planning process (Horngren et. Al., 1994). That overview
allows managers to examine the possible impacts of a wide range of strategic
decisions. These decisions can include such crucial areas as pricing policies, product
mixes, market expansion or contractions, outsourcing contracts, idle plant usage,
discretionary expenses planning and a variety of other important considerations in the
planning process. Given the board range of context in which cost volume profit can
be used.
The basic simplicity of cost volume profit is quite remarkable. Armed with just three
inputs of data Sales price, variable cost per unit, and fixed cost a managerial
analyst can evaluate the effect of decision that potentially alter the basic nature of a
firm.
RESEARCH METHODOLOGY
Research Methodology is a way to systematically analysis the research subject and it
may be understood as a science of study how research at done scientifically. Research
is common parlance refer to a research for knowledge. According to Redman and
Mary, research is defined as a systematized effort to gain new knowledge. Research
Methodology is a way to systematically solve the problem. It may be understood as a
science of studying how research is done scientifically. The advanced learners
dictionary lay down the meaning of research as a careful investigation or inquiry
especially through search for new facts in any branch of knowledge.
The secondary data is collected from the annual report of TELCON LTD and the
various records maintained in the Finance Department.
In addition, the data collected by interviewing the Finance Department employees is
used in this study to understand the thing clearly. It is necessary for the research
method, techniques but also the methodology.
RESEARCH DESIGN:
Research Design is the conceptual structure within which the research is conducted.
A research is the arrangement of conditions for the collection and analysis of data in a
CONCEPTUAL FRAMEWORK
MEANING OF FINANCE
In the modern money using economy, finance is considered to be the life blood of
business. It is the foundation of every economic activity and is the pivot around
which every business activity rotates. Money or finance has acquired so much of
important that the modern economy is described as money economy. At present, we
cannot think of an economy without money because an economy without money
cannot function as effectively, efficiently and smoothly as a money economy. It has
made possible tremendous saving of time and trouble in the marshalling of try of to
final consumer it has brought about rapid economic progress by facilitating
specialization and division of labor, technological progress large-scale production and
expansion of various forms of business and financial organizations.
DEFINITION OF FINANCE
In business, finance is defined as provision of money at the time when it is wanted.
Finance is the art of rising and spending of money. Every business concern requires
money or finance to commerce its operations and to continue its operations and for
expansion or growth. There must be continuous flow of finance in or out of the
organization.
COST-BENEFIT ANALYSIS:
Costbenefit analysis (CBA), sometimes-called benefitcost analysis (BCA), is a
systematic process for calculating and comparing benefits and costs of a project.
THEORY:
Governments and others, e.g. businesses, to evaluate the desirability of a given policy,
often use costbenefit analysis. It is an analysis of the expected balance of benefits
and costs, including an account of foregone alternatives and the status quo, helping
predict whether the benefits of a policy outweigh its costs, and by how much (i.e. one
can rank alternate policies in terms of the ratio of costs and benefit). Altering the
status quo by choosing the lowest cost-benefit ratio can improve Pareto efficiency,
[citation needed] in which no alternative policy can improve one group's situation
without damaging another. Generally, accurate cost-benefit analysis identifies choices
that increase welfare from a utilitarian perspective. Otherwise, cost-benefit analysis
offers no guarantees of increased economic efficiency or increases of social welfare;
1. Benefit to management:
The management use cost benefit analysis in formulating policies, making
decision, evaluating performance, knowing the trend of business, planning and
forecasting.
2. Benefit to share holders:
Cost benefit analysis helps investor to select best company for making investment.
The existing shareholders will be able to understand the performance of their
company and about future prospects.
3. Benefit to creditors:
Creditors and suppliers of goods on credit basis are interested in company, who
has solvency and good liquidity position.
4. Benefit to employees:
Employees are interested in the performance of the company as their benefits are
related with profit earned by the company.
2. Usefulness of the ratios depends upon the ability and intention of the person who
handle them.
3. If there is a window dressing of financial statements ratios derived from them will
not serve the purpose.
COST ANALYSIS:
The accumulation, examination, and manipulation of cost data for comparisons and
projections is called as cost analysis. In cost analysis I am taking 8 important costs to
analyze that will give us the clear picture of the cost analysis in the company we are
comparing these costs with respect to the net sales of the company so that we can get
the ratio or the percentage of these costs to net sales of the company. The most
important of them are:
1.
2.
3.
4.
5.
6.
7.
8.
Factory expenses
Administration expenses
Operating expenses
Direct expenses
Indirect expenses
Operating ratio
Financial expenses
Debt Equity proportion
Now we will analyze each item with respect to sales so that we can get a clear picture
of cost analysis of the company.
THEOROTICAL
BACKGROUND