Chapter 1overview of the industry

INTRODUCTION OF THE COMPANYAnalysis of any industry would require a thorough study along with critical analysis to know the exact nature of the business. This study of Indian Tyre industry is no exception. This project is undertaken to study the nature of Indian Tyre industry along with is different shades that affects Indian economy. This study includes analysis of various key components like, growth, competitors, and foreign threats.To gain in depth knowledge, it was important to study one brand in Indian Tyre market and then have a competitors analysis with other players. For this purpose JK TYRES is analyzed as epicenter for gaining marketing strategies as well as issues hampering the Tyre industry. THE INDIAN TYRE INDUSTRY-AN OVERVIEW HighlightsThe Tyre industry is a R. 12,000 crore industry. The fortune of this industry depends on the agricultural and industrial performance of the economy, the transportation needs and the production of vehicles. While the tyres industry is mainly dominated by the organized sector, the unorganized sector holds away in bicycle tyres. In the last five years (2008 to 2009), the industry managed to achieve a compounded annual growth of only 4.40 per cent. However in the last fiscal the industry registered a growth of 7 percent. Natural rubber constitutes 25 per cent of the total raw material cost of the tyres. The ratio of natural rubber content to synthetic rubber content is 80:20 in Indian tyres, whereas worldwide, the ratio of natural rubber to synthetic rubber is 30:70. The overall recession in the Indian economy and especially the automobile sector continued for 3-4 years. The largest hit among the auto sector was the commercial vehicle segment. Tyre industry is capital intensive, and as production is released in spurts, it leads to constant demand-supply imbalances and consequent cyclically in prices. As raw materials from 70% of the costs, variable costs are very high. Profit margins are therefore thin. Production process is technology intensive and globally huge sums are invested in R&D. Tyre demand is a derived demand, dependent on the auto industry. SALIENT FEATURES The Indian tyre market is expected to grow by12% this year. As automobiles have become more sophisticated, technology has become key to success in this sector. Truck and bus segment account for 60% of the total tyre market by value. Passenger car radials are the most profitable but because of poor road condition in India; truck radials are yet to catch on. It will take at least 5 years for light trucks and over 10 years for heavy trucks to reach 25-30% radialisation. With the large additions in capacity over the last two decades, tyre companies have found themselves hard-pressed to maintain market share.

THE INDIAN TYRE INDUSTRY Company wise figures Company FY66 (in nos.Division of tyre market (%) Excludes 2/3 wheelers tyres

Apollo tyres26901310.7

Birla1706405.6

Ceat27976417.0

Good year1972111.4

JK/VIKRANT42422918.7

MRF23257425.1

Modi rubber 1739049.9

Sector Comments Ever since the first Indian tyre company, Dunlop Rubber company (India) was incorporated in 1926, the tyre industry has grown rapidly and today it is a Rs. 12,000 core industry. India has 2.1 lakhs villages, connected by 6.23 lakhs kms of metalled roads and 9.81 lakhs kms of unmetalled roads. These villages are linked to towns and cities. There is a daily traffic of over 4.12 lakhs trucks, 1.27 lakhs buses, 7.23 lakhs cars, and thousands of taxis, two-wheelers, tractors and animal driven vehicles on Indian roads. There exists a vast potential for tyre industry in India. The fortune of the tyre industry depends on the agricultural and industrial performance of the economy, the transportation needs and the production of vehicles.

Hence, this a very sensitive industry, which has to adapt itself to a highly volatile environment. Market Profile While the tyre industry is mainly dominated by the organized sector, the un-organized sector holds sway in bicycle tyres. The major players in the organized tyre segment consist of MRF, Apollo tyres, Ceat, and JK industries, which account for 63 per cent Industries and Goodyear India, with 11 percent, 7per cent share and 6 per cent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited (TCIL), TVS Srichakra, Metro Tyres and Balkrishna Tyres are some of the other players in the industry. MRF, the largest tyre manufacturer in the country, has strong brand equity. While it rules supreme in the industry, other players have created niche market of their own. Sector SpecifiesThe tyre industry is a major consumer of the domestic rubber production. Natural rubber constitutes 80 per cent of the material content of a tyre in India. Worldwide, the ratio of natural rubber to synthetic rubber is 30:70. Apart from natural and synthetic rubber, rubber chemicals are also widely used in tyres. Most of the RSS-4 grade natural rubber required by the Indian tyre industry is domestically sourced, with only a marginal amount being imported. This is an advantage for the industry, since natural rubber constitutes 25 per cent of the total raw material cost of the tyres. The two types of synthetic rubber used in tyres are Poly Butadiene Rubber (PBR) and Styrene Butadiene Rubber (SBR). The former is used in most of the tyres, while the latter is mainly used in the radials for passenger cars. Synthetic rubber accounts for 14 per cent of the raw material cost. Unlike in the case of natural rubber, India imports 60 per cent of its synthetic rubber requirements. Apart from rubber, major raw materials are nylon tyre cord and carbon black. The former is used to make the tyres strong and impart tenacity to it. The latter is

responsible for the colour of the tyre and also enhances the life span of the tyre. Nylon tyre cord comprises 34 per cent, while carbon black accounts for another 13 per cent of the raw material cost. In India, the carbon black used is of the N660, N220 and N330 variety.To sum up, the tyre industry is highly raw-material intensive, with raw material costs accounting for 70 per cent of the lost of production. Fortunately for the industry, the rubber and carbon black prices have taken a beating recently, which means lower costs for the tyre industry. The export-import policy allows free import of all types of new tyres and tubes. However, import of retreaded tyres, either for use or for reclamation of rubber is restricted. This has led to used tyres being smuggled into the country under the label of new tyres except natural rubber are under open general license (OGL), only import of natural from Sri Lanka is eligible under OGL.Sector TrendsCross ply tyres have been used in India for several decades. In these tyres, the ply cords run across each other or diagonally to the outer surface of the tyre. Rayon and nylon tyre cords are used as the reinforcing medium. These tyres can be retreaded twice during their lifetime and are hence preferred by Indian transport operators who normally overload their trucks. A vehicle with the normal carrying capacity of around 12 tones is usually loaded with double the capacity. Moreover, one also has to contend with the bad suspensions and bad road conditions. No wonder, 95 per cent of the tyres used in India are cross plies. Radial tyres have their cords running radially from bead at 90-degree angle to the rim or along the outer surface of the tyre. The reinforcing mediums used in these tyres are polyester, nylon, fiberglass and steel. Hence, these tyres are 20 per cent more expensive than the cross plies. But they have a longer life and provide lower fuel consumption. The unhealthy condition of the Indian roads has resulted in radial tyres accounting for only 5 per cent of the tyre industry as against a global trend of 60 per cent. With two-thirds of the capacity of all major tyre manufacturers being reserved for radials, this is a real cause for concern. Tyre Industry in India comprises of 40 tyre companies (53 factories), 12 companies account for over 85% of total production (In Nos.) APOLLO TYRES k J.KTYRES MODISTONE BIRLA TYRES CEAT MODI RUBBER LTD CEAT INDIA LT MRFLTD FALCON TYRE LTD PREMIER TYRE LTD GOODYEAR INDIA LTD VIKRANT TYRE LTDIndustry turnover Rs 100,000 Million

Installed capacity 5730 Million Numbers

Production 4140 Million Numbers

Capacity Utilization 72% (2008-2009)

Taxes and Duties paid Rs 28,500 Million

SALIENT FEATURES OF INDIAN TYRE INDUSTRYAdaptability & AbsorptionSuccessful and fast absorption of international technology and availability of technical expertise and professionals to absorb and implement technical advancements.InnovativenessSeveral innovations introduced to apply international technologies? processes to create tyres suitable for Indian road conditions.ExportsSustained exports for over a decade to more than 50 countries. All large tyre companies are exporting, with over 30% exports to US. Approx. 20% of total Truck& Bus tyres produced domestically is exported. All large companies are engaged in sustained exports as a long-term commitment.Technology ProgressionWithin a span of four decades, technology progression from cotton (reinforcement) carcass to high performance radial tyres.Indigenous and Ready AvailabilityNew vehicle manufacturers, while launching a series of latest models, have easy access to (and ready availability of) indigenous tyres of their respective specifications and matching international standards.

Chapter 2profile of the organization

DETAILED STUDY OF JKJ.K Organization founded over 100 years ago ranks within the Elite private groups in terms of assets and sales. The Groups operations can best be characterized as multi- business, multi-product and multi-location with head office in New Delhi, the capital of India. The Group has a distinguished record of being pioneers in introducing several new products and processes into India for the first time.It comprises of a number of industrial and commercial companies, exceeding 70 in number, most of them public limited, in which J.K Organization has controlling interest ranging from 35 to 70%. In the major public limited companies, there are a large number of public shareholders aggregating over 8,00,000.J.K. Organization has achieved a number of important technological break-through and has an impressive record of FIRSTS in India, prominent among them being:1944 First in India to produce Aluminium Virgin Metal from Indian Bauxite. The Company was nationalized in 1973. 1949 First in India to manufacture Steel Engineering in 1973.1969 First to manufacture Acrylic Fibres in India.1977 First to produce Steel Belted Radial Tyres for passenger cars , trucks and buses in India. 1980 First in the World to make Steel Belted Radial Tyres for 3 wheelers.1984 First to produce White cement in India using dry processed technology, etc.

ASSETS AND TURNOVERMember units of J.K. Organization have total assets of over US $ 2.4 billion and these are expected to touch $ 3.0 billion within the next 2 years.PRODUCT AND SERVICESJ.K. Organization has very diversified manufacturing activities such as Synthetic Fibres like: Nylon, Polyester, Acrylic; Paper & Boards; Cement; Automobile Tyres & Tubes; Cotton, Woollen and Jute Textiles; Engineering; Plastic Processing; Agrochemicals; Hybrid Seeds; Cosmetics; Audio & Video magnetic tapes; Power transmission including V-Belts and conveyor Beltings, Automotive Belts, Oil Seals; System Engineering, Industrial, Electronics and Material handling systems, etc. The group is further diversifying in other fields like Petrochemicals, steel, Drugs & Pharmaceuticals, Food & Dairy Products, Electronics, Computer Software, Power Generation, Rubber hoses, etc. The Group exports number of products including Jute Textiles, Woollen textiles, Readymade Garments, Engineering files, Tyres and Tubes, Synthetic Fibres, Paper, Marine products, Spices, etc. The entrepreneurial, managerial and technical expertise available within the J.K. Organization has enabled it to establish and operate several projects in India and abroad.Most of the industries promoted and established by J.K. Organization are today the leaders in their product lines in India. The success of a manufacturing enterprise depends, especially in a competitive consumer product line, on the efficiency of its manufacturing and marketing organization and more so in India where the marketing activities have to be very competitive. In fact, the success of J.K. Group of companies is based primarily on the latest technology, innovation, and continuous Research & development policies as also on its effective marketing set-up, which is involved on a sustained basis in: Maintaining continuous touch with the customer, Identifying the needs of the consumer, Establishing effective channels of distribution, After-Sales Service and consumer satisfaction.J.K. Organization has well-established necessary infrastructure and capabilities to market a very wide range of products, which include core sector industrial products, engineering products, consumer goods, agrochemicals, etc.

To cater to the needs of the various consumers for the goods manufactured by the group and to provide prompt delivery and services, as, when and where required, the organization has established:Over 50 well-equipped branch offices all over the country for distribution, control and monitoring product lines;Four Zonal Offices at: New Delhi Bombay, Calcutta and Kanpur

To support and monitor the branch offices.Network of over 5,000 distributors and retailers for distribution and sales promotion of different products.Besides the above, the Group has established, wherever required, number of show rooms for retail trade as in case of woolen Textiles. The large distribution network has enabled the Group to enter very successfully into many competitive lines of manufacture such as Paper, Cement, Automobile Tyres & Tubes, Synthetic Fibres, Agrochemical, Cosmetics, etc. The Group enjoys high reputation for the quality of their products and has been able to capture reasonably high share of the market within a short time.The group has in-house setup for handling, advertising, market service, sales promotion, supply/demand forecast, government liaison and coordination supported by some of the leading outside marketing and advertising agencies and arrangements with diverse media and publicity channels like newspapers, magazines, financial weeklies, cinema slides, commercials on TV etc., depending on the type of product.J.K. Organization is highly competent and eminently suited to promote and operate industrial enterprises as also plantations. It offers Entrepreneurial, Commercial,

Managerial and Technical expertise for launching new projects right from concept to commissioning, which would include:Identification and development of new projects Selection of Technology Preparation of Feasibility Reports Arranging Basic and Detailed Engineering of the Projects Procurement and Inspection of Equipment & Machinery Training of personnel Erection and commissioning of Plants Running and Management of the Plants Social & Welfare ActivitiesJ.K. organization, conscious of its social responsibilities and dedication to improving the quality of life of its people, strives to serve the community in diverse fields of social welfare. These include promotion of education, religious and ethical values, provision of medical and modem living facilities and amenities.J.K. Industries is a mega corporate entity that is emblematic of excellence, diversification and pioneering new technologies. A part of JK Organization which ranks among the top private groups private groups in India, J.K. Industries is committed to self reliance and follows an ethic that views customer satisfaction as an index of achievement. Over the years, the company has expanded and diversified its business portfolio. It has developed into a multi product, multi-location corporate entity comprising of following business divisions:MISSION OF THE COMPANY To be the largest & profitable tyre in India. To retain no 1 position in truck & bus segment and to be amongst top two- in all other four-wheeler tyre segment. To make truck! bus radial operations profitable and retain leadership in the passenger radial market. To be largest Indian tyre exporter

To is customer-obese company To enhance value to shareholders an service to stake holders To develops highly motivated team with a sense of Amanda. To excel as value driven organization. To be the most preferred tyre brand in India. GLOBAL VISION OF THE COMPANY J.k tyres branded products are sold in nearly sixty countries across six countries. J.K tyre is the number one exporter of tyres from India to developed nations like U.S.A this has lead to repeated recognition such as prime ministers national export award top? Export award of chemical and allied products export council lac export award for exports. To Latin America. Ever since its inception it has been JK tyress belief in the value of technological superiority that has made it grow by leaps and bounds. This division produces and sells tyres and tubes under the brand name JK Tyre for Truck, Buses, Passenger, cars, jeeps, light commercial vehicles, multi utility vehicles and tractors. The company pioneered steel radial technology in India in 1977 and continues to be. The industry leader in the Radial segment in India. JK tyres is the only Tyre manufacturer in the country to produce high performance T & H rated steel radial tyres. JK tyre has consciously followed a policy of continuously modernizing and expanding its tyre manufacturing facilities to retain its edge n the market place. Our customer base covers virtually the entire original equipment manufacturers (OEMs) in India together with replacement Market for four wheeler vehicles, Defence and State Transport Units. Besides India, we have a worldwide customer base in over 45 countries across all 6 continents. To keep pace with the market demand as well as technological leadership in Indian market, J.K. industries acquired Vikrant Tyres Limited, Mysore in 1977. J.K. Industries and Vikrant Tyres Limited are the only tyre companies in India to have received all three ISO 9001, QS 9000 and ISO 14001 certificates. This indeed is a true reflection of our commitment to system-

oriented approach. The company has a technical collaboration with M/s Continental AG, Germany, which is among the top five tyre manufacturers in the world to keep pace with latest technological developments. To stay at the forefront of technological advancements a state of art Research & Development Centre, HASETRI, was set up, which remains the nerve centre for providing cutting edge technology. In a short span of time it has emerged as the 17th largest tyre manufacturer in the world an achievement in itself.With three plants located in Rajasthan, Madhya Pradesh and Karnataka, JK Tyre is the largest manufacturer of truck and bus tyres in India. The truck and bus tyres produced account for nearly 74% of the total tyre business in India, thus giving JK Tyre an undisputed position. Additionally, JK Tyre is the only manufacturer of truck! bus steel radial tyres, and the second largest manufacturer of 4-wheeler tyres in the country. Also, JK Tyre is the largest exported tyre brand from India. It was awarded the CAPEXILs Highest Export Award for 1997-97 by FIEO. It enjoys preferred premium brand status in Truck Bias market in USA and across many markets in Africa, Middle East and South East Asia.JK Tyre plans Rs 170-cr expansionJK Tyre is investing Rs 170 crore this year to augment production capacity at its car and truck radial facilities and aims 15 per cent top line growth at Rs 2,300 crore this fiscal due to rising car tyre sale. We have earmarked Rs 170 crore to increase production capacity at two of our manufacturing units, one for cars and the other for truck radials, JK Tyre vice chairman Raghupati Singhania told PTI. The production capacity at the passenger car tyres unit will be hiked to 3.6 million units from 3.2 million units at present while production at the truck radial tyre plant will be augmented to 3.5 lakhs units over 2.5 lakhs units. The Rs 170 crore investment will be a mix of internal accruals and debt. At present, JK Tyre has 22 per cent market share in the Rs 12,000 crore Indian four-wheeler tyre market, which produces 20 million units annually. The JK Industry flagship targets 25 per cent rise in export earnings at Rs 400 crore during 2008-09 over Rs 320 crore last year. The company ships tyres to 65 countries, including Australia and the Southeast Asian countries. JK Tyre also- 15 -

sources tyres from a number of countries like China and European nations for both domestic and international markets.Colored Tyres from JK TyreIndias No.1 manufacturer of four-wheeler tyres and pioneers of radial tyre technology in India today unveiled nations first eco-friendly coloured radials. Developed indigenously at JK Tyres state-of-the-art R&D facilities HASETRI (Han Shankar Singhania Elastomer and Tyre Research Institute), these tyres employ path-breaking technology, which replaces the traditionally used Carbon Black with environment friendly material Silica. Besides being environmentally less hazardous, silica also promises higher fuel efficiency as a result of its lower rolling resistance.These tyres will also have longer life due to advanced compounding technology - offering excellent performance; handling and breaking that are a hallmark of tyres from JK Tyre. Results of JK Tyres pioneering research initiatives into new-age environment-friendly raw materials, these tyres are made from silica based tread compounds. The tyres also offer higher durability as compared to normal radials and offer better resistance against cuts - thanks to its superior compounding technology.Showcasing the stunning next generation tyres - Mr. Raghupati Singhania - Managing Director, JK Industries, said, We have always been conscious and committed towards the cause of environment and its conservation. Indeed, it was the inspiration from natures best gift to mankind - colour, along with the technical competence of our R&D team, which lead to the development of the product youre seeing today. In line with its pioneering spirit, JK Tyre has again set an example for the entire Indian automobile industry to become more sensitive towards the environment. Celebrating our 25th year of glorious existence, we dedicate this product to our nation on the eve of the World Environment Day. Welcome to a colorful journey ahead.The new radials, to be initially available in green colour, will be manufactured at state-of-the-art Banmore radial tyre plant of JK Industries. To be launched in a phased manner, they would be currently available in the major cities such as Delhi, Mumbai, Bangalore, Chennai, Cochin, Pune and Chandigarh.

These new tyres will not only add a dash of glamour to cars on the road, but also promise to transform the image of a tyre from just an auto accessory to a key- differentiating feature which is sure to catch fancy of customers across all segments.Apart from being eco-friendly, the coloured tyres promise to make a lifestylestatement. These revolutionary tyres are currently available in the sizes 165/65113Tornado Green (for Hyundai Santro & Tata Indica) & 1751701R13 Ultima XPS Green (for Ford Icon, Hyundai Accent, Fiat Siena, Opel Corsa, Honda City, Daewoo Cielo, Maruti Esteem).J K INDUSTRIES COMPLETES RESTRUCTURINGDemerger of Sugar and Agri-Genetics and Merger of Vikrant Tyres creates a Tyre giant The Board of Directors of J K Industries Limited (JK1), a flagship company of H S Singhania Group, today announced the completion of the restructuring of its Businesses. As a result JKI, upon demerger of its non-tyre businesses and merger of Vikrant Tyres has emerged as a Tyre giant with Automobile Tyres as its sole business. Non tyre business viz. Sugar and Agri seeds have been demerged into two separate entities namely J K Sugar Limited (JKSL) and J K Agri-genetics Limited (JKAGL) respectively.

Commenting on the restructuring initiatives, Mr Han Shankar Singhania, Chairman, JKI said This is a forward looking strategic step for the Company by creating strong business focussed entities, which will be able to leverage their core competencies in the competitive business environment both in the domestic as well as global markets. This reorganization and creation of three business focussed entities opens up tremendous possibilities of strategic alliances and enhancement of technological prowess which would result in further strengthening market leadership in these important sectors of Indian Economy.

JKIs main business is Tyres sold under the well-known brand J K Tyre. Some time back the Company had made foray into Agri businesses by setting up facility for manufacture of Sugar and established research farms and facilities for production of Hybrid and High Yielding Seeds. These businesses will now have better focus on astand-alone basis. JKI had acquired majority stake in Vikrant Tyres Ltd. (VTL) in 1997 and turned it around in a short period of one year. Merger of VTL with JKI is a logical step forward to achieve the benefits of scale, synergy, logistics and marketing, besides greater financial strength. The consolidated tyre entity will increase its global competitive strength thereby significantly contributing to better profitability and future growth, thus maximizing shareholder value. J.K. Tyre is the foremost manufacturer of four wheeler tyres and is the largest bus and truck tyre manufacturer.

Mr Singhania added that JK Tyre pioneered radial technology in India way back in 1977 and is the leader in radials. It is the only Indian manufacturer producing the entire range of truck/bus, LCV, MUV, Jeep, Car and Tractor radials. It has taken upon the challenge of leading the radial revolution in commercial vehicle segments as well. JK Tyre is first and the only manufacturer of truck radials in India. It has a state-of- the-art Truck Radial plant in Mysore, which is poised for further expansion of the capacity. JK Tyres expansion of bias truck tyres and passenger radials is nearing completion, which will raise its radial passenger capacity by 50%. This shall further strengthen its market share. JKIs turnover in a years time would be Rs.2, 500 crores, which is expected to increase to Rs.5, 000 crores by the year 2009. JK Tyre is the largest exporter of tyres from India accounting for 30% of total tyre exports. It exports to over 60 countries in all the 6 continents including USA, Latin America, Africa, Middle East, South East Asia, Australia, etc. It has launched its products in China and is also out-sourcing tyres from China for international markets. JK Sugars current capacity of 4,300 TCD is poised for expansion to 5,000 TCD. Its co-generation capacity of 19 MW and export of power to UP Power Corporation adds great value to the business.

JK Agri-Genetics Ltd. is a leading producer of Hi-yielding Hybrid seeds under its brand name JK Seeds. It produces seeds for a large variety of crops such as Bajra, Jowar, Cotton, Maize, Rice, Sun Flower, Tomato, etc. It is the largest in Bajra and leader in Jowar and Cotton. JK Seeds are sown by 8 laths farmers in 15 states covering an area of 2 million acres under cultivation. It has a state-of-the-art Biotechnology Lab in Hyderabad and research farms to carry out its research activities.Both these Agri businesses of Sugar and Hybrid Seeds have tremendous scope for growth, looking at Indias fundamental strength in Agriculture. The shareholders of JKI will reap benefits by creation of these 3 focused entities. They will be receiving the share of J K Sugar and J K Agri-genetics as well in the same proportion as their existing holding in JKI. The shareholders of VTL shall also be rewarded. For every holder of 100 shares of VTL, the shareholder will be receiving 45 shares of JKI i.e. in the proportion of 9 shares of JKJ for every 20 shares held in VTL. This is a win-win situation for the shareholders in every respect.

PRODUCT PROFILEJET RIB/FEATURES & BENEFITS 16 PR Nylon Tyre for Front Fitment in Trucks and All Wheel Positions in Buses. Aggressive 5 Rib Pattern for Easy Steering. Computer Designed Tread for Uniform wears and Smooth running. Multiple radius tread design for Better Road Contact which Improves Mileage and Wear Nature and helps in Quicker Heat Dissipation. NIP (Natural Inflated Profile) designed tyre for improved Structural Integrity and Retreadibility. Sipes designed to ensure Uniform Tread wearing.

INNOVATIVE CONSTRUCTIONStrong Casing for Dimensional stability, Longer Life and Better casing Value.

SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability and High Mileage Potential. The Ultimate Rib Tyre for Maximum Mileage. Offers Best Value For Money. Higher Retread ability.

FEATURES & BENEFITS16 PR Nylon Tyre for All Wheel Fitment On Normal To Moderate LoadTrucks/Buses.INNOVATIVE CONSTRUCTIONUnique Tread pattern designed for application on vehicles operating on hilly terrain and long haulage.Rounded tie-bars and higher base radius provided to reduce localized stress on tie-bar. Wider rib designed with reinforced lugs for higher mileage and trouble free service life.Higher number and width of lugs at shoulder for higher mileage, low stress on shoulder channel and better on-off road application.SUPERIOR PERFORMANCESpecially processed compounds to suit performance needs for Front-Axel application on Buses. Use of specially compounded tread rubber for cooler running and more mileage. Super strong casing enhances capacity for multiple retread ability. Renders Excellent Service and Clean Casing.JET TRAK FEATURES & BENEFITS16 PR Nylon Tyre for Rear Fitment on Normal and Moderate loading vehicles. Wide Deep Pyramid Lugs with high stability, are most suitable for On & Off road Conditions. Strong Shoulder designed to carry Loads under any Road Conditions. Computer Aided Design for Uniform Wear. Wider Center Rib for higher Initial Mileage and Tread life.INNOVATIVE CONSTRUCTIONSuper Strong Casing, which gives maximum service, and better Retreadibility.Deep Tread for Extra Mileage.SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability and high Mileage Potential. Runs cooler for high performance. Renders Excellent Service and Clean Casing fetches far better Casing Value. JET TRAK 39

FEATURES & BENEFITS 18 PR Nylon Tyre for Rear Fitment on Heavy Loads. A tyre designed exclusively for Heavy Load Conditions. Wide Deep Pyramid lugs most suitable for On & Off road Conditions. Extra Strong casing designed to carry Heavy Loads under grueling conditions. Computer aided design Tread for uniform wear.INNOVATIVE CONSTRUCTION Super Strong casing to provide stability under Heavy Loads. Superior Tread Compound for greater Mileage.SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability, more Mileage Potential and high load carrying ability. Runs Cooler for High Performance. Tried and Time proven Lug Tyre for heavy loads. Renders Excellent Service and Clean Casing fetches far better Casing Value.JET TRAK DX/FEATURES & BENEFITS 16 PR Nylon Tyre for Rear Fitment on Moderate to Heavy Loading vehicles. Extra strong construction to carry heavy loads. Super sidewall protector to repel any sidewall hits. Wide Deep Pyramid Lugs with high stability, are most suitable for On & Off road Conditions. Strong Shoulder designed to carry Loads under any Road Conditions. Computer Aided Design for Uniform Wear.INNOVATIVE CONSTRUCTIONExtra reinforced casing to withstand extra load without casing distortion and betterretread ability. Extra strong bead especially designed and developed for Indian roads.

SUPERIOR PERFORMANCEDual Compound Tread to ensure Structural Stability and Good Mileage Potential.JET TRAK 39 DX/FEATURES & BENEFITS 18 PR Nylon Tyre for Rear Fitment on Heavy and Super Heavy Loads. Wide Deep Pyramid Jugs most suitable for On & Off road Conditions. Extra Strong casing designed to carry Heavy Loads under grueling conditions. Computer aided design tread for uniform wear.INNOVATIVE CONSTRUCTION Additional rubber in treads for better Mileage. Extra strong shoulder for carrying heavy loads. Special re-enforced bead construction to carry extra heavy loads. Special rubber compounding to have super cool running at heavy loads.SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability, more Mileage Potential and high load carrying ability. Runs Cooler for High Performance. Renders Excellent Service and Clean Casing fetches far better Casing Value.

JET MILES/FEATURES & BENEFITS Premium high mileage tyre with unparalleled mileage performance. 16 PR Nylon Tyre for Front Fitment in Trucks and All Wheel Positions in Buses. Aggressive 5 Rib Pattern for Easy Steering. CAE generated tread pattern. Multiple radius tread design for Better Road Contact which Improves Mileage and Wear Nature and helps, in Quicker Heat Dissipation. NIP (Natural Inflated Profile) designed tyre for improved Structural Integrity and Retreadibility.INNOVATIVE CONSTRUCTIONFEA developed cavity for stress free running, results in no structural failures.

SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability and High Mileage Potential. The Ultimate Rib Tyre for Maximum Mileage. Offers Best Value for Money.

JET KING FEATURES & BENEFITS 16 PR Nylon Tyre for Rear Fitment On Normal Load Vehicles. Optimum design and premium Lug depth for Extra High Mileage for Normal Load Applications. Computer Designed Tread for Uniform wears. Wide Deep Pyramid Lugs for all types of road conditions. Wider Center Rib for Higher Initial Mileage and Tread life. Sipes provided for Better Road Grip in Wet Road Conditions and cooler running.INNOVATIVE CONSTRUCTION Super Strong Casing, which gives Maximum Service and Better Retreadibility. Deep tread to give best possible mileage in normal to moderate loads.SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability and High Mileage Potential. Cut Resistant. Runs Cooler For High Performance. Gives Extra High Mileage. Renders Excellent Service and Clean Casing.JET TRAK CLASSIC/FEATURES & BENEFITS 16 PR Nylon Economy Tyre for Rear Fitment on Normal and Moderate loading vehicles. Wide Deep Pyramid Lugs with special compounding to reduce damage from sidewall impact and avoid Lug Chipping. Strong Shoulder designed to carry Loads under any Road Conditions. Dual Tread Compound For cooler running.INNOVATIVE CONSTRUCTION Super Strong Casing, which gives maximum service, and better Retreadibility. Specially constructed Super Strong Bead for Better load carrying capability and added safety factor. FEA analyzed cavity for smoother, quiet running and superior mileage.SUPERIOR PERFORMANCE Extra Premium Depth Tyre for Higher Initial Mileage. Dual Tread Compound For cooler running. Renders Excellent Service and Clean Casing fetches far better Casing Value.TANKER LUG FEATURES & BENEFITS Specialized tyre for tanker operations and vehicles carrying dynamic load. 16 PR Nylon Tyre for Rear Fitment On Normal Load Vehicles. Optimum design and premium Lug depth for Extra High Mileage for Normal Load Applications. Computer Designed Tread for Uniform wears. Wide Deep Pyramid Lugs for all types of road conditions. Wider Center Rib for Higher Initial Mileage and Tread life. Special tread compound for more mileage.INNOVATIVE CONSTRUCTION Super Strong Casing, which gives Maximum Service and Better Retreadibility. Deep Tread gives High Mileage.SUPERIOR PERFORMANCE Dual Compound Tread to ensure Structural Stability and High Mileage Potential. Cut Ressistant. Runs Cooler For High Performance. Gives Extra High Mileage. Renders Excellent Service and Clean Casing.COMPETITION INFORMATIONTHE company is one among the major players in the Indian tyre industry the main competitors being. Apollo MRF Ceat, Birla G- year Bridgestone.The competition is not restricted to the product mix only but also to the price mix promotion mix product range quality product development product positioning and other areas in preview of marketing management.J.K Tyre has successfully overcome the prevailing recession in the economy and further strength then its position vis--vis competitors by improved operations cost reduction and aggressive consumer focused marketing.The rate of growth is much higher than the comparative growth in the industry.BRIEFING ABOUT THE COMPETITIORGOODYEAR INDIA LTD: -Goodyear India ltd is subsidiary of Goodyear an American multinational that is one of the largest tyre manufacturers in the world. Goodyear has a substantial share in the global market and in 1955 it was 3id among the top 20 tyre manufacturers in the world with a sales of $lOlO5million. But Goodyear indicated is relatively enjoying a market share of about 6% and despite strong brand loyalty has not been able to overcome its increase in its cost.MRF: - MRF ltd was established in 1960 manufacturers automobile tyre in collaboration with mans field tyre and rubber company U.S.A. MRF becomes the largest manufacturer in 1993 with a turnover of Rs l500crore. The company makes automotive tyres conveyor belts tubes leather products and surface coaching. It was the largest producer of tyre in each and every segment in 1995-1996. MRF enjoys high brand equity as well as a very good reputation both between consumer and dealers. Today MRF has a Vast network spanning 3000 dealers across India around 50 to 100 new dealers joining up every year. Today the company spends about Rs 40 crorers on advertising, which revolves around strengths and the vision of its pneumonic the MRF muscleman.

A special factory dedicated entirely to the manufacture of radials is being built up at Pondichery, MRF tyres were also chosen for fitment on the ford opal and feat uno further proofs its superior quality.DUNLOP INDIA: - Dunlop worldwide had been at the fore front of every development of pneumatic tyres, which is the actual name of tyres we use for 100 years after 100 years of establishment Dunlop tyre group is a global network, fully geared to meet the growing needs of the world market. Today Dunlop has the size economies and scale that enable it to invest in research and development and in modern facilities to manufacture products of highest quality. It has got technical collaboration with sumitomo rubber industries Japan Dunlop ltd U.K. currently under takeover of Mr. Chhabria.CEAT LTD: - set up in 1958 management under R.P. Goenka, technical collaboration with Yokohama rubber company Japan. Ceat ltd. enjoys a market share of about 20%. It has found its position amongst the top manufactures in the country. It has manufactured a wide range of tyres and boosts of capacity utilization of 55%. It is the second largest car tyre manufacturers in the world with a turnover of $322million.APOLLO TYRES: - set up in 1972 in Karla by industrialist Raunaa Singh with technical collaboration with general tyre international. Apollo is one of the fastest growing tyre companies in the world. Its strength lie in its aggressive marketing and this is reflected in sales growing of over 30% per annum for the last 5 years, the company produced truck Icy passenger car tyres. Apollo is tied up with s Kumars to manufacture-2 wheeler tyre to sell under the Apollo brand name Apollo is among top three manufacturers in the country and in 1995 it was 16th amongst the top 25 tyre manufacturers in the world with a turnover of about $376million.

S.W.O.T ANALYSIS OF J.K TYRE STRENGTH Best of the technology used for production. State govt. incentives are available since the manufacturing plants are located in socially and economically backward areas. High production capacity Sound dealer network throughout the country Biggest truck/ bus tyre manufacturer in India Wide product range Pioneer in radial tyre Supplier to OEMS like Telco M&M Mercedes Benz Economics of scale provide a competitive edge over the others Pricing is better as compared to other Indian tyre manufacturing company The brand quality of jet track 39 of j.k and track king and star lug of vtl is found to be better than competing brand of Apollos amar&xt-7 and Ceats hcl 80 plus They have good performance tyres for rainy as well as winter season this adds up to their lineup of good tyre manufacturers. J.K industries gives claim up to 50% of ruggedness while its major competitor entertained only up to 10% of ruggedness.WEAKNESS Quality control problems. Slow dealer response. No proper communication channel with dealers. Fluctuating rates are disturbing the market price. There is more swelling of tyres have been reported in vikrant.the quality of tyres are inferior to Apollo tyres. The performance of tyre is found to be bad in summers. J.k tyres performance in overloading is not satisfactory. More manufacturing defects have been found out in j.k and vtl. The claim service takes 1 5or more than I 5days that must be given in 2/3 days. The smaller dealers are not entertained properly resulting in annoyance and dissatisfaction. Late delivery of tyre. There is lack of equity in schemes for big and small dealers. There have harsh payment policies as compared to MRF tyres. There is complaint by the dealers that the sales staff is transferred more frequently. The complaints are not entertained properly and there is lack of proper communication to dealers regarding the disclosure of company policies. There is a late supply of tyres, which affects payment. Stock of vikrant tyres is inappropriate as complained by several dealers.OPPORTUNITIES Passenger car market growing @ 12% per annum. Good export potential. Still immense scope in truck/ bus radial market. Two wheeler segments is still to be explored. The upward trend of the share of road transport vs. train transportation is expected to strengthen further with govt. initiative for developing a network of multilane high ways and for giving shape to the golden quadrangle. Eco friendly tyre is a hotcake in the market with no substitute. There is tremendous potential in the Delhi area that opens the gateway for increasing the sales and capturing a larger to ast of market share. The price to quality ratio of Apollo is similar to the price quality ratio of j.k tyres if the r&d work is done more in j.k some of the popular brands like jet track and jet track-39 the quality could be improve so that it could work better in summers with relative less increase in price. J.K tyres has been found out to have poor performance in overloading which can be improve through R&D. however the quality of vikrant tyres in overloading has been found out to be superior. Tyre infinding its place infront as well as rear tyres. The claim must be given with in 2/3 days as demand by most of the dealers and thus could enhance their claim services above atl. There should be proper communication in disclosing the complaints of the dealers as early as possible. There is a high demand for the promotional scheme that should be in the market regularly to boost up sales. The scheme for the dealer and customers must be separate as Apollo launches attractive schemes for the dealers.THREATS The market is flooded with many competitors like atl ceat MRF Apollo Goodyear Birla in truck segment. Many new multinational players are going to launch their products in the near future. In order to save themselves and maintain and increase their market share they have to constantly incur expanse in R&D to have superior quality better technology and environment friendly. There is a threat of price war that is set at the stage to have the cutthroat competition. The price quality ratio must have the competitive edge over its nearest competitor Apollo tyres. In the overloading capacity the performance of tyre is not satisfactory as compared to its nearest competitor MRF & Apollo. The mileage has unsatisfactory performance as compared to the multinational brands like Goodyear and MRF and national company like Apollo. The shortage in availability which is currently noticed in all the companies in India if persist long time may lead to a setback in the brand image and also will loose the customer satisfaction. The shortage especially faced by the smaller dealers may result in the purchase from the bigger ones may also affect the sales from companies premises. There must be equity in dealing with small as well as big dealers because if the smaller dealers are not given proper span of time by the sales people then this may result in loss of a large market share. There must be transparency in communication with dealers. Upcoming competition in radial segment from countries like china & South Korea. Liquid products are being transported through pipelines, which is again a major threat for tyre industry.

Chapter 3Research Objective and Methodology

2.2managerial usefulness OF STUDYThis project is useful To know the earning capacity or profitability of the J K Tyres. To know the solvency position of J K Tyres. To know the financial strength of the J K Tyres. To know the trend of the business. To know the efficiency of the management.2.3OBJECTIVE OF STUDY To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm. To study the financial position of the J K Tyres. To analyze the profitability and solvency position of the unit with the existing tools of financial analysis. To analyze the financial stability and overall performance of J K Tyres.2.4SCOPE OF THE PROJECTWhen the project report is prepared it includes all the aspects of projects like companys product and its market, manufacturing process, operational viability, its financial projection and various ratios. This helps the management to understand whether the project is practically possible or not. Ratio analysis gives the idea about the profitability of the project.Project report gives projected financial statements and on basis of that ratios are calculated. Ratio analysis helps in judging the operational efficiency of the managements ability to repay short and long term loans, doing inter-firm comparison and to assess the future growth of the company. The ratio analysis of the company is done before investing or providing credit to the company. This is the reason of selecting the project.2.5METHODOLOGY Research is defined as a systematic, gathering recording and analysis of data about problem relating to any particular field. It determines strength reliability and accuracy of the project.Research Design: Research Design pertains to the great research approach or strategy adopted for a particular project. A research project has to be the conducted scientifically making sure that the data is collected adequately and economically. The study used a descriptive research design for the purpose of getting an insight over the issue.It is to provide an accurate picture of some aspects of market environment. Descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible.Method of Data Collection:Secondary Data: Through the internet and published dataLimitationS of the studySignificant business decisions are frequently made using one or more of the analytical tools illustrated in this term paper. But, one should be aware of the limitations of these tools and of the financial statements on which they are based.EstimatesFinancial statements contain numerous estimates. Estimates are used in determining the allowance for uncollectible receivables, periodic depreciation, the costs of warranties, and contingent losses. To the extent that these estimates are inaccurate, the financial ratios and percentages are inaccurate.

CostTraditional financial statements are based on cost. They are not adjusted for price-level changes. Comparisons of unadjusted financial data from different periods may be rendered invalid by significant inflation or deflation. me period.Alternative Accounting MethodsCompanies vary in the generally accepted accounting principles they use. Such variations may hamper comparability. For example, one company may use the FIFO method of inventory costing: another company in the same industry may use LIFO. If inventory is a significant asset to both companies, it is unlikely that their current ratios are comparable. In addition to differences in inventory costing methods, differences also exist in reporting such items as depreciation, depletion, and amortization. These differences in accounting methods might be detectable from reading the notes to the financial statements. But, adjusting the financial data to compensate for the different methods is difficult, if not impossible in some cases.Atypical DataFiscal year-end data may not be typical of the financial condition during the year. Firms frequently establish a fiscal year-end that coincides with the low point in operating activity or in inventory levels. Therefore, certain account balances (cash, receivables, payables, and inventories) may not be representative of the balances in the accounts during the year.Diversification of FirmsDiversification in U.S. industry also limits the usefulness of financial analysis. Many firms today are so diversified that they cannot be classified by a single industry they are true conglomerates. Others appear to be comparable but are not.

Chapter 4Conceptual Discussion

Meaning of Financial StatementFinancial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: - The Balance Sheet Profit And Loss AccountThey provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firmMeaning of Financial AnalysisThe first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation.Features of Financial Analysis To present a complex data contained in the financial statement in simple and understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various conclusions.Purpose of Analysis of financial statements To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt Procedure of Financial Statement Analysis The following procedure is adopted for the analysis and interpretation of financial statements:- The analyst should acquaint himself with principles and postulated of accounting. He should know the plans and policies of the managements that he may be able to find out whether these plans are properly executed or not. The extent of analysis should be determined so that the sphere of work may be decided. If the aim is find out. Earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary. The financial data be given in statement should be recognized and rearranged. It will involve the grouping similar data under same heads. Breaking down of individual components of statement according to nature. The data is reduced to a standard form. A relationship is established among financial statements with the help of tools & techniques of analysis such as ratios, trends, common size, fund flow etc. The information is interpreted in a simple and understandable way. The significance and utility of financial data is explained for help indecision making. The conclusions drawn from interpretation are presented to the management in the form of reports.Analyzing financial statements involves evaluating three characteristics of a company: its liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is primarily interested in the ability of the borrower to pay obligations when they come due. The liquidity of the borrower is extremely important in evaluating the safety of a loan. A long-term creditor, such as a bondholder, however, looks to profitability and solvency measures that indicate the companys ability to survive over a long period of time. Long-term creditors consider such measures as the amount of debt in the companys capital structure and its ability to meet interest payments. Similarly, stockholders are interested in the profitability and solvency of the company. They want to assess the likelihood of dividends and the growth potential of the stock.Comparison can be made on a number of different bases. Following are the three illustrations:1. Intra-company basis. This basis compares an item or financial relationship within a company in the current year with the same item or relationship in one or more prior years. For example, Sears, Roebuck and Co. can compare its cash balance at the end of the current year with last years balance to find the amount of the increase or decrease. Likewise, Sears can compare the percentage of cash to current assets at the end of the current year with the percentage in one or more prior years. Intra-company comparisons are useful in detecting changes in financial relationships and significant trends.2. Industry averages.This basis compares an item or financial relationship of a company with industry averages (or norms) published by financial ratings organizations such as Dun & Bradstreet, Moodys and Standard & Poors. For example, Searss net income can be compared with the average net income of all companies in the retail chain-store industry. Comparisons with industry averages provide information as to a companys relative performance within the industry.

3. Intercompany basis.This basis compares an item or financial relationship of one company with the same item or relationship in one or more competing companies. The comparisons are made on the basis of the published financial statements of the individual companies. For example, Searss total sales for the year can be compared with the total sales of its major competitors such as Kmart and Wal-Mart. Intercompany comparisons are useful in determining a companys competitive position.Tools of Financial Statement AnalysisVarious tools are used to evaluate the significance of financial statement data. Three commonly used tools are these: Ratio Analysis Cash Flow AnalysisRatio Analysis:Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results.Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future.Meaning of Ratio:A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as so many times. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. Meaning of Ratio Analysis:Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented.Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool.This technique is called cross-sectional analysis. Cross-sectional analysis compares financial ratios of several companies from the same industry. Ratio analysis can provide valuable information about a company's financial health. A financial ratio measures a company's performance in a specific area. For example, you could use a ratio of a company's debt to its equity to measure a company's leverage. By comparing the leverage ratios of two companies, you can determine which company uses greater debt in the conduct of its business. A company whose leverage ratio is higher than a competitor's has more debt per equity. You can use this information to make a judgment as to which company is a better investment risk.However, you must be careful not to place too much importance on one ratio. You obtain a better indication of the direction in which a company is moving when several ratios are taken as a group.Objective of Ratios:Ratios are worked out to analyze the following aspects of business organization-1. Solvency-0. Long term 0. Short term0. Immediate1. Stability1. Profitability1. Operational efficiency1. Credit standing1. Structural analysis1. Effective utilization of resources1. Leverage or external financingForms of Ratio:Since a ratio is a mathematical relationship between two or more variables / accounting figures, such relationship can be expressed in different ways as follows A] As a pure ratio:For example the equity share capital of a company is Rs. 20, 00,000 & the preference share capital is Rs. 5,00,000, the ratio of equity share capital to preference share capital is20,00,000: 5,00,000 = 4:1.B] As a rate of times:In the above case the equity share capital may also be described as 4 times that of preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit sales are Rs. 30,00,000. So the ratio of credit sales to cash sales can be described as 2.5 [30,00,000/12,00,000] = 2.5 times are the credit sales that of cash sales.C] As a percentage:In such a case, one item may be expressed as a percentage of some other items. For example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000]Steps in Ratio AnalysisThe ratio analysis requires two steps as follows:1] Calculation of ratio2] Comparing the ratio with some predetermined standards. The standard ratio may be the past ratio of the same firm or industrys average ratio or a projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with some predetermined standard. The importance of a correct standard is oblivious as the conclusion is going to be based on the standard itself.Types of comparisonsThe ratio can be compared in three different ways 1] Cross section analysis:One of the way of comparing the ratio or ratios of the firm is to compare them with the ratio or ratios of some other selected firm in the same industry at the same point of time. So it involves the comparison of two or more firms financial ratio at the same point of time. The cross section analysis helps the analyst to find out as to how a particular firm has performed in relation to its competitors. The firms performance may be compared with the performance of the leader in the industry in order to uncover the major operational inefficiencies. The cross section analysis is easy to be undertaken as most of the data required for this may be available in financial statement of the firm.2] Time series analysis:The analysis is called Time series analysis when the performance of a firm is evaluated over a period of time. By comparing the present performance of a firm with the performance of the same firm over the last few years, an assessment can be made about the trend in progress of the firm, about the direction of progress of the firm. Time series analysis helps to the firm to assess whether the firm is approaching the long-term goals or not. The Time series analysis looks for (1) Important trends in financial performance (2) Shift in trend over the years (3) Significant deviation if any from the other set of data\3] Combined analysis:If the cross section & time analysis, both are combined together to study the behavior & pattern of ratio, then meaningful & comprehensive evaluation of the performance of the firm can definitely be made. A trend of ratio of a firm compared with the trend of the ratio of the standard firm can give good results. For example, the ratio of operating expenses to net sales for firm may be higher than the industry average however, over the years it has been declining for the firm, whereas the industry average has not shown any significant changes.The combined analysis as depicted in the above diagram, which clearly shows that the ratio of the firm is above the industry average, but it is decreasing over the years & is approaching the industry average.Pre-Requisites to Ratio Analysis:In order to use the ratio analysis as device to make purposeful conclusions, there are certain pre-requisites, which must be taken care of. It may be noted that these prerequisites are not conditions for calculations for meaningful conclusions. The accounting figures are inactive in them & can be used for any ratio but meaningful & correct interpretation & conclusion can be arrived at only if the following points are well considered.1. The dates of different financial statements from where data is taken must be same.1. If possible, only audited financial statements should be considered, otherwise there must be sufficient evidence that the data is correct.1. Accounting policies followed by different firms must be same in case of cross section analysis otherwise the results of the ratio analysis would be distorted.1. One ratio may not throw light on any performance of the firm. Therefore, a group of ratios must be preferred. This will be conductive to counter checks.1. Last but not least, the analyst must find out that the two figures being used to calculate a ratio must be related to each other, otherwise there is no purpose of calculating a ratio.

Liquidity Ratio: -Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below

Current RatioMeaning:This ratio compares the current assets with the current liabilities. It is also known as working capital ratio or solvency ratio. It is expressed in the form of pure ratio. E.g. 2:1Formula: Current assets Current ratio = Current liabilitiesThe current assets of a firm represents those assets which can be, in the ordinary course of business, converted into cash within a short period time, normally not exceeding one year. The current liabilities defined as liabilities which are short term maturing obligations to be met, as originally contemplated, with in a year. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, and provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation.CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. This compares assets, which will become liquid within approximately twelve months with liabilities, which will be due for payment in the same period and is intended to indicate whether there are sufficient short-term assets to meet the short- term liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is under utilizing its current assets.Liquid Ratio:Meaning:Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1.The term quick assets refer to current assets, which can be converted into, cash immediately or at a short notice without diminution of value.

Formula:Quick assetsLiquid ratio = Quick liabilitiesQuick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those current assets that can be converted into cash immediately without any value strength. QA includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required.QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets, which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. Cash Ratio:Meaning:This is also called as super quick ratio. This ratio considers only the absolute liquidity available with the firm.Formula:Cash + Bank + Marketable securities Cash ratio = Total current liabilitiesSince cash and bank balances and short term marketable securities are the most liquid assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to the current liabilities then it may affect the profitability of the firm.

Investment/ Shareholder

EARNING PER SHARE:-Meaning:Earnings per Share are calculated to find out overall profitability of the organization. Earnings per Share represent earning of the company whether or not dividends are declared. If there is only one class of shares, the earning per share are determined by dividing net profit by the number of equity shares.EPS measures the profits available to the equity shareholders on each share held. Formula:Net Profit after TaxEarnings per share =Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. But remember not all profit earned is going to be distributed as dividends the company also retains some profits for the businessDividend Per Share:-Meaning:DPS shows how much is paid as dividend to the shareholders on each share held. Formula: Dividend Paid to Ordinary ShareholdersDividend per Share =Number of Ordinary SharesDividend Payout Ratio:-Meaning:Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders out of the profit available to the equity shareholders.Formula: Dividend per shareDividend Payout ratio = *100Earning per shareD/P ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders.

Gearing

CAPITAL GEARING RATIO:-Meaning:Gearing means the process of increasing the equity shareholders return through the use of debt. Equity shareholders earn more when the rate of the return on total capital is more than the rate of interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio shows the relationship between two types of capital viz: - equity capital & preference capital & long term borrowings. It is expressed as a pure ratio.Formula: Preference capital+ secured loanCapital gearing ratio = Equity capital & reserve & surplus

Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a concern.ProfitabilityThese ratios help measure the profitability of a firm. A firm, which generates a substantial amount of profits per rupee of sales, can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin.

GROSS PROFIT RATIO:-Meaning:This ratio measures the relationship between gross profit and sales. It is defined as the excess of the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. This ratio helps to judge how efficient the concern is I managing its production, purchase, selling & inventory, how good its control is over the direct cost, how productive the concern , how much amount is left to meet other expenses & earn net profit. Gross profitGross profit ratio = * 10 Net SalesNet Profit Ratio:-Meaning: Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed in the form of a percentage.Formula:NPAT Net profit ratio =* 100 Net salesThis ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm.Return on Capital Employed:-Meaning:The profitability of the firm can also be analyzed from the point of view of the total funds employed in the firm. The term fund employed or the capital employed refers to the total long-term source of funds. It means that the capital employed comprises of shareholder funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net working capital.Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with which the long-term funds of a firm are utilized. Formula: NPATReturn on capital employed = *100 Capital employedFinancialThese ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described below:

DEBTORS TURNOVER RATIO (DTO) Meaning:DTO is calculated by dividing the net credit sales by average debtors outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average debtors are the average of debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the DTO, the better it is for the organization. Formula: Credit salesDebtors turnover ratio =Average debtorsInventory or Stock Turnover Ratio (ITR)Meaning:ITR refers to the number of times the inventory is sold and replaced during the accounting period. Formula:Cost of Goods Sold Stock Turnover Ratio = Average stockITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory, which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories).Fixed Assets Turnover (FAT)The FAT ratio measures the net sales per rupee of investment in fixed assets. Formula: Net SalesFixed assets turnover =Net Fixed Assets

This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low). Proprietors Ratio:Meaning:Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders fund to total assets. This ratio determines the long term or ultimate solvency of the company.In other words, Proprietary ratio determines as to what extent the owners interest & expectations are fulfilled from the total investment made in the business operation.Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the form of percentage. Total assets also know it as net worth.

Formula: Proprietary fundProprietary ratio = ORTotal fund Shareholders fundProprietary ratio = Fixed assets + current liabilitiesStock Working Capital Ratio:Meaning:This ratio shows the relationship between the closing stock & the working capital. It helps to judge the quantum of inventories in relation to the working capital of the business. The purpose of this ratio is to show the extent to which working capital is blocked in inventories. The ratio highlights the predominance of stocks in the current financial position of the company. It is expressed as a percentage.Formula:StockStock working capital ratio = Working CapitalStock working capital ratio is a liquidity ratio. It indicates the composition & quality of the working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means that the amount of liquid assets is lower.Debt Equity Ratio:Meaning:This ratio compares the long-term debts with shareholders fund. The relationship between borrowed funds & owners capital is a popular measure of the long term financial solvency of a firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1Formula:Total long-term debt

Debt equity ratio = Total shareholders fundDebt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the equity shareholders return through the use of debt. Leverage is also known as gearing or trading on equity. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity.Return on Proprietor Fund:Meaning:Return on proprietors fund is also known as return on proprietors equity or return on shareholders investment or investment ratio. This ratio indicates the relationship between net profits earned & total proprietors funds. Return on proprietors fund is a profitability ratio, which the relationship between profit & investment by the proprietors in the concern. Its purpose is to measure the rate of return on the total fund made available by the owners. This ratio helps to judge how efficient the concern is in managing the owners fund at disposal. This ratio is of practical importance to prospective investors & shareholders.Formula: NPATReturn on proprietors fund =* 100 Proprietors fund

Creditors Turnover Ratio:It is same as debtors turnover ratio. It shows the speed at which payments are made to the supplier for purchase made from them. It is a relation between net credit purchase and average creditors Net credit purchase Credit turnover ratio = Average creditors Months in a year Average age of accounts payable = Credit turnover ratio Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It enhances credit worthiness of the company. A very low ratio indicates that the company is not taking full benefit of the credit period allowed by the creditors.Importance of Ratio Analysis:As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of interference regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects:1] Liquidity position2] Long-term solvency3] Operating efficiency4] Overall profitability5] Inter firm comparison6] Trend analysis.1] Liquidity position: -With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligation when they become due. A firm can be said to have the ability to meet its short-term liabilities if it has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as well as to repay the principal. This ability is reflected in the liquidity ratio of a firm. The liquidity ratio is particularly useful in credit analysis by bank & other suppliers of short term loans.2] Long-term solvency: -Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This respect of the financial position of a borrower is of concern to the long-term creditors, security analyst & the present & potential owners of a business. The long-term solvency is measured by the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power & operating efficiency.Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for instance, will indicate whether a firm has a reasonable proportion of various sources of finance or if it is heavily loaded with debt in which case its solvency is exposed to serious strain. Similarly the various profitability ratios would reveal whether or not the firm is able to offer adequate return to its owners consistent with the risk involved.3] Operating efficiency:Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of management, is that it throws light on the degree of efficiency in management & utilization of its assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its assets- total as well as its components.4] Overall profitability:Unlike the outsides parties, which are interested in one aspect of the financial position of a firm, the management is constantly concerned about overall profitability of the enterprise. That is, they are concerned about the ability of the firm to meets its short term as well as long term obligations to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the assets of the firm. This is possible if an integrated view is taken & all the ratios are considered together.5] Inter firm comparison:Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison & comparison with the industry averages. A single figure of a particular ratio is meaningless unless it is related to some standard or norm. One of the popular techniques is to compare the ratios of a firm with the industry average. It should be reasonably expected that the performance of a firm should be in broad conformity with that of the industry to which it belongs. An inter firm comparison would demonstrate the firms position vice-versa its competitors. If the results are at variance either with the industry average or with those of the competitors, the firm can seek to identify the probable reasons & in light, take remedial measures.6] Trend analysis:Finally, ratio analysis enables a firm to take the time dimension into account. In other words, whether the financial position of a firm is improving or deteriorating over the years. This is made possible by the use of trend analysis. The significance of the trend analysis of ratio lies in the fact that the analysts can know the direction of movement, that is, whether the movement is favorable or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be upward. On the other hand, though the present level may be satisfactory but the trend may be a declining one.

Chapter 5Data Analysis and Interpretation

Financial Position of J K TyresAfter going through the various ratios, fund flow and cash flow analysis would like to state that: The long-term solvency of the J K Tyres is very satisfactory. Immediate solvency position of the J K Tyres is also quite satisfactory. The J K Tyres can meet its urgent obligations immediately. Credit policies are effective. Overall profitability position of the J K Tyres is quite satisfactory. Dividend payout ratio is satisfactory. Dividend paid in all years to its shareholders. The J K Tyres is paying promptly to the suppliers. The return on capital employed is satisfactory. The profitability position of the J K Tyres is very satisfactory.

Data analysis and Interpretation

Calculation and Interpretation of Ratios

1] Current Ratio:Formula: Current assetsCurrent ratio = Current liabilities YEAR2007-20082008-20092009-20102010 -2011

Current assets24,696.1530,210.9944,743.8656,298.09

Current liabilities21,547.0025,858.0632,221.1645,675.71

Current ratio1.141.161.381.23

Comments:In J K Tyres the current ratio is 1.23:1 in 2010-2011. It means that for one rupee of current liabilities, the current assets are 1.23 rupee is available to the them. In other words the current assets are 1.23 times the current liabilities. Almost 4 years current ratio is same but current ratio in 2009-2010 is bit higher, which makes J K Tyres sounder. The consistency increase in the value of current assets will increase the ability of the J K Tyres to meets its obligations & therefore from the point of view of creditors the J K Tyres is less risky.Thus, the current ratio throws light on the J K Tyress ability to pay its current liabilities out of its current assets. The J K Tyres has a goody current ratio.

2] Liquid Ratio:Formula:Quick assetsLiquid ratio =

Quick liabilities

YEAR2007-20082008-20092009-20102010 -2011

Quick assets14,576.3318,674.4824,227.7536029.91

Quick liabilities21,547.0025,858.0632,221.1645,675.71

Liquid ratio0.670.690.750.78

Comments:The liquid or quick ratio indicates the liquid financial position of a J K Tyres. Almost in all 4 years the liquid ratio is same, which is better for the J K Tyres to meet the urgency. The liquid ratio of the J K Tyres has increased from 0.67 to 0.78 in 2010-2011 which shows that J K Tyres follow low liquidity position to achieve high profitability.This indicates that the dependence on the long-term liabilities & creditors are more & the J K Tyres is following an aggressive working capital policy.Liquid ratio of J K Tyres is not favorable because the quick assets of the J K Tyres are less than the quick liabilities. The liquid ratio shows the J K Tyress ability to meet its immediate obligations promptly.

3] Proprietary Ratio:Formula:Proprietary fundProprietary ratio = OR

Total fund

Shareholders fundProprietary ratio =Fixed assets + current liabilities

YEAR2007-20082008-20092009-20102010 -2011

Proprietary fund49,804.2663,967.1381,448.60126,372.97

Total fund68,520.72 87,439.93105,405.58189,655.07

Proprietary ratio0.720.730.770.66

Comments:The Proprietary ratio of the J K Tyres is 0.66 in the year 2010-2011. It means that the for every one rupee of total assets contribution of 66 paisa has come from owners fund & remaining balance 34 paisa is contributed by the outside creditors. This shows that the contribution by owners to total assets is more than the contribution by outside creditors. As the Proprietary ratio is very favorable of the J K Tyres. The J K Tyress long-term solvency position is very sound.

4] Stock Working Capital Ratio:Formula: StockStock working capital ratio = Working CapitalYEAR2007-20082008-20092009-20102010 -2011

Stock10,119.8212,136.5114,247.5414,836.72

Working Capital3149.154352.9312,522.7010,622.38

Stock working capital ratio 3.212.781.131.39

Comments:This ratio shows that extend of funds blocked in stock. The amount of stock is decreasing from the year 2007-2008 to 2010-2011. However in the year 2010-2011 it has increased a little to. In the year 2009-2010 the sale is increased which affects decrease in stock that effected in increase in working capital in 2009-2010.It shows that the solvency position of the J