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APROJECT REPORT

ONBAJAJ AUTO LTD.

ON25TH NOVEMBER,2008.

IN PARTIAL FULFILLMENT OF THE REQUIREMENTIN SEMISTER I

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO:MS. NEHA SHUKLA

N.S.V.K.M.S. MBA COLLEGE,VISNAGAR

SUBMITTED BY:PRATIK DEVANI (20)

DILIP KHUNT (31)

PUNIT LIMBACHIYA (34)TEJAS PANDYA (49)

PREFACE

Life is full of efforts and struggles and, success and failures. But the sincereefforts done in right direction and at right time will give us fruits of successas a student of management faculty we are expected with something more

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organized specific and effective efforts with desire results towards the workentrusted to us.

Now a days cut throat competition prevails in each and every area ofmanagement. So with the intension to teach the students how to merge thetheoretical knowledge with the actual practice give to the students of M.B.A.Hemchandracharya north Gujarat university has compulsory for each groupof student to prepare a project on some topic covered under circulation of

Hemchandracharya north Gujarat university. So as per the requirements wethe student of Nootan Sarva Vidhyalaya Kelvani Mandal Sanchalit MBAdepartment have tried our level best to prepare the project report andsubmitting to the college. This report involves collective participation of eachand every student of our group.

As a part of MBA 1st year syllabus in managerial accounting, we have toprepare a financial report on particular company for getting practicalknowledge from that report.

This report is prepared on the financial analysis of BAJAJ AUTO LTD. The

financial part contains brief introduction of the company and other partcontains the financial analysis. The most important thing required foranalyzing the financial statement is the annual report of the company.

ACKNOWLEDGEMENT

Gratitude is the noble response of ones soul to kindness or helpgenerously rendered by another and its acknowledgment is a duty andjoyance. So it is that We express briefly our debt to those who have madethe creation of this project possible.

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We thank the almighty, Lord on whom we believe and depend on. Oureach and every achievement is nothing but a look of the God on us.

We thankful to Dr. Jayashish Sethi, Head of Department ofN.S.V.K.M.S. MBA College, for giving the guidelines about how to make theproject report.

We thankful to Ms. Neha Shukla, Lecturer of N.S.V.K.M.S. MBA College,for helping nicely in preparing a Project Report.

We extends our thankfulness to all my friends and all my well wisherswho had helped in the completion of this project. Last but never the least Iextend my wholehearted thankfulness to the librarian Ms. Pallavi Khatri andto the Lab Assistant Mr. Chandrakant Patel and Mr. Kalpesh Patel.

Thank you,

BY PRATIK DEVANI (20)DILIP KHUNT (31)

PUNITLIMBACHIYA (34)

TEJAS PANDYA (49)

EXECUTIVE SUMMARYCompeting with Everyone from Everywhere for Everything, Bajaj has grown

operations in 50 countries by creating a line of value-for-money bikes

targeted to the different preferences of entry-level buyers with quality such

that Kawasaki buys Bajaj products for some of its markets. Bajaj Auto is a

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major Indian automobile manufacturer. It is India's largest and the world's

4th largest two- and three-wheeler maker.

Over the last decade, the company has successfully changed its image from

a scooter manufacturer to a two wheeler manufacturer. Its product range

encompasses Scooterettes, Scooters and Motorcycles. Its real growth in

numbers has come in the last four years after successful introduction of a

few models in the motorcycle segment.

This project report is prepared on financial analysis of BAJAJ AUTO LTD. This

report containing mainly two parts General information and main theme of

the report that is financial analysis.

The second part of this report containing financial analysis of BAJAJ. The

financial analysis part containing Horizontal analysis, Vertical analysis, Trend

analysis, Average analysis, Ratio analysis, Cashflow analysis, Du Pont Chart

and their interpretations.

Horizontal analysis containing comparative Profit & Loss account andcomparative Balance Sheet of three financial years 2005-06, 2006-07 &

2007-08. This part also containing various graphs of growth and sales. Some

of the graphs are based on Profit & Loss A/C and some are on Balance Sheet.

The vertical analysis part of this report containing common-size Profit & Loss

A/C and common-size Balance Sheet of three years.

Trend analysis part containing trend analysis of various components of Profit

& Loss A/C and Balance Sheet of three years.

1. COMPANY PROFILE

The Bajaj Group was formed in the first days of India's independence fromBritain. Its founder, Jamnalal Bajaj, had been a follower of Mahatma Gandhi,who reportedly referred to him as a fifth son. 'Whenever I spoke of wealthymen becoming the trustees of their wealth for the common good I alwayshad this merchant prince principally in mind,' said the Mahatma afterJamnalal's death.

Jamnalal Bajaj was succeeded by his eldest son, 27-year-old Kamalnayan, in1942. Kamalnayan, however, was preoccupied with India's struggle forindependence. After this was achieved, in 1947, Kamalnayan consolidatedand diversified the group, branching into cement, ayurvedic medicines,electrical equipment, and appliances, as well as scooters.

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The precursor to Bajaj Auto had been formed on November 29, 1945 as M/sBachraj Trading Ltd. It began selling imported two- and three-wheeledvehicles in 1948 and obtained a manufacturing license from the government11 years later. The next year, 1960, Bajaj Auto became a public limitedcompany.

Rahul Bajaj reportedly adored the famous Vespa scooters made by Piaggio ofItaly. In 1960, at the age of 22, he became the Indian licensee for the make;

Bajaj Auto began producing its first two-wheelers the next year.

Rahul Bajaj became the group's chief executive officer in 1968 after firstpicking up an MBA at Harvard. He lived next to the factory in Pune, anindustrial city three hours' drive from Bombay. The company had an annualturnover of Rs 72 million at the time. By 1970, the company had produced100,000 vehicles. The oil crisis soon drove cars off the roads in favor of two-wheelers, much cheaper to buy and many times more fuel-efficient.

A number of new models were introduced in the 1970s, including the three-wheeler goods carrier and Bajaj Chetak early in the decade and the Bajaj

Super and three-wheeled, rear engine Autorickshaw in 1976 and 1977. BajajAuto produced 100,000 vehicles in the 1976-77 fiscal year alone.

The technical collaboration agreement with Piaggio of Italy expired in 1977.Afterward, Piaggio, maker of the Vespa brand of scooters, filed patentinfringement suits to block Bajaj scooter sales in the United States, UnitedKingdom, West Germany, and Hong Kong. Bajaj's scooter exports plummetedfrom Rs 133.2 million in 1980-81 to Rs 52 million ($5.4 million) in 1981-82,although total revenues rose five percent to Rs 1.16 billion. Pretax profitswere cut in half, to Rs 63 million.New Competition in the 1980s Japanese and Italian scooter companies beganentering the Indian market in the early 1980s. Although some boastedsuperior technology and flashier brands, Bajaj Auto had built up severaladvantages in the previous decades. Its customers liked the durability of theproduct and the ready availability of maintenance; the company'sdistributors permeated the country.

The Bajaj M-50 debuted in 1981. The new fuel-efficient, 50cc motorcycle wasimmediately successful, and the company aimed to be able to make 60,000of them a year by 1985. Capacity was the most important constraint for theIndian motorcycle industry. Although the country's total production rose from262,000 vehicles in 1976 to 600,000 in 1982, companies like rival LohiaMachines had difficulty meeting demand. Bajaj Auto's advance orders for oneof its new mini-motorcycles amounted to $57 million. Work on a new plant atWaluj, Aurangabad commenced in January 1984.

The 1986-87 fiscal year saw the introduction of the Bajaj M-80 and theKawasaki Bajaj KB100 motorcycles. The company was making 500,000vehicles a year at this point.

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Although Rahul Bajaj credited much of his company's success with its focuson one type of product, he did attempt to diversify into tractor-trailers. In1987 his attempt to buy control of Ahsok Leyland failed.

The Bajaj Sunny was launched in 1990; the Kawasaki Bajaj 4S Championfollowed a year later. About this time, the Indian government was initiating aprogram of market liberalization, doing away with the old 'license raj'

system, which limited the amount of investment any one company couldmake in a particular industry.

A possible joint venture with Piaggio was discussed in 1993 but aborted.Rahul Bajaj told the Financial Times that his company was too large to beconsidered a potential collaborator by Japanese firms. It was hoping toincrease its exports, which then amounted to just five percent of sales. Thecompany began by shipping a few thousand vehicles a year to neighboringSri Lanka and Bangladesh, but soon was reaching markets in Europe, LatinAmerica, Africa, and West Asia. Its domestic market share, barely less than50 percent, was slowly slipping.

By 1994, Bajaj also was contemplating high-volume, low-cost carmanufacture. Several of Bajaj's rivals were looking at this market as well,which was being rapidly liberalized by the Indian government.

Bajaj Auto produced one million vehicles in the 1994-95 fiscal year. Thecompany was the world's fourth largest manufacturer of two-wheelers,behind Japan's Honda, Suzuki, and Kawasaki. New models included the BajajClassic and the Bajaj Super Excel. Bajaj also signed development agreementswith two Japanese engineering firms, Kubota and Tokyo R & D. Bajaj's mostpopular models cost about Rs 20,000. 'You just can't beat a Bajaj,' stated thecompany's marketing slogan.

The Kawasaki Bajaj Boxer and the RE diesel Autorickshaw were introduced in1997. The next year saw the debut of the Kawasaki Bajaj Caliber, the Spirit,and the Legend, India's first four-stroke scooter. The Caliber sold 100,000units in its first 12 months. Bajaj was planning to build its third plant at a costof Rs 4 billion ($111.6 million) to produce two new models, one to bedeveloped in collaboration with Cagiva of Italy.

New Tools in the 1990s

Still, intense competition was beginning to hurt sales at home and abroadduring the calendar year 1997. Bajaj's low-tech, low-cost cycles were notfaring as well as its rivals' higher-end offerings, particularly in high-poweredmotorcycles, since poorer consumers were withstanding the worst of therecession. The company invested in its new Pune plant in order to introducenew models more quickly. The company spent Rs 7.5 billion ($185 million) onadvanced, computer-controlled machine tools. It would need new models to

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comply with the more stringent emissions standards slated for 2000. Bajajbegan installing Rs 800 catalytic converters to its two-stroke scooter modelsbeginning in 1999.

Although its domestic market share continued to slip, falling to 40.5 percent,Bajaj Auto's profits increased slightly at the end of the 1997-98 fiscal year. Infact, Rahul Bajaj was able to boast, 'My competitors are doing well, but mynet profit is still more than the next four biggest companies combined.' Hero

Honda was perhaps Bajaj's most serious local threat; in fact, in the fall of1998, Honda Motor of Japan announced that it was withdrawing from thisjoint venture.

Bajaj Auto had quadrupled its product design staff to 500. It also acquiredtechnology from its foreign partners, such as Kawasaki (motorcycles), Kubota(diesel engines), and Cagiva (scooters). 'Honda's annual spend on R & D ismore than my turnover,' noted Ruhal Bajaj. His son, Sangiv Bajaj, wasworking to improve the company's supply chain management. A marketingexecutive was lured from TVS Suzuki to help push the new cycles.

Several new designs and a dozen upgrades of existing scooters came out in1998 and 1999. These, and a surge in consumer confidence, propelled Bajajto sales records, and it began to regain market share in the fast-growingmotorcycle segment. Sales of three-wheelers fell as some states, citingtraffic and pollution concerns, limited the number of permits issued for them.

In late 1999, Rahul Bajaj made a bid to acquire ten percent of Piaggio for $65million. The Italian firm had exited a relationship with entrepreneur DeepakSinghania and was looking to reenter the Indian market, possibly throughacquisition. Piaggio itself had been mostly bought out by a Germaninvestment bank, Deutsche Morgan Grenfell (DMG), which was looking to sellsome shares after turning the company around. Bajaj attached severalconditions to his purchase of a minority share, including a seat on the boardand an exclusive Piaggio distributorship in India.

In late 2000, Maruti Udyog emerged as another possible acquisition target. The Indian government was planning to sell its 50 percent stake in theautomaker, a joint venture with Suzuki of Japan. Bajaj had been approachedby several foreign car manufacturers in the past, including Chrysler(subsequently DaimlerChrysler) in the mid-1990s.

Employment fell from about 23,000 in 1995-96 (the year Bajaj suffered atwo-month strike at its Waluj factory) to 17,000 in 1999-2000. The companyplanned to lay off another 2,000 workers in the short term and another 3,000in the following three to four years.

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Principal Subsidiaries: Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; BajajElectricals Ltd.; Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd.

Principal Competitors: Honda Motor Co., Ltd.; Suzuki Motor Corporation;Piaggio SpA.

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1.4 MANAGEMENT PROFILERahul Bajaj Chairman

Madhur Bajaj Vice Chairman

Rajiv Bajaj Managing Director

Sanjiv Bajaj Executive Director

Abraham Joseph Vice President (Research & Development)

Pradeep Shrivastava President (Engineering)

S Sridhar CEO (2WH)

R C Maheshwari CEO (Commercial Vehicles)

Rakesh Sharma CEO (International Business)

C P Tripathi Vice President (Corporate)

N H Hingorani Vice President (Commercial)

Kevin P D'sa Vice President (Finance)S Ravikumar Vice President (Business Development)

K Srinivas Vice President (Human Resources)

J. Sridhar Company Secretary

Rahul BajajChairmanRahul Bajaj is an Honours Graduate in Economics and Law and a BusinessGraduate from the Harvard Business School. He was appointed ChiefExecutive Officer of Bajaj Auto in 1968 and took over later as Head of theBajaj Group of companies.

Madhur Bajaj

Vice ChairmanAfter graduating in Commerce, Mr Bajaj did his MBA from Lausanne,Switzerland. Joined as DGM in March 1983, took over as General Manager -Aurangabad Division in June 1986, as its Chief Executive in October 1988,became President of Bajaj Auto in September 1994, Executive Director inMay 2000 and is Vice Chairman since July 2001.

Rajiv Bajaj

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http://www.bajajauto.com/1024/aboutbajaj/profile.asp#rahulhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#madhurhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rajivhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sanjivhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#josephhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#pradeepshttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#ssridharhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivashttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#jsridharhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#madhurhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rajivhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sanjivhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#josephhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#pradeepshttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#ssridharhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivashttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#jsridharhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rahul


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Managing DirectorRajiv Bajaj, who took charge as Managing Director on 1st April 2005, is aMechanical Engineer from Pune University. He later did his Masters inManufacturing Systems Engineering from the University of Warwick. HeJoined as Officer on Special Duty in 1990, took over as General Manager(Products) in February 1993, Vice President (Products) in June 1995,President in May 2000, President & Whole Time Director in March 2002 andas Joint Managing Director in March 2003.

Sanjiv BajajExecutive DirectorMr. Sanjiv Bajaj, who took charge as the Executive Director in April 2004, is aMechanical Engineer from Pune University. He obtained a Masters Degree inManufacturing Systems from the University of Warwick and an MBA degreefrom Harvard Business School. Mr. Sanjiv Bajaj joined as an Officer onSpecial Duty in 1994, took over as the General Manager (CF) in 1997 andVice President (Finance) in April 2001.

Abraham JosephVice President (Research & Development)Mr. Joseph started his tenure in Bajaj in July 1989 as a Graduate TraineeEngineer, took over as General Manager (R&D) in April 2005 and is currentlythe Vice President (R&D) since April 2007. He is a Mechanical Engineer fromthe National Institute of Technology, Bhopal.

Pradeep ShrivastavaPresident (Engineering)Mr.Pradeep Shrivastava joined Bajaj in April 1986. He took over as VicePresident (Engineering) in April 2005 and is currently the President(Engineering) since July 2007. After receiving a degree in MechanicalEngineering from IIT - Delhi, Mr. Shrivastava obtained a graduate diploma inProduction and Finance from IIM Bangalore in 1986.

S SridharCEO (2 Wh)Mr. Sridhar joined Bajaj in March 2001 as GM (Sales) for two wheelers, tookover as Vice President (Marketing & Sales 2W) in April 2005 and is currentlythe CEO (2WH) since July 2007. He holds an Engineering Graduate degree inAgriculture.

R C MaheshwariCEO (Commercial Vehicles)Mr. Maheshwari joined Bajaj in July 2007 as CEO (CV). He is a gold medallistMechanical engineer from BITS, Pilani.

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Rakesh SharmaCEO (International Business)Mr. Sharma joined Bajaj in October 2007 as CEO (IB). He holds a PostGraduate Diploma in Management from IIM Ahmedabad

C P TripathiVice President (Corporate)Mr. C.P. Tripathi started in Bajaj in January 1996 asthe Vice President (Waluj Plant ), took over as Vice President (Operations) in

April 2001 and is Vice President (Corporate) since July 2007. A ScienceGraduate from Agra University, Mr. Tripathi also holds a degree inMechanical Engineering from the Indian Institute of Technology, Kharagpur.N H HingoraniVice President (Commercial)Mr. N.H. Hingorani joined Bajaj in 1997 as the General Manager (Materials),took over as the Vice President (Purchase) in 1998 and is Vice President(Commercial) since February 2006. Mr. Hingorani holds a degree inMechanical Engineering from the Malaviya Regional Engineering College,Jaipur.

Kevin P D'SaVice President (Finance)Mr. Kevin Dsa began his career with Bajaj in September 1978 and ispresently the Vice President (Finance). After acquiring a Bachelors degree inCommerce, he completed his CA in 1978 and ICWA in 1981.

S RavikumarVice President (Business Development)Mr. Ravikumar joined Bajaj in June 1984 as an Accounts Officer and is nowthe Vice President (Business Development). He is an active member of theInstitute of Chartered Accountants of India.

K SrinivasVice President (Human Resources)Mr. Srinivas joined Bajaj in January 2000 as the DGM (HRD) and is now theVice President (HR). He holds a Bachelors Degree in Electrical Engineeringfrom VJTI, Mumbai.

J. SridharCompany SecretaryMr. J Sridhar is the Company Secretary since July 2001. A graduate inCommerce and Law, Mr. Sridhar also did his FCA, FCS and MMS. Prior to joining Bajaj, he was the Controller of Finance and Company Secretary,Maharashtra Scooters Ltd., a Bajaj Auto joint venture.

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2.1 Trend analysis of profit and loss account

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particulars 2008-

09

2007-

08

2006-

07INCOME

Net sales 115.98 124.40 100

Othe income 79.37 123.05 100

Total 113.11 124.30 100

EXPENDITURE

Materials 124.34 129.61 100

Other Expenses 114.18 122.00 100

Interest 1517.65

1570.59

100

Depriciation 90.81 95.20 100

121.97 127.62 100

Compansation paid under voluntary 452.12 216.25 100

Total 123.12 127.93 100

Profit before tax 71.78 109.32 100

Current tax 76.48 97.46 100

Deffered tax 43.91 34.00 100

Fringe benefit tex 67.00 60.00 100

Net tax 79.06 102.29 100

profit after tax 68.62 112.38 100


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INTERPRETATION:By the above graph we can see that the sales and other income is increasingin the year 2006-07 but in 2007-08 it is decreasing around 10 %.

INTERPRETATION:In 2006-07 the profit before tax is increasing but suddenly in the year of2007-08 it decrease largely and reaches at 71.78 %.

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INTERPRETATION:In the year of 2006-07 the profit after tax is increasing but suddenly because

of recession period the profit is increasing 50% compare to last year.

2.2 TREND ANALYSIS OF BALANCE

SHEET

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INTERPRETATION:From the above graph we can see that the sources of funds are increasing inthe year of 2006-07 but because of recession period the sources of funds aredecreasing in the year of 2007-08.

INTERPRETATION:From the above graph we can see that the applications of funds are

increasing in the year of 2006-07 but because of recession period the

applications of funds are decreasing in the year of 2007-08.

.3 Vertical analysis of profit and loss account

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particulars 2007-

08

2006-

07

2005-

06INCOME

Net sales 94.51 92.22 92.14

othe income 5.51 7.78 7.86

total 100.00 100.00 100.00

EXPENDITURE

materials 72.21 68.49 65.68

other expenses 12.60 12.25 12.48

interest 0.06 0.05 0.00

depriciation 1.65 1.57 2.05

86.51 82.36 80.22

compansation paid under voluntary 1.12 0.49 0.28

total 87.62 82.85 80.50

profit before tax 12.38 17.15 19.50

current tax 4.28 4.97 6.34

deffered tax -0.19 -0.13 -0.49

fringe benefit tex 0.04 0.03 0.06

net tax 4.13 4.86 5.91

profit after tax 8.24 12.29 13.59


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INTERPRETATION:

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In the vertical analysis we have taken sales and other income as 100 %

INTERPRETATION:

The profit after tax is increasing every year that we can see that. In the yearof 2005-06 the PAT is 14 %, in the next year it is 12.29 % and in the year of2007-08 PAT is 8.24 % because of recession period.

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2.4 Vertical analysis of Balance Sheet

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Sources of funds 2007-08 %

2006-07 %

2005-06%

1. shareholder's fund

a) share capital 4.93 1.40 1.60

b) Reserves and Surplus 49.20 75.11 73.82

total 54.13 76.51 75.42

2. Loan Fund

a) Secured loan 0.24 0.31 0.00

b) unsecured loan 45.26 22.16 23.19

total 45.50 22.47 23.19

3. Deferred Tax Adjustments

a) Deferred Tax Liability 4.84 2.55 3.01

b) Deferred Tax Assets -4.47 -1.53 -1.62

total 100.00 100.00 100.00

1. Fixed Assets

a) Gross Block 101.75 43.88 45.73

b) less-Depreciation 58.85 26.58 28.12

c) Net Gross Block 42.90 17.31 17.61

d) Lease Adjustment Account Plant &Machinary

0.00 0.24 0.28

e) Capital Work in Progress 1.18 0.37 0.38

total 44.08 17.09 18.27

2. Technical know-how 0.36 0.06 0.02

3. Investments 63.32 89.13 92.59

4. Current Assets, Loans and Advances

a) inventories 11.85 4.28 4.31

b) Sundry Debtors 9.39 7.32 4.77c) Cash and Bank Balance 1.91 1.15 1.30

d) Other Current Assets 2.73 0.50 1.14

e) Loans and Advances 30.30 39.53 33.63

total 56.25 52.79 45.15

less- current liabilities and provisions

a) liabilities 35.57 20.72 19.43

b) provisions 28.44 39.17 36.61

net current assets -7.76 -7.11 -10.89

total 100.00 100.00 100.00


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INTERPRETATION:From the above graph we can see that in the year 2007-08 from the whole

Sources of funds 54.13 % are shareholders fund,45.5 % are loan fund,0.37% are deferred loans.

As compare to the year of 2007-08 shareholders funds are more in 2005-06

and 2006-07.

2. RATIO ANALYSIS

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The relationship of one item to another expressed in simple mathematical

form is known as the ratio. A company keeps fit by ensuring that among

another things, its various financial propositions are kept healthy. Its

business performance can be measured the use of ratio. A ratio is quotient of

two numbers. It must be interpreted against some standards. In assessing

the financial stability of firm, a management should apart from profitability,

be interested in relative figures rather than in absolute figures. In fact an

analysis of financial statements is possible only when figures are express aspercentages or ratios. There is growing body of evidence that ratio can be

directly helpful as basis for making predication. A ratio is a mathematical

relationship between two quantities. It is of major important for financial

analysis. It engages qualitative measurement and shows precisely how

adequate is one key item in relation to another. To evaluate the financial

condition and purpose of a firm the financial analyst need certain yardsticks.

The yardsticks frequently used are ratio or an index relating to pieces of

financial data to each other. Not only those who manage a company but also

its shareholders and creditors are interested in knowing about the financialposition or earning capacity of that concern.

ADVANTAGES:

I. Lee observed that the process of producing financial ratio isessentially concerned with the identification of the significantaccounting data relationships, which give the decision makersinsights into the company that is assessed.

II. A ratio analysis involves the study of total financial picture. Bybasing conclusions upon thorough understanding of theimportant of each ratio, the analyst can recommend and indicatepositive action with confidence.

III. One of the most fruitful areas for the use of traditional financialratio seems to be that of predication company failures.

IV. Ratio are tool which enables management to analysis businesssituation and to monitor their performance as well as that of theircompetitors.

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V. Ratio analysis helps the management to diagnose the situations,monitor the performance and help plan forward.

VI. There are certain priority ratios for chief executives. These arerelated to key areas, which are common to nearly all businessesand with which top management is seriously concerned. Thesepriority ratios enable the chief executive to understand the

relationship between his organization, at one end, and themarket, investors, suppliers and employees. He is also in aposition to watch how well is the organization using its assetsand how well it is providing for the future.

VII. There are ratios which help the marketing manager, thepurchasing manager, the financial manager and otherrepresenting the middle management to know the what positionsare like how to make a way in typical situations, from time totime.

The integrated relationships of various functions ratio can be presented as

under:

Liquidity ratio

Profitability ratio

Asset turnover ratio

Finance structure ratio

Valuation ratio.

(1) LIQUIDITY RATIO:

Liquidity is the ability of a company to meets in short term obligationswhen they fall due. A company should have enough cash and othercurrent assets. This can be converted into cash, so that it can pay its

suppliers and lenders on time.

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(1.1) Current Ratio:Current ratio is an indicator of the firms commitment to meet itshort term liabilities. It is calculated to establish a relationshipbetween current asset and current liabilities. it is also called asworking capital ratio.

Current Ratio = Current Assets

Current Liabilities

Generally the current assets should be least twice the current liabilities for acomfortable liquid positions, i.e. current ratio be 2:1 which is referred to asexcepted standard of liquidity.

TABLE-1.1 (IN MN.)PARTICULARS 2005-06 2006-07 2007-08

CURRENT ASSETS 9592.3 7287 7609.4CURRENT LIABILITY 14989.7 12288.7 10432.5CURRENT RATIO 0.64 0.59 0.73

Interpretation:A current ratio of less than 1.0 indicates that a company does not haveenough current assets to cover current liabilities. Most analysts expect acompany to have a current ratio of at least 1.5. In the year of 2007-08 TheCurrent Ratio is 0.73 that was 0.14 less in the year 2006-07 and in the yearof 2005-06 the Current Ration was 0.64. We can say that with thiscomparison that in the year of 2006-07 the level of Current Assets was

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decreased as compare to Current Liability. But in the next year we can seethe change.

(1.2) Quick Ratio:Quick Ratio is base on those current assets which are highly liquid-inventories are excluded from the numerator of this ratio becauseinventories are deemed to be the least liquid component of current

assets.

Quick Ratio = Quick Assets / Liquid Liabilities

Quick Assets = Current Assets Stock Debtors

Quick Liabilities = Current Liabilities Bank OverdraftQuick ratio is also known as Liquid Ratio or Acid Test Ratio. Ideally quickassets should be at least equal to the current liability. i.e. quick ratio shouldbe 1 is ideal.

Interpretation:The companys liquidity position is not good. In future crises may come.From the above ratio we can see that in the year of 2005-06 the Quick Ratiois 0.056 that increase by 0.011 in the next year. But again in the year of2007-08 the Ratio is 0.054.

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QUICK ASSETS 834.8 820.9 560.7QUICK LIABILITY 14989.7 12288.7 10432.5QUICK RATIO 0.056 0.067 0.054


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(Profit After Taxes + Depreciation + Non cash Expenses) 100Sales


PAT + Depreciation + NonCash Exp

28803.5 31604 24820.2

Sales 74693.8 92922.3 86632.9Cash Generated Per Rupee

Of Sales Ratio

38.56 % 34.01 % 28.65 %

Interpretation:Cash Generated Per Rupee Ratio for the year 2005-06 is 38.56 % and that isdecrease in the next year by 4 %. In the year of 2007-08 the ratio is 28.65.so its shows the good cash position for the company.

(2) PROFITABILITY RATIO:

Profitability ratio measure the degree of operating success of acompany in an accounting period. Failure to earn an adequate rate ofprofit over a period will also drain the companys cash and impairliquidity.

(2.1) Gross Profits Ratio:

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Gross Profits Ratio = Gross Profits 100Sales

Gross Profits = Sales Total Factory Cost

TABLE-2.1 (IN MN.)PARTICULARS 2005-06 2006-07 2007-08GROSS PROFIT 17133.7 18994.4 15560.7

SALES 74693.8 92922.3 86632.9GROSS PROFIT RATIO 22.94 % 20.44 % 17.96 %

Interpretation:Company should maintain its position in profitability. Year by year its

decreasing, thats not good for the company. In the year of 2005-06 theGross Profit was 22.94 % that decreased 2 % in the next year. In last yearthe Gross Profit is 17.96 %. For increasing Gross Profit the company shouldincrease the sales.

(2.2) Rate Of Return On Investment:

This is measure of profitability from the given level of investment.

Rate of Return on Investment = EBIT 100

Total Assets

Total Assets= Net Fixed Assets + Investment +Net Working Capital


EBIT 15804 17227.1 11295.7xxx


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TOTAL ASSETS 63241.2 72028.7 28876.4RETURN ON INV. 24.99 % 23.91 % 39.12 %

Interpretation:On the investment on Assets company is making good return. And companyshould maintain that. Return on Investment is very high for Bajaj Auto. In theyear of 2005-06 ROI was 24.99 % that decrease by 1 % in the next year. Butin the year of 2007-08 the ROI is 39.12 % that is very good as compare tolast year.

(2.3) Rate Of Return On Equity:

This is a measure of profitability from the standpoint of theshareholders. The ratio measures the efficiency with whichshareholders funds are employed.

ROE = Profit for the Equity 100Net Worth

Profit for the Equity = Net Profits Preference Dividend


PROFIT FOR EQUITY 4398.6 4743.5 3387.2NET WORTH 55343.2 47707.3 15875.9

RETURN ON EQT. 7.95 % 9.94 % 21.34 %

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Interpretation:Company is highly profitable with the help of equity shares. The Company isprofitable in every year. And every year the margin of profit is increasing. Inthe year 2005-06 the ratio is 7.95 %. That increase by 2 % in next year. Thereturn on equity ratio is very high in the yerar of 2007-08. That is 21.34 %.

3) ASSET TURNOVER RATIO:

(3.1) Total Asset Turnover Ratio: This is measure of the efficiency with which assets are utilized. It

indicates how many times the assets were turned over in a period.

Total Assets Turnover Ratio = SalesTotal Assets


SALES 74693.8 92922.3 86632.9TOTAL ASSETS 63241.2 72028.7 28876.4

ASSET TURNOVER 1.18 1.29 3.01

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Interpretation:In the last year the demand is increasing. The sales is increased by 2 timesas compare to the last year. The efficiency also increased. The AssetTurnover Ratio is constant increasing in each year. In the year of 2005-06the ratio was 1.18. It increases by 0.11 in the next year. And in the year of2007-08 the ratio increase highly and reaches at 3.01.

(3.2) Net Fixed Asset Turnover ratio:This ratio measures sales per rupee of investment in fixed assets. Thisratio supposed to measure the efficacy with which fixed assets areemployed. A high ratio indicates a high degree of efficacy in assetsutilization and vice versa.

Net fixed assets turnover Ratio = SalesNet fixed assets


SALES 74693.8 92922.3 86632.9NET FIXED ASSETS 11141.6 12519.7 12580.5NET FIXED ASSET

TURNOVER6.70 7.42 6.89

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Interpretation:Increase in the fixed assets in lower than increasing in sales. In the year of2006-07 the ratio of Net Fixed Asset Turnover is high as compare with lastyear but in the year of 2007-08 it decrease around 0.60 and reaches at 6.89.

(3.3) Net Working Capital Turnover Ratio:Net Working Capital Turn Over= Sales

Net Working Assets


SALES 74693.8 92922.3 86632.9NET WORKING

ASSETS9592.3 7287 7609.4

NET WORKINGCAPITAL 7.79 11.93 11.38

Interpretation:

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The rate of working capital is declining but it is not bad as compare to the 1 st

year. Because of companys efforts company increased its sales in 2006-07as compare with last year. But in the year 2007-08 that decrease around0.50.

(3.4) Inventory Turnover Ratio:This ratio shows the number of times a companys inventory is turnedinto sales. The lesser the inventory, the greater the cash available formeeting operating needs.

Inventory Turn Over = Cost of Goods SoldAverage Inventories


COST OF GOODS SOLD 57560.1 73927.9 71072.2AVG. INVENTORIES 2485.52 2913.16 3296.55INVNTR. TURNOVER

RATIO19.95 25.38 21.56

Interpretation:In the last year the inventory turnover ratio is decreasing and that is good forcompany. The company has to maintain this downward slopping.

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(4) FINANCESTRUCTURE RATIO:

Finance structure ratio indicates the relative mix or blending of

owners funds and outsider data funds in the total capital employed in

business. It should be noted that equity funds are the prime fund which

increase progressively through reinvestment of profit, while outside debt

funds are supplementary funds and the added at the discretion of the

management. Management prefers to choose debt only when it helps in

enhancing the earning of equity. The debt fund carry fixed committed

interest rate.

(4.1) Equity Ratio:

Equity Ratio = net worth

Total capital employed

Net worth = Share capital + reserve and surplus miscellaneous expense

Total capital employed = net worth + long term debt

TABLE-4.1 (IN MN.)PARTICULARS 2005-06 2006-07 2007-08NET WORTH 9592.3 7287 7609.4

TOTAL CAPITALEMPLOYED

62378.8 71597.5 29219.3

EQUITY RATIO 0.15 0.10 0.26

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Interpretation:Company is reliable on equity shares. Instead of paying 100 % dividend toshareholder its retaining. In the second year the Equity Ratio decreased by0.14 but in the next year its increase with high rate and reaches at 0.26.

(4.2) Debt Ratio:

Relationship between creditors fund and owners capital can also be

expressed in terms of another ratio. The outside liabilities are related

to the total capitalization of the firm and not merely to the

shareholders equity.

Debt Ratio = Long term Debt

Total capital employed


LONG TERM DEBT 14671.5 16254.3 13343.4TOTAL CAPITL EMPLD. 62378.8 71597.5 29219.3

DEBT RATIO 0.24 0.23 0.46

Interpretation:The company is increasing loans from market. The long term debt is highlyincreasing. This ratio shows us the companys Debt. We can see that thedebt is increasing every year. In the year of 2005-06 it was 0.23 and in theyear of 2007-08 the debt ratio is 0.46.

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(4.3) Debt Equity Ratio:

The Debt Equity Ratio measures the relationship of the capitalprovided by creditors to the amount provided by shareholders. Debtincludes both short term and long term debt. The ratio indicates theextent of use of financial leverage.Debt Equity Ratio = Total Long Term Debt

Net Worth


LONG TERM DEBT 14671.5 16254.3 13343.4NET WORTH 55343.2 47707.3 15875.9

DEBT EQUITY RATIO 0.27 0.34 0.84

Interpretation:

Long term debt is increasing as compare to net worth. The Debt Equity Ratiois constantly increasing every year. In the first year the ratio was 0.27 itsincrease by 0.7 and reaches at 0.34 in the year of 2006-07. In the third yearalso its increases highly and reaches at 0.84.

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It measures the earning per equity shares.

Earning Per Share = Net Profit for Equity ShareNumber of Equity Shares


NET PROFIT FOR EQT. 4398.6 4743.5 3387.2NO. OF EQT. SHARES 1012 1012 1447

EPS 4.35 4.69 2.34

Interpretation:On every 1 share the company is given 2.34 shares in 2007-08 but it is low.

Because of decreasing EPS may be the trust of the shareholder decrease.This ratio shows the companys performance. The ratio is 4.35 in 2005-06. Itsincrease and reaches at 4.69 in the next year. But in the year of 2007-08 itsdecrease and reaches at 2.34.

(5) VALUATION RATIOS: Valuation Ratios are the result of the management of above fourcategories of the functional ratios. Valuation Ratios are generally presentedon a per share basis and thus are more useful to the equity investors.

(5.1) Dividend pays out Ratio:

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Dividend pay out share is the dividend paid to the equity share holderson a per share basis.

Dividend Pay Out Ratio = Dividend per ShareEarning Per Share

TABLE-5.1 (IN MN.)

PARTICULARS 2005-06 2006-07 2007-08DIVIDEND PER SHARE 3.99 3.99 2.86

EPS 4.35 4.69 2.34DIVIDEND PAY OUT 0.91 0.85 1.22

Interpretation:

The company should decrease retained earning and start give moredividend. This ratio is good for the company. As compare with first year theratio decrease 0.6 and reaches at 0.85 but in the year of 2007-08 effectivelyincrease and reaches at 1.22. So we can tell that company is giving gooddividend to its shareholders, but company can give more.

(5.2) Dividend yield Ratio:

The ratio represents the current cash returns to the share holders.

Dividend Yield Ratio = Dividend per ShareAverage Market Price


DIVIDEND PER SHARE 3.99 3.99 2.86xli


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AVG. MARKET PRICE 945.20 840.8 639.5DIV. YIELD RATIO 0.0042 0.0047 0.0045

Interpretation:Because of recession period in the year of 2007-08 the average market pricehighly decreased. The market condition is not good in this year because ofrecession in America.

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Cash Flowstatement

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particulars 2006 2007 2008

1. Cash from operation

a.Profit before taxation 100 91.46 139.28

b.Adjustment 100 -53.21 -249.72

c.Increase/(decrease) in current assets 100 11.74 167.88

Net Cash From Operation 100 62.07 166.12

2.Investment activities

a.Increase/(decrease) in subsidiary 100 -4.55 14.13

b.Increase/(decrease) in other investment 100 -72.88 1613.84

c.Capital Expenditure 100 -12.79 51.63

d.Sales Proceeds of Assets 100 0.86 46.57

e.Technical Know how 100 0.05 21.03

f.Increase/(decrease) with Joint CompaniesDeposites

100 0.83 61.12

g.Investment and \Other non OperatingIncome

100 25.64 70.85

Net Cash From Investment 100 62.93 -770.21

3.Finaning Activities

a.Cash Credit Fom Banks 100 0.00 0.01

b.Intrest On Cash Credit 100 0.00 -1.43

c.Repayment of Fixed Deposites 100 -0.05 76.00

d.Interest on Fixed Deposites 100 0.00 77.78

e.Increase in Unsecure Loans 100 13.95 198.85

Dividend Paid 100 -14.56 38.55

Net Cash From Financing 100 -0.68 2.26

Opening Balance 100 6.29 193.74

Closing Balance 100 4.75 185.72


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Interpretation

Here we have analyzed the cash flow statement in the part as following.

1. Operating activities

2. Investing activities3. Financing activities

Analysis of cash flow from operating activities

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As compare to the year of 2006-07 in the next year the operating income ishighly increasing.On the other hand, invests significantly in research and development,advertising, training and working capital to support its future growth mayable to generate positive cash flow from operation so the cash flow fromoperating activities increased in the year 2007-08.

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ANALYSIS CASH FLOW FROM INVESTING ACTIVITES

Cash flow is analyzed from investing activities to understand the companys

strategies for long term growth. It also helps to understand whether

increases/ decreases in current asset and current liabilities is normal, and

whether adequate explanation is available for those changes. As compare to

the year of 2006-07 year its highly decreased in the year of 2007-08.

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ANALYSIS OF CASH FLOW FROM FINANCING ACTIVITIES

Financingactivities involve obtaining resource from owners and providing them with areturn on, and return of, their investment, borrowing money and repayingamounts borrowed, and obtaining and paying for other resources obtain fromcreditors on long term credit. As compare to the last year It is increased inthe next year 2007-08.

LIMITATIONS OF THE ANALYSIS

1) This financial analysis carried out does not consider the effect of theopportunity cost of money. It ignores the present value and the futurevalue of money.

2) The standards for comparison data of the other companies are not

available easily. So an overall view of the analysis cannot be broughtabout through this analysis.

3) No information related to the effects of the external factors on thebusiness conditions and the company policy can be obtained throughthis analysis.

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4) The analysis carried out is based only on the past information. No onecan successfully predict the future conditions and strategies based onthis data.

5) Moreover at times there exists a confusion to record some of theexpenses or financial terms into both different categories. So onecannot be 100 percent accurate in such analysis.

CONCLUSION

A current ratio of less than 1.0 indicates that a company does not haveenough current assets to cover current liabilities. The company shouldimprove this situation. Because of liquidity problem crises may come. The

gross profit of the company is good. Its decreasing but not bad at all.Considering the liquidity position the major contributors to the companycurrent assets are the debtors and the inventories. So a high current ratio orquick ratio does not mean that the company has sufficient liquidity. Thecompany needs to focus more on the cash and other current assets.

The EPS rate of the company is decreasing. Because of decreasing in EPS thetrust of the investors may be decrease. The company should decrease theretained earning and give more dividends to the shareholders. The companyis not giving 100 % dividend to the shareholders. The company is alsoreliable with equities.

From investment on profit the company is making good returns. In the lastyear, companys sales increased by 3 times.

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BIBLIOGRAPHY

BOOKS AND ANNUAL REPORT:

Annual Reports of Bajaj Auto Ltd.

Book: Financial ManagementBy: M.Y. Khan & P.K. Jain3rd EditionThe Mac-Grow Hill Publication

WEB-SITES: www.bajajauto .com www.bseindia .com

WEBLINKS:

Annual Report 2007-08:http://www.bajajauto.com/1024/download/BAJAJ_Auto.pdf

Annual Report 2006-07: http://www.bajajauto.com/1024/download/AR_2006-07.pdf

Average Market Price:http://gujarati.bseindia.com/stockreach/index.aspx?

scripcd=&myScrip=bajaj
http://www.bajajauto.com/http://www.bajajauto.com/http://www.bseindia.com/http://www.bseindia.com/http://www.bajajauto.com/1024/download/BAJAJ_Auto.pdfhttp://www.bajajauto.com/1024/download/AR_2006-07.pdfhttp://www.bajajauto.com/http://www.bseindia.com/http://www.bajajauto.com/1024/download/BAJAJ_Auto.pdfhttp://www.bajajauto.com/1024/download/AR_2006-07.pdf

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