Financial Statement Analysis of RSB Transmissions (I) Ltd

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INTRODUCTION AND STUDY DESIGN

1.1 INTRODUCTION ABOUT INTERNSHIP
Internship is a method of the job training for white collar and professional careers. Internship
for professional careers are similar in same ways to apprenticeships for trade and vocational
jobs but the lack of standardization and oversight leaves the term open to broad
interpretation. Interns may be college or university students, post graduate students. These
positions may be paid or unpaid and are usually temporary.
Internship is an integral part of the academic year. It is an initiative to bridge gap between
knowledge and its applications through a series of invention that will enable students to gain
insights and exposure to the industry. It provides opportunity to know theoretical concepts of
a industry and also to know corporate culture and familiarize with the corporate code of
behaviour. It also helps to manage resources work under deadlines, identity and carry out
specific goals. It helps to gain knowledge and provide cross functional skills.
An internship consists of an exchange of services for experience between the student and an
organization students can also use an internship to determine if they have an interest in
particular career, create a network of contacts. Some interns find permanent, paid
employment with the organization for which they worked. This can be significant benefit to
the employer as experienced interns often need little or no training when they begin regular
employment unlike a trainee program, employment at the completion of an internship is not
guaranteed.
Modern era is called the industrial era everywhere is developed in the field of industry on
account of the development of the industries. The modern industries requires minimum cost
of production and as such maximization of profit, for this they depend on the financial
statement gives information as whole it means the entire industry is treated as one unit and it
is difficult task to locate errors.
Financial Statement Analysis is an important aspect of business decision making. A firm not
adhering to sales efficiency practices may end up not making much profit. Profit is the total
cost reduction while revenue maximization remains an important activity of firm at the same
time.
As part of MBA program the study is undertaken at RSB transmissions (i) Ltd, Belur
(Dharwad) to analyze and understand the financial structure involved in various areas with
reference to companys previous year balance sheets.
During 12 weeks study the previous year data is collected to analyze the industry efficiency
based on the sales variation in different areas. The study not only gives the detail about the
financial structure along with that it provides opportunity to know the actual practical
exposure about the financial structure, industry working environment, the policies adopted
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for managing the sales fluctuations, its current performance, customer expectations about the
company and etc.
The primary objective of financial statement is to provide information to present and

potential investors, creditors and others in making rational investment, credit and other
decisions. Effective decision making requires evaluation of the past performance of
companies and assessment of their future prospects. In financial statement analysis we
describe a number of techniques used by investors, creditors, and analysts for analyzing and
interpreting the information contained in financial statement.
We look closely at the components of earnings to see if they are sustainable. We will learn
how to perform financial statement analysis, trend analysis. analysis attempt to condense the
mass of data in financial indicators that convey the story of a business. We will learn how to
calculate and interpret those indicators.
The intense competition for capital spurs firms to provide additional information in order to
attract investors. We will see how firms can benefit from providing voluntary disclosure.
Finally, we will learn about managerial motives for earnings management.
1.2 PROBLEM STATEMENT:
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Financial statement analysis being an integral part of overall corporate management and it is
one of the powerful tools of financial analysis. As a investors or creditor point of view it is
very important to study the financial position of the company. Thus, to study the financial
analysis at RSB transmissions (i) ltd. Also study about the liquidity and profitability of the
company. Is management generating its adequate profit on its investment, if it is not then it
would create a problem in failure of a company in future.
1.3 SIGNIFICANCE OF THE STUDY

The Indian auto component industry is grown up 13% in the period of 2006-15.It is
competing in the global as fastest industry in the world. The main significance to make a
thorough study of the industry is to know the present scenario and how it is growing year
by year. The total auto component manufacturing companies are 500 in that 360 are
exporting companies and the main significance of this particular RSB transmissions
company is to study the financial statement analysis of the company by analysing the
data using different methods, of financial statement of the company. To access the
companys trends for the last three years with regard to liquidity performance and overall
performance of the company including profitability and liquidity. It also includes
assessing the impact of financial analysis on liquidity and profitability strength of the
company to achieve its present market goal.
The need of the study is that it enhances the financial decisions, assessment and
efficiency. The topic mainly focuses on the following points
Financial efficiency of the company
Liquidity of the company.
Overall performance of the assets.
Financial analysis is to mainly help for financing decisions.
It helps in rectifying the wrong financial decisions.
It enables in the application of technology in financial assessment.
It impacts in the fulfilment of the need of the company.
It helps in analyzing the companys trends.
1.4 OBJECTIVE OF THE STUDY
For the purpose of any research, objective is must. It shows the direction with which the task
can be accomplished.
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The specific objectives of the study are
To understand the Liquidity and Profitability status of the firm.

To know whether the management generating adequate operating profits on the assets.
To know how the firm financing its assets.
To identify the financial strength and weakness that the firm might have
1.5 SCOPE OF THE STUDY
The scope of the study is to identifying the financial strengths and weaknesses of the firm by
properly establishing relationships between the items of the balance sheet and the profit and
loss account. Mainly the scope of the study is to find out how assets and liabilities are
maintained in the RSB transmission (i) Ltd. It is done through the Balance Sheet and
Income Statement of the company for the period of 2013, 2014 & 2015.
1.6 METHODOLGY
This project is an analytical research where in the researcher has to use the available facts as
information and analyse these to make a critical evaluation of materials. This is also an
applied research with an aim to find a solution for immediate problems facing industry or the
firm.
The methodologies followed in the analysis of the financial statement are comparative
Statement, Common size statement, Trend analysis and Ratio analysis.
Sources of data collection
Primary data:
Primary data is the first hand collection of the source. This data is not collected by any
secondary source. The data required for the project was collected by interaction with the
company personnel. Here the direct observation of the companys finance department and its
trends and statements helped to find the primary data as a source.
Secondary data:
Secondary data means the data collected by the secondary source. This is also a major source
of any research. The major source of data for this project was collected from the following
sources:
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Annual reports
Profit and loss account
Manuals
Articles related to analysis financial statements.
Researches and studies.
1.7 COMPANY PROFILE

In 1975, Mr. R. K. Behera, a young mechanical engineer from NIT, Jamshedpur, hailing
from a humble service oriented middle class family, shunned the security of a job and
plunged into the hurly burly of high-risk and high-reward business area and founded
International Auto in Jamshedpur with 15 people and 500 square feet of workspace.
Inspired and motivated by the benevolent ideals of the legendry JRD and obsessed with an
incorrigible and irrepressible passion to create a world class industrial edifice, R. K. Behera
along with his brother S. K. Behera set about meticulously crafting the present-day RSB
enterprise brick by brick. Toughened by the early trials and tribulations and propelled by
nothing-is-impossible spirit of the Behera brothers, RSB has now blossomed into a pulsating
and throbbing global engineering institution in automotive components and systems and
construction equipment aggregates.
RSB now boasts of manufacturing facilities in six different locations in India and one in the
USA with 85,000 square meters of workspace. Latest technologies and human resources are
working together around the world passionately to create an enduring institution.
Founder and Chairman Mr. R. K. Behera, Co-Founder and Managing Director Mr. S. K.
Behera and Joint Managing Director Mr. Sailendra Behera now spearhead RSB.
All RSB manufacturing units are ISO / TS16949, ISO: 14001 and OHSAS: 18001 certified.
1.8 LIMITITIONS OF THE STUDY

The limitation of the study is that the study depends on the published data and
documents such as balance sheet and income statement.
It was difficult to obtain confidential data from the concern department with a viewpoint
of secrecy that the company would like to observe.
The period of the study was only restricted for two periods.
Only three years balance sheet was collected for the analysis.
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LITERATURE REVIEW
Review of Literature refers to the collection of the results of the various researches
relating to the present study. It takes into consideration the research of the previous
researchers which are related to the present research in any way.
Financial statement analysis is vital for the triumph of an enterprise. Financial statement
analysis is an appraisal of the feasibility, solidity and fertility of a business, sub-business
or mission. Altman and Eberhart (1994) reported the use of neural network in
identification of distressed business by the Italian central bank. Using over 1,000
sampled firms with 10 financial ratios as independent variables, they found that the
classification of neural networks was very close to that achieved by discriminated
analysis. They concluded that the neural network is not a clearly dominant mathematical
technique compared to traditional statistical techniques. Gepp and Kumar (2008)
incorporated the time bias factor into the classic business failure prediction model.
Using Altman (1968) and Ohlsons (1980) models to a matched sample of failed and
non-failed firms from1980s, they found that the predictive accuracy of Altmans model
declined when applied against the 1980s data. The findings explained the importance of
incorporating the time factor in the traditional failure prediction models.
Campbell (2008) constructed a multivariate prediction model that estimates the
probability of bankruptcy reorganization for closely held firms. Six variables were used
in developing the hypotheses and five were significant in distinguishing closely held
firms that reorganize from those that liquidate. The five factors were firm size, asset
profitability, the number of secured creditors, the presence of free assets, and the number
of under-secured secured creditors. The prediction model correctly classified 78.5% of
the sampled firms. This model is used as a decision aid when forming an expert opinion
regarding a debtors likelihood of rehabilitation. No study has incorporated the financial
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performance analysis of the central public sector enterprises in Indian automobile

Industry. Nor has any previous research examined the solvency position, liquidity
position, profitability analysis, operating efficiency and the prediction of financial health
and viability of public sector automobile industry in India.
1.10 Chapter Schemes:
1. Introduction and Study Design: This chapter covers the small introduction
about the topic of the project, Statement of the problem, Significance of the
study, review literature helps in understanding the project in detail, Objectives
of the study, Scope of the study, Research methodology which gives research
type, data collection method, location, duration, profile of company, and
limitation of the study, chapter scheme.
2. Theoretical Study: Meaning of financial statement analysis, methods being

used to analyse the data, parties, significance & purpose of financial statement
of analysis, limitations, principles tools analysis, comparative financial
statement, ratios, classification of ratios.
3. Industry profile: Introduction of automotive components, component market

in India, auto component turnover in India, tracing the growth of the Indian auto
industry, charcterstics, competitive structure, clusters in India, distribution
structure, current state of trans nationalisation, growth diversification, export
scenario, SWOT analysis.
4. Company Profile: Introduction of the company, Nature of the business

carried, Vision, Mission and Quality policy of the company, products and
services of the company, area of operation, Infrastructure facility, Competitors
information, Financial Statement Analysis.
5. Analysis and interpretation: Analysis of the balance sheet, profit and loss
account, ratios and other aspects. The interpretations of these according to the
analysis in done through graphs and charts with the tools used such as excel.
6. Findings, Suggestion and Conclusion: Findings of the can be made on the

data collected through questionnaire & analysis and interpretation. Suggestions
and conclusion.
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REFERENCE
Altman and Eberhart- article on financial statement analysis(2008)
www.rsbglobal.com
CONEPTUAL FRAMEWORK
2. FINANCIAL STATEMENT ANALYSIS
2.1 MEANING OF FINANCIAL STATEMENT
Meaning of financial statement refers to two basic statements which an accountant prepares
at the end of an accounting period for a business enterprise. These are
Balance sheet (statement of financial position)
Which reflects the assets, liabilities and capital as on a certain date, and
Profit and loss account (or income statement)
Which shows the results of operations, i.e., profit or loss during a certain period.
Apart from the balance sheet and profit and loss account, the following financial statement
also prepared.
Funds flow statement
Which explains increase or decrease in working capital during the accounting period.
Cash flow statement
Which explains changes in cash position between the beginning and end of the accounting
period.
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These financial statements are the formal records of the financial activities of a business and
provide an overview of its financial condition. For large companies these statements are quite
complex. According to international accounting standards board the objectives of financial
statement is to provide information about the financial position, performance and changes in
financial position of an enterprise that is useful to a wide range of users in making economic
decisions.
2.2 NATURE OF FINANCIAL STATEMENTS
The financial statement provides a summary of the accounts of a business enterprises.

According to the American institute of accounts, financial statements reflects a combination
of recorded facts, accounting conventions and personal judgments and conventions applied
affect them materially. Thus the data exhibited in financial statements are the results of the
combined effect of (a) recorded facts; (b) accounting conventions; (c) personal judgments
used in the application of accounting conventions
(a) Recorded facts
The financial statements show the factual data drawn from the financial accounts. For
example, items like cash in hand at bank, cost of fixed assets, salaries paid are the facts
recorded in the books.
(b) Accounting conventions
Financial statements are affected to large extent by the various accounting concepts and
conventions. For example, because of going concern concept, fixed assets are recorded at
cost and not their market value. Similarly due to the convention of conservatism, the stock in
trade valued at cost or market price whichever is less.
(c) Personal judgments
Although an accountant is guided by accounting concepts and conventions in preparing the

financial statements, he has to exercise personal judgment in many cases, which affects the
financial statements. For example, an accountant has to decide whether to use straight line
method or written down value method for depreciation of fixed assets.
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2.3 MEANING OF ANALYSIS AND INTERPRETATION
Analysis of financial statements means to critically examine the composition of an item or

amount appearing in the financial statement. In other words, analysis means breaking up of
an amount appearing into its elements so that a particular element may be correlated to
another and significant relationship may be established between them and conclusions may
be drawn on the data presented in financial statements. Such an analysis makes use of various
analytical tools and techniques to data of financial statements so as to derive from them
certain relationships that are significant and useful for decision making.
In the word of John N Myers, financial statement analysis is largely a study of the
relationships among the various financial factors in business as disclosed by a single set of
statements and a study of the trends of these factors as shown in a series of statements
Interpretation is determining the meaning and drawing inference or conclusions with regard
to the results of significant relationship between the items correlated.
2.4 PARTIES INTERESTED IN FINANCIAL STATEMENT ANALYSIS
Information contained in financial statements is useful to different categories of users of

financial data. These are managers, shareholders, creditors, government, auditors and other
interested groups.
1. Management
Management of a company is interested in its in financial condition, profitability and

progress. It uses a number of methods, tools and techniques available to it to analyse the
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financial data. Such analysis is used by the management to exercise control over the business
and to make decisions to run it more efficiently.
2. Share holders
Shareholders are the supplier of the basic capital to run the business. Such capital is exposed
to all the risks of ownership. Shareholders are interested in the profitability, dividends
declared and market value of the holdings. The current earnings of the company determine
both dividends and market value of the shares.
3. Creditors
Creditors include short term creditors like bankers, trade creditors, and also long term credit
grantors like debenture holders and financial institutions, etc. all creditors are mainly in short
term and long term solvency of the company. They are also interested in the profitability of
company.
4. Purchase of business
Any person interested in the purchase of going concern analyses the financial statements to
determine its real value. It makes an assessment of the financial and operating strengths and
weaknesses of the business.
5. Government
Financial statement are used by various government departments, like income tax, sales tax,
excise duty, etc., to determine the tax liability of the company on the basis of such financial
statements of companies in different industries, the government determines tax policy,
import-export policy and industry policy.
6. Other interested groups
Financial statement analysis also serves the needs of many other user groups. For example,
workers trade unions analyse the financial statements to prepare ground for collective
bargaining, to claim bonus, etc.
Researchers also get useful data from the analysis also financial statement to make
comparative study of profitability of many companies.
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2.5 SIGNIFICANCE AND PURPOSE OF FINANCIAL STATEMENT

ANALYSIS
Financial statement analysis performs the essential function of converting mass data into
useful information such analysed financial information serves many and varied purposes as it
is described below.
1. Judging profitability
Profitability is the measure of the efficiency and success of a business enterprise. A company
which earns profits at a higher rate is defiantly considered a good company by the potential
investors. The potential investors analyze the financial statements to judge the profitability
and earning capacity of a company. As so as to decide whether to invest in a company or not.
2. Judging liquidity
Liquidity of a business refers to its ability to pay off its short liabilities, when they become
due. Short term creditors, like trade creditors and bankers, make an assessment of liquidity
before granting credit to the company.
3. Judging solvency
Solvency refers to the ability of a company to meet its long term debts. Long term creditors,
like debenture holders and financial institutions judge the solvency of a company before any
lending decisions. They analyse the companys profitability over a no of years and its ability
to generate sufficient cash to be able repay their claims.
4. Judging the efficiency of management
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Performance and efficiency of management of a company can be easily judge by analysing its
financial statement. Profitability of a company is not the only measure of companys
managerial efficiency. There are a no of other ways to judge the operational efficiency of
management.
5. Inter firm comparison
A comparative study of financial and operating efficiency of different firms is possible only
after proper analysis of their financial statement. For this purpose, it also necessary that the
financial statement are maintained on a uniform basis so that financial data of various firm
are comparable.
6. Forecasting and budgeting
Financial analysis is the starting point for making plans by forecasting and preparing budgets.
Analysis of the financial statement of a past year helps a great deal in forecasting for the
future.
2.6 LIMITATIONS OF FINANCIAL STATEMENTS:
It is general impression that financial statements are precise, exact and final .but sometimes
these statements conceal some very important information. As such they suffer from certain
limitations these are discussed below.
1. Effect in accounting concepts and conventions:
Various concepts and conventions of accounting affect the values of assets and
liabilities, as shown in the balance sheet. Similarly profit or loss disclosed by profit
and loss account is also affected by these concepts and conventions. For example: on
account of the going concern concept and also the convention of conservatism, the
balance sheet does not show current economic values assets and liabilities.
2. Effect of personal judgments:
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The financial statements are influenced, to a certain extent, by the personal judgment
of the accountant. For example the amount of provision for bad and doubtful debts
depends on the judgment and past experience of the accountant.
3. Recording only monetary transactions:
Financial statements record only those transactions and events which can be
expressed in terms of money. But there are many factors which are qualitative in
nature and cannot be expressed in monetary terms. These are non- monetary factors
do not find any place in the financial statements. Example: efficiency and loyalty of
workers etc.
4. Historical in nature:
Financial statements disclose data which is basically historical in nature, i.e, it tells
about the past. These statements do not give future projections.
5. Ignores human resources:
No business can prosper without an efficient work force. But financial statements do
not include human resources which is very important asset for a business.
6. Ignores social costs:
Apart from earning a fair return on investments, a business has certain social
responsibilities. Financial statements do not make any attempt to show the social cost
of its activities. For example social cost of manufacturing company or air pollution,
water pollution etc.
3.7 PRINCIPLES TOOLS OF ANALYSIS

In the analysis of financial statements, the analyst has available, a number of tools, from
which he has to choose nest suited for his specific purpose. The following are the principal
tools of analysis of financial statements.
1. Comparative financial statements,
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2. Common size financial statements,
3. Trend percentage
4. Ratio analysis
Horizontal and vertical analysis
In horizontal analysis, financial dare of two or more years of the company is presented
horizontally in a number of columns in comparative from. Comparative financial statements
and trend percentage are types of horizontal analysis.
Vertical analysis covers a period of only one year and analysis is made on the basis of one set
of financial statements. Common size financial statements and ratio analysis are the
techniques employed in vertical analysis.
2.7.1 COMPARATIVE FINANCIAL STATEMENT
Comparison of financial statements is one of the important tools of horizontal analysis of

financial statements. It has been seen that balance sheet and profit and loss account are the
two most important financial statements. Information contained in these financial statement
for a particular year is extremely important and useful. However, such information becomes
still more useful if it compared. With the data shown in the financial statements of the
previous few years. Such comparison of financial statement is accomplished is by setting up
balance sheet and profit and loss account of two or more years side by side and studying the
changes have occurred in the individual figured therein from year to year and over the years.
Thus comparison of financial statements means that the financial statements of the company
for any year are compared with financial statements of the same company for earlier years.
Comparative balance sheet
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Comparative balance sheet has two columns for the data of the original balance sheet. A third
column is prepared to show the increase and decrease in suppressing various assets and
liabilities. A fourth column is generally added to show percentages of increase and decrease.
Thus there are generally total four columns in a Comparative balance sheet.
Comparative income statement
An income statement shows the net profit or net loss resulting from the operation of a
business for a definite period of time. A comparative income statement is prepared to show
the net profit or net loss for a number of years in comparative form. By comparing income
statement for two or more years, it is possible to observe the progress of a business.
A comparative income statement contains the same columns as the Comparative balance
sheet
2.7.2 COMMON SIZE FINANCIAL STATEMENTS:
Common size statement or common size financial statements is a type of comparative

financial statement in which each item of the financial statement is expressed as a percentage
of the appropriate total. The appropriate total is taken as 100 percent and each item is shown
as a proportion of this 100 percent .such as statement is also known as 100 percent statement
or vertical analysis. a common size statement may be prepared for balance sheet as well as
income statement.
Common size balance sheet:
In common size balance sheet, each item of asset is shown as a percentage of total assets and
each item of liability and capital is shown as a percentage of total liabilities and capital
(which is the same as total assets) in other words, the total of the assets and also that of
liabilities and capital is taken as 100 percent and each item appearing on the asset side as
well as liabilities side is shown as proportion of the total of 100.
2.7.3 TREND PERCENTAGES
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Trend percentages is a technique of studying financial statement of company over a no of

years in other words, it is an extension of horizontal analysis to several years. Under this
method, a representative year is selected as the base year and values of items in the base year
are assumed to be 100. Then the relationship of each item in the subsequent years is
expressed as a percentage of the same item in the base year. This means, when an item is
expressed as 100 all other values expressed in term of the base year will reflect in trend,
upward or downward, in retaliation to 100. Any year may be taken as the base but generally
the starting or initial year is taken as the base year.
Advantages:
1. Trend percentages analysis is of immense use in making a comparative analysis over a

series of year.
2. It is easy to identify changes and interpret the same because percentage figure disclose
more than absolute figures.
2.7.4 RATIO ANALYSTS
Ratio analysis is a very powerful and most commonly used tool of analysis and
interpretations of financial statements. It concentrates on the inter relationship among the
figures appearing in the financial statements. Ratio analysis helps to analyse the past
performance of a company and to make future projections. It allows various interested
parties, like management shareholders, potential investors, creditors, creditor, government
and other analysts to make an evaluation of the various aspects of companys performance
from their own point of view and interest.
Meaning of ratio analysis
A ratio is simply one number expressed in terms of another number. In other words, a ratio
express mathematically relationship between one number and another. For example the ratio
of 200 to 100 is expressed as 2:1 or as 2. Thus a ratio is calculated by dividing one figure into
another.
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2.7.4.1 INTERPRETATION OF RATIOS:
Broadly Speaking, ratios may he interpreted in four different way as follows:
1. An individual ratios may have significance of its own. For example a ratios of
25% of net profit on capital employed shows a satisfactory return.
2. Ratios may be interpreted by making comparison over time. For example ratios of
net profit on capital employed is 25% .This ratio may be compared with same
ratios of a number of past years. Such a comparison will indicate the trend of rise,
decline or stability of the profitability.
3. Ratios of any one firm may be compared with ratios of other firms in the same
industry. This is known as inter- firm comparison. Such a comparison shows the
efficiency of a firm as compared to other firms. For example, return on capital
employed is 20% for A ltd but only 12% is B ltd. Thus A ltd is more profitable.
2.7. 4.2 CLASSIFICATIONS OF RATIO
Classification according to the nature of accounting statement:
1. Balance sheet ratios
These ratios deal with relationship between two items appearing in the balance sheet; e.g.,
current ratios, liquid ratios, debt equity ratios, etc
2. Profit and loss account ratio
This type of ratios show the relationship between two items which are in the profit and loss
account itself, e.g., gross profit ratio, net profit ratio, operating ratio and stock turnover ratio.
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3. Combined or composite ratio
These ratios show the relationship between items one of which is taken from profit and loss
account and the other from the balance sheet e.g., rate of return on capital employed, debtors
turnover ratio, stock turnover ratio and capital turnover ratio.
Classification from the point of view of financial management or objectives these

are:
1. Capital structure ratios to set the long term solvency of a firm.
2. Turnover ratios to indicate the efficiency with which assets are utilized.
3. Profitability ratios to measure the efficiency of a business.
4. Liquidity ratios to set the ability of a firm to meet its current liabilities.
LIQUIDITY RATIOS (short-term solvency)
Liquidity means ability of a firm to meet its current liabilities. The liquidity ratios, therefore,
try to establish a relationship between current liabilities, which are the obligations soon
becoming due and current assets, which presumably provide the source from these
obligations will be met.
Important liquidity ratios are:
Current ratio
Quick ratio
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Current ratio (working capital ratio)
This ratio commonly used to perform the short- term financial analysis .also known as the
working capital ratio, this ratio matches the current assets of the firm to its current liabilities.
currnt assets
Current ratio=
Formula: current liabilities
Current assets
Include (a) cash in hand and at bank, (b) readily marketable securities, (c) bills receivables,
(d) debtors less provision for bad and doubtful debts, (e) stock in trade(f) prepaid expenses
(g)any other assets, which in the normal course of business will be converted in cash in a
year's time.
Current liabilities
These includes all obligations maturing with a year, such as (a) sundry creditors, (b) bills
payable, (c)bank overdraft,(d)income tax payable, (e)dividends payable ,(f) outstanding
expenses, (g) provision for taxation, (h) unclaimed dividends.
Significance and objectives of the current ratio
Current ratio throws good light on the short term financial position and policy. It is an
indicator of a firms ability to promptly meet its short term liabilities. A relatively high
current ratio indicates that the firm is liquid and has the ability to meet its current liabilities.
On the other hand a relatively low current ratio indicates that the firm will find it difficult to
pay its bills.
Normally a current ratio of 2:1 is considered satisfactory. In other words, current assets
should be twice the amount of current liabilities. If the current ratio is 1:1, it means that funds
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yielded by current assets are just sufficient to pay the amounts due to various creditors and
there will be nothing left to meet expenses which are been currently incurred thus the ratio
should always be more than 1:1. A very high current ratio is also not desirable because it
indicates idleness of funds which is not a sign of efficient financial management.
Quick ratio
This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of liquidity of
a company. It shows the ability of a business to meet its immediate financial commitments. It
is used to supplement the information given by current ratio.
quick assets
Quick ratio= 100
quick liabilities
Quick assets and quick liabilities
The quick assets include cash, debtors (excluding bad debts) and securities which can be
realized without difficulty. Stock is not included in quick assets for the purpose of this ratio.
Similarly prepaid expenses are also excluded as they cannot be converted into cash. Liquid or
quick liabilities refer to all current liabilities except bank overdraft.
PROFITABILITY RATIOS
Every business should earn sufficient profits to survive and grow over a long period of time.
In fact, efficiency of a business is measured in terms of profits. Profitability ratios are
calculated to measure the efficiency of a business.
Profitability of a business may be measured in two ways:
1. Profitability in relation to sales.

2. Profitability in relation to investment.
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Profitability in relation to sales indicates the amount of profit per rupee of sales.
Similarly, profitability in relation to investment indicates the amount of profit per
rupee invested in assets. If a company is not able to earn a satisfactory return on
investment, it will not be able to pay a reasonable return to its investors and the
survival of the company may be threatened.
Important Profitability Ratios
Gross profit ratio

Net profit ratio
Operating ratio and expense ratio
Return on investment
Return on equity
Earnings per share (EPS)
Dividend payout ratio
Dividend yield ratio
Price earning ratio
Profitability ratios based on sales
1) Gross profit ratio 2) Net Profit Ratio 3) Operating Ratio.
Gross profit ratio (gross profit margin ratio)
This ratio expresses the relationship between gross profit and sales. It is calculated as follows
Gross profit
Gross Profit Ratio= 100
Net sales
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Net sales means sales minus sales returns.
Gross profit means sales minus cost of goods sold.
Significance and objectives of gross profit ratio
Gross profit ratio indicates the average margin on the goods sold. It shows whether the
selling price are adequate or not. It also indicates the extent to which selling prices may be
reduced without resulting in. a low gross profit ratio may indicate a higher cost of goods sold
due to higher cost of production. It may also be due to low selling prices.
Net Profit Ratio (Net Profit Margin)
There are two variations of this ratio:
a) Net operating profit ratio, and

b) Net profit ratio
a) Net operating profit ratio

This is the ratio of net operating profit to net sales. Its format is
Net operating profit

Net profit ratio= 100
sales
Net operating profit is the gross profit minus all operating expenses. Operating
expenses consists of the following:
i) Administrative expenses, like directors fees, legal expenses, office salaries,

rent, insurance etc.
ii) Selling and distribution expenses, like advertising, travelling expenses,
salaries and commission of salesmen, etc.
Thus,
Net operating profit = Gross Profit-Administration. And selling expenses.
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b) Net profit ratio
This is the ratio of net profit to net sales. It is computed as.
Net profit
Net profit ratio= 100
Net sales
Significance and objectives of Net Profit Ratio
The net profit ratio is the overall measure of a firms ability to turn each rupee of sales into
profit. it indicates the efficiency with which a business is managed. A firm with a high net
profit ratio is in an advantageous position to survive in the face of rising cost of production
and falling selling prices. Where the net profit ratio is low, the firm will find it difficult to
withstand these types of adverse conditions.
Comparison of net profit ratio with other firms in the same industry or with the previous
years will indicate the scope for improvement. This will enable the firm to maximize its
efficiency.
Operating ratio:
This is also an important profitability ratio. This ratio explains the relationship between cost
of goods sold and operating expenses on the one hand and net sales on the other.
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opearating cost
operating ratio= 100
net sales
Significance and objectives of operating ratio
The operating ratio is the yard stick to measure the efficiency with which a business is
operated. It shows the percentage of net sales that is absorbed by cost of goods sold and
operating expenses. A high operating ratio is considered unfavourable because it leaves a
smaller margin of profit to meet non-operating expenses. On the other hand, a lower
operating ratio is considered a good sign.
Profitability ratio based on investment
1. Return on investment
2. Return on equity
Return on investment (ROI) or return on capital employed (ROCE)
This is the most important test of profitability of a business, it measures the overall
profitability. It is ascertained by comparing the profit earned and the capital ( or funds)
employees to earn it. It is calculated as follows.
net operating profit

Neturn on investment= 100
capital employed
Significance and objectives of ROI
ROI is the only ratio which satisfactorily measures the overall performance of a business
from the point of view of profitability. This ratio indicates how well the management has
utilized the funds supplied by the owners and creditors. In other words, this ratio is intended
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to measure the earning power of the net assets of the business. The higher the ROI, the more
efficient the management is considered to be in using the funds available. In fact, this ratio
can also be advantageously used in judging the performance efficiency of different firms in
different industries. Management also uses this ratio for decision making purposes.
Return On Equity Capital
This ratio establishes the relationship between the net profit available to equity shareholder
and the amount of capital invested by them.
Net profit after tax

Return on Equity capital= 100
Equity Shareholders funds
Net profit for the purpose of this ratio is taken after dividend payable tp preference
shareholders, if any. Equity shareholders funds include equity capital, reserves and other
undistributed profits.
Significance and objectives of Return on equity capital
This ratio shows the profit percentage for equity share holders. A high rate of return on equity
shareholder funds is favoured by investors and a higher market valuation is placed on such
shares. This ratio is used for inter-firm comparison, to judge the comparative profitability of
different firms.
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3. INDUSTRIAL PROFILE
3.1 INDUSTRY PROFILE
The Indian automotive components industry has emerged as one of India's fastest
growing manufacturing sectors and a globally competitive one. The total global auto
components trade was worth INR 740,000 Crore in 2006-2007 and is expected to grow to
INR 7,000,000 Crores in 2015. The auto component sector in India generated sales of about
INR 60,000 Crores in 2006-07. The ACMA-McKinsey Vision 2015 document estimates the
potential for the Indian auto component industry to be INR 160,000 Crores to INR 180,000
Crores by 2016. In 2006-07 automotive components exports were worth INR 11,200 Crores
and expected to reach INR 72,000 Crores in 2015.A
The industry has been experiencing a high growth rate of 27 percent over the period
2001-06 and is expected to grow at a rate of 13 percent over the period 2006-14. Similarly,
while growth rate of exports has been 38 percent during 2002-06, the exports are expected to
grow by 24.4 percent during 2006-15. The quality of components made in India has improved
significantly in the last decade and 11 Indian auto components companies have won the
Deming prize so far. India is estimated to have the potential to become one of the top five
auto component economies by 2025.
The Indian auto-components industry has experienced healthy growth over the last
few years. Some of the factors attributable to this include a buoyant end user market,
improved consumer sentiment and return of adequate liquidity in the financial system.
The auto-components industry accounts for almost seven percent of Indias gross
domestic product (GDP) and employs as many as 19 million people, both directly and
indirectly. A stable government framework, increased framework, increased purchasing
power, large domestic market and an ever increasing development in infrastructure have
made India a favourable destination for investment.
TOTAL AUTOMOTIVE COMPONENT MARKET IN INDIA
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Indian automotive components are now part of many major markets in North America and
Europe. Around 70 percent of these are exported auto components bought by global majors
such as General Motors, Ford Motor and Daimler (formerly DaimlerChrysler), among others.
India has a strong auto component base for various mechanical, electrical and electronic
components. Many auto component companies are home grown and have a strong
background. When Maruti Udyog started operations, many Japanese companies formed joint
ventures with companies in India and also set up world class manufacturing facilities in India.
Many Indian companies through their association with Maruti upgraded all facets of their
business including productivity, quality, and delivery systems, among others. Entry of many
multi-national vehicle manufacturers from Korea, Europe and US in India from 1995
onwards enabled global component suppliers to enter India in a big way.
The Indian auto-components industry can be broadly classified into the organized and
unorganized sectors. The organized sector caters to the Original Equipment Manufacturers
(OEMs) and consists of high-value precision instruments while the unorganized sector
comprises low-valued products and caters mostly to the aftermarket category.
Over the last decade, the automotive components industry has scaled three times to US$ 40
billion in 2015 while exports have grown even faster to US$ 11 billion. This has been driven
by strong growth in the domestic market and increasing globalization (including exports) of
several Indian suppliers.
According to the Automotive Component Manufacturers Association of India (ACMA), the

Indian auto-components industry is expected to register a turnover of US$ 100 billion by
2020 backed by strong exports ranging between US$ 80- US$ 100 billion by 2026, from the
current US$ 11.2 billion.
AUTO COMPONENT TURNOVER IN INDIA, 2014
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(1US $ = INR 40 Rupees (Approx)
MARKET OVERVIEW
India's component industry has achieved the capability to manufacture the entire range of
auto components, such as engine components, drive and transmission components,
suspension and braking components, electrical components, and body and chassis
components. Engine components make up nearly a third of all exports of auto components
from India. The automotive component industry caters to three broad categories of the
market:
1) Original equipment manufacturers (OEM) or vehicle manufacturers comprise 25 percent

total demand
2) Replacement market that comprises 65 percent of the total demand
3) Export market that comprises primarily of international tier-I suppliers and constitutes 10
percent of total demand
Defining the role of the Government in the Trans nationalization Efforts of the Indian SMEs
in the Auto Components Sector 28
The key segments of the Indian automotive-component market include:
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Engine components (31 percent): Engine components fall into three broad categories
core engine components, fuel delivery system and others. This also includes
products such as pistons, piston rings, engine valves, carburettors, and diesel-based
fuel delivery systems. This is the most critical component and requires high
involvement from the supplier.
Drive transmission and steering components (19 percent): Gears, wheels, steering
systems, axles and clutches are the important components in this category.
Body and chassis (12 percent)
Suspension and braking components (12 percent) - These include brakes, leaf springs,
shock absorbers
Equipment (10 percent) - This includes headlights, dashboard instruments
Electrical components (9 percent) - The main products in this category include starter
motors, generators, spark plugs and distributors.
Others (7 percent) - Sheet metal components and plastic moulded components are two
of the major components in this category.
AUTOMOTIVE COMPONENT MARKET SHARE IN INDIA
BODY AND CHASSIS DRIVE

12%
TRANSMISSIONS
31%
PARTS
19%
SUSPENSION & EQUIPMENTS
BRAKING PARTS
7% 12% ELECTRICAL PARTS OTHERS
9% 10%
ENGINE PARTS
TRACING THE GROWTH OF THE INDIAN AUTO INDUSTRY
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The auto component industry in India has seen high growth in recent years. Post
Liberalization, Indian economy grew at an average rate ofm6 to 7 % from the conservative
growth rate of 3 % and is expected to touch 10% by 2007.India has the potential to become
one of the top five automotive economies by 2025 (ACMA 2005).
The Indian auto component industry which was 3.1 bn $ in 1997, with a CAGR of 9% for
(1997- 2000), grew to more than 10bn$ in 2005, with a CAGR of 20%. With a projected
CAGR of 17% for (2005-2014), the Indian auto component industry is predicted to reach
40bn$ by 2014 (ACMA). There are three major reasons behind the recent robust growth of
auto component industry in India.
First, the domestic automobile industry (two-wheelers, commercial vehicles and
passenger cars) has registered positive growth, with passenger vehicle production
rising from a CAGR of 9% in (1995-2000) to 14% in (2000- 2005) (Nasscom -
Mckinsey Report 2005). High demand for automobiles has subsequently fuelled the
demand for auto component from automakers.
Second, the replacement market is growing rapidly as more and more new vehicles
hit the road. Moreover, the product life cycle of automobiles are becoming shorter. As
more new models hit the road the demand for auto component keep rising. The
increasing number of vehicles means an expanding market for replacement
components. For example, the sale of foreign brand cars grew from almost nothing
before the entry of Hyundai in 1997 to 15% of the car market in the year 1998-99 to
more than 25% of the car market in 2004-05. Consumers reacted favorably to the
expanded set of offerings and consequently the demand for cars in India surged.
Third, the global automobile industry is going through its worst phase ever. To cut
production cost, the world's leading automobile companies are sourcing cheaper auto
components from countries like India and China. The government policies also
enabled faster growth.
CHARACTERISTICS OF THE INDIAN AUTOMOTIVE

COMPONENTS INDUSTRY
Thrust sector of India
The Indian auto component industry is a thrust sector in India. The direct employment
generated by the medium and large firms in the organized sector is 250,000 man-years.
Geographical spread of the industry
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In terms of location, over 70 percent of the automotive components companies are situated in
either the northern or western regions. NCR/ Delhi, Pune, and Chennai-Bangalore have
traditionally been the most important clusters for the automotive components segment in
India. With Tata setting up its manufacturing unit in Singur, West Bengal and its existing
manufacturing base in Jharkhand, eastern regions is likely to emerge as an equally important
cluster.
Low volume and fragmented industry
There are over 500 small, medium and large players in auto components in the organized
sector along with 6,000 ancillary units. Most of these companies in India are family-owned
businesses. The unorganized sector predominantly caters to the aftermarket. Manufacturers in
this sector operate independently with little investment and on a small scale.
Low import dependence
Most components required by the Indian automobile industry are manufactured locally.
Import dependence was estimated to the tune of 13.5 percent of the domestic demand for the
year 2007. Imported automotive components include special steels and materials or high
precision engineering components, such as gearboxes.
COMPETITIVE STRUCTURE
Leading manufacturers from across the globe have initiated steps for developing a vendor
base in India by inviting their suppliers to set up manufacturing companies here. Leading
automotive component companies such as Lear Corporation, Delphi, Visteon, Mando, ZF
Steering, and Denso have a strong presence in India and cater to the OEM and the
aftermarket. Some of the major domestic automotive components manufacturing groups in
India include the TVS, Rane, Amalgamations, Kalyani, Sona, Rico, Minda, Amtek, among
others. The two-wheeler market is the largest volume segment in India and automotive
component companies in this segment have well developed technology and quality systems in
place. Many auto component companies apart from catering to the domestic demand also
have strong export operations. It is estimated that 15 to 25 percent of the turnover of many
large-sized Indian auto component manufacturer is accounted for by exports. A significant
trend in the last 2-3 years is the interest shown by vehicle manufacturers and global tier-I
companies in procuring components from India.
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The SME players in the auto components sector are formally organized under the auto
component manufacturers association (ACMA). Many companies present in India, as in-
house vendors of vehicle manufacturers, are not part of ACMA and are estimated at nearly
125 in number. A large number of auto component companies cater exclusively to the
aftermarket and are unorganized in nature and these are estimated at 375. The engine and
transmission components account for about 50 percent of the component output in India. The
engine components account for 31 percent of the total automotive component production
output and transmission and steering components account for 19 percent of the output. All
engine and transmission components like engine block, piston, valves, camshaft, crankshaft,
gears, and casings are manufactured locally. Companies in India possess well-established
foundries for forged and cast components and are globally competitive.
AUTOMOTIVE CLUSTERS IN INDIA
Mumbai-Pune, Chennai-Bangalore, Delhi-National Capital Region (NCR) are the major

automotive clusters in India and majority of the automotive component manufacturers are
located in these clusters.
Mumbai-Pune - 185
Chennai-Bangalore - 120
Delhi-NCR - 250
Mumbai-Pune and Bangalore-Chennaiare areas that have received high automotive

investments in the past and where the prominent OE manufacturers are located. Infrastructure
problems such as poor roads, connectivity and communication issues resulted in the
formation of automotive clusters. There is an ongoing expansion in these regions, as the
existing OEMs have increased production capacities and attracted new suppliers and their
product mix and technology requirements have widened. Government has been proactive
with plans to establish vehicle test facilities in each of these automotive clusters to quicken
the homologation procedure.
Mumbai-Pune is the oldest and largest cluster with the presence of large OEMs such as
Tata Motors, Fiat, General Motors India, Mahindra, and DaimlerChrysler in passenger cars;
Tata Motors and Force Motors in commercial vehicles and Bajaj Auto and Kinetic in two-
wheelers. To support these OEMs in the region, there are a number of large suppliers
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including Tata AutoComp, Bharat Forge, Bosch, Lear and a whole lot of smaller component
manufacturers.
The cluster around the National Capital Region (NCR) of Delhi originated with Maruti
establishing its base in Gurgaon and the Suzuki-owned company was subsequently
instrumental in establishing a supplier base for its cars. With most of the OE companies being
Japanese manufacturers or their collaborations, a high percentage of suppliers in the NCR
cluster have Japanese origins, equity or technical inputs. The leading suppliers in this area are
mostly Maruti affiliates like Asahi Glass, Krishna Maruti, Sona Koyo, Jai Bharat Maruti
(JBM), Omaxe and Bharat Seats. Maruti's new investment plans have increased the
investment in the region as existent as well as new suppliers have announced plans to expand
and enter the region. Honda SIEL Motors, based near Delhi also draws from the suppliers
cluster in the region. While the NCR region is at a disadvantage because of its large distance
from ports, the Government has responded well by setting up an Inland Container Depot
(ICD) at Tughlakhabad to facilitate exports.
Ashok Leyland in the commercial vehicles space and a small Hindustan Motors facility
in the passenger car sector primarily drove the auto component cluster in the Bangalore-
Chennai sector. However, the early 1990s saw manufacturers like Ford, Hyundai and Toyota
setting up manufacturing facilities there and a resultant inflow of suppliers into the area.
Visteon, Delphi, and Bosch are some of the important suppliers in the cluster. The proximity
to the Chennai port facilitates exports for the suppliers in the cluster. Toyota has established a
supplier park in the Bidadi region near Bangalore. This also has its own transmission
components unit under Toyota Kirloskar Auto components. Bangalore is also the Indian
headquarters of India's largest automotive supplier Mico Bosch.
The last decade has seen increased investment in the automotive sector in new
geographical areas. For example, the General Motors plant near Vadodara (Gujarat) and
Sonalika Groups Car division in the Una district (Himachal Pradesh) has the potential to
attract a number of automotive component suppliers in that region. Tatas Nano car
manufacturing facility at Singur in West Bengal is likely to attract substantial investment for
the auto component industry in the state.
DISTRIBUTION STRUCTURE
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Indian Auto Component Supply Chain Structure The supply chain of the auto industry has
completely changed over the years. Major OEM players are increasingly focusing on basic
design and assembly operations as well as servicing the after sales market and they prefer to
deal with a smaller number of large suppliers. Consequently, the supply chain is morphing
into sub-system integrators, component makers, and commodity players. The segregation is
increasingly defined by risk sharing, which was earlier defined by only cost
pressure. Tier-I suppliers (concentrating on system supply, module assembly and sub-supplier
management) are taking increasing risk from major players, shifting the cost pressure to tier-
II suppliers who concentrate only on the production of sub-components.
In the Asia-Pacific region, the growth of component manufacturers has taken a different
route. Most of the Japanese producers follow a tight relationship with their suppliers
(Independent or quasi independent). The existence of the keiretsu system (business
affiliation) in Japan greatly facilitated such an arrangement. But other manufacturers like
Korean, Chinese and Indians give a lot of importance to price and quality while buying from
a number of trusted suppliers. As a result of this, indigenous auto- component sectors are
thriving in many Asian countries.
CURRENT STATE OF TRANS NATIONALISATION
Out of the 500 companies who were sent the questionnaire for the study, 326 (65%) are
exporters of auto components. Also, 192 companies (38%) have entered in to foreign
collaboration. This indicates a high level of trans nationalisation. However, the width and
depth of trans nationalisation may not be high in majority of the organizations.
GROWTH DRIVERS FOR THE AUTO COMPONENT SECTOR
The growth of the auto component industry is directly linked to the growth of the automobile
industry since more than 50 percent sales are to the OEMs. However, in recent years,
component export is becoming an important growth driver and it is expected to assume
greater importance in future.
EXPORT SCENARIO IN THE AUTO COMPONENT MARKET
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India exports a vast range of automotive chassis and components. The major component
categories that have shown a healthy growth in exports are vehicle components and
accessories, transmission shaft and cranks, drive axles, starter motors and generators, and
bumpers and components.
The driving force behind Indias growing automotive components exports in the past has
been higher exports by Indian subsidiaries of global OEMs and tier-I manufacturers.
Prominent among them is Ford India, which has made India its global hub for manufacturing
Ikon kits. The company has also started procuring components and assemblies from China.
Similarly, Hyundai Motor India has decided to make India its sourcing hub for its small car
Santro. In line with this development, exports of replacement and service components have
increased. Initially, a majority of component exports were to South Korea but with increasing
exports of Santro, the share of components exports to Indonesia, Sri Lanka, and Turkey have
also increased as the company has already started exporting its cars to countries such as
Algeria, Sri Lanka, and Indonesia. Among tier- I companies, Delphi Automotive India,
Visteon Automotive Systems and Visteon Powertrain Control Systems, FAG Bearings,
Timken India, Keihin Fie, and Meritor HVS India have all increased their export revenues
from their Indian operations.
Exports growth has outpaced the growth in production over the last 5-year period.
Exports grew by a compound annual growth rate (CAGR) of 38 percent over the period
2002-06 and the potential is estimated to grow at a CAGR of 24.4 percent during the period
2006 to 2015. Of the total production of INR 48,000 Crores in 2005 approximately INR
6,000 Crores worth of components were embedded in vehicles that have been exported,
reflecting the true potential of exports. Emerging trend of global companies procuring
components from India is expected to drive the exports growth over the long term.
EXPORT MECHANISM AND KEY PRODUCT CATEGORIES AND SEGMENTS

FOR EXPORTS
The engine components segment is technology and capital intensive and is likely to be
dominated by the existing major firms in the short to medium term. Engine technology is
expected to move towards superior design (for optimal fuel consumption and lesser
emission), thus access to such technologies will be limited to existing major firms. On the
other hand, this is the most labour-intensive segment and holds promise for growth of
exports. Starter and generator manufacturers form a major part of the electrical components
segment. Given the engines criticality in vehicle performance, these products are assembled
mostly by the vehicle manufacturers. Besides the increasing popularity of electronic ignition
systems, the increasing electronic content per vehicle has provided growth opportunities for
companies in this segment. Many multinational companies are strengthening their position
here, because of the opportunity to introduce new technology.
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Among drive transmission and steering components, the steering systems are among the
critical components of a four-wheeler. The capital and technology intensive nature of the
segment acts as an entry barrier for companies in the unorganized segment. As power steering
systems reduce driving effort considerably, these are being increasingly preferred by OEMs,
which in turn is prompting manufacturers to shift their product mix towards such steering
systems. Access to technology and localization of production for power steering components
impacts the ability of local companies to withstand increasing competition and cost pressures
from OEMs.
The demand for gearboxes is primarily linked to the demand for passenger cars. The
gearbox segment is currently witnessing a tierization of the supply base. Since gearboxes
require high precision engineering, and the establishment of a manufacturing unit calls for
significant capital investments, quite a few companies in the passenger car segment rely on
imports of knock down assemblies of gearboxes. In the clutch segment a few players, with
technology, and ability to supply complete assemblies, being critically important, dominate
the OEM market.
Axles are critical components of a vehicle, and the capability to design and offer products to
meet exact engine specifications is a key success factor. Also, high capital requirements and
technical know-how may act as an entry barrier in this segment, thus leading to the likely
concentration of market among a few players. Although some of the OEMs procure complete
assemblies, a large number of them still procure individual components, like housings, shafts
and differentials from various vendors. However, over time, it is expected that OEMs will
procure complete axle assemblies from one or two vendors rather than individual components
like housing, shafts and differentials from various vendors.
SWOT analysis of Indian auto component industry
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SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses,
opportunities, and threats involved in a project or in a business venture or in any other
situation of an organization or individual requiring a decision in pursuit of an objective.
An analysis of the Indian auto component would serve as an example to diagnose the
strengths, weaknesses, opportunities and threats existing for automakers. The SWOT analysis
was performed based on secondary data sources such as industry reports and research papers
in journals.
STRENGTHS
The strengths of the Indian auto component industry which it leverages to its advantage are as
listed below :
Research and Development (R&D) Capability
In recent years the world's leading automakers and Tier I suppliers have opened their R&D
centres in different parts of the country. The cost of R&D in India is low compared to any
developed country due to availability of skilled manpower and qualified engineers
Availability of Global Labour Skill / Qualification
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India's strength in software can be utilized in R&D in the auto component sector for reverse
engineering, designing and testing auto parts. Sona Koya, an Indian auto component maker
has set up an engineering designing solution centre in Gurgaon and world's leading OEMs
outsource their engineering designs from Sona Koya. India has the huge potential to export
embedded software for automobiles for the developed markets (ACMA). Embedded software
handles many critical control functions such as braking systems, airbags etc. Embedded
software is also used for safety, climate, control and so on.
Product Liability
The World's leading OEMs follow strict product liability rules while going for any contract
with their suppliers. Under product liability rules any supplier could be penalized by its client
if the product fails to meet the set quality standards and results in line stoppages, recalls and
claims. In India the domestic insurance companies such as Tata-AIG (American International
Group) started providing product liability insurance to the Indian auto component makers.
This will give the Indian auto component manufacturers the confidence to do more business
with foreign automakers.
The other strengths of the Indian auto Component Industry include, Wide Industry base
(manufacturing 97% of component required), Growing entrepreneurship, growing domestic
market, expanding global markets, trans-nationalisation of world economy, Investments by
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non-resident Indians and economic liberalization. The auto Component industry in India has
the potential of becoming the export driver of the auto industry. To achieve the Auto industry
version of 10% share of industrial output by 2010, the component industry will have to grow
at close to 22% over next 12 years , with export contributing to 20% of the output.
WEAKNESSES
There are several challenges, which the industry has to overcome at industry level and
organizational levels Vasant Khisty (2004). Few of these have been briefly described here
with.
Small in size
The Indian auto component industry is wide with over 400 firms in the organized sector, but
small in sales turn over. It is currently a Small and fragmented industry by global standards.
Inferior Quality
Quality up gradation is the most important challenge for Indian component suppliers. ACMA
reports that over 456 of its members have already received ISO9000 certification and 248
have obtained TS 16949 and 136 have received QS9000 certification. But ACMA members
constitute only 7% of the Indian auto component manufacturers, numbering 6,400. Out of the
four Deming appreciation Prize winners for 2005, three were Indian Companies and all were
from the auto sector. However statistics do not represent the overall quality problems, which
plague the industry, driven by historically protected markets. Defect rates in India are in the
range of 1000-2000 parts per million (PPM) against Japanese average of 100-200 PPM
Lower Labour Productivity
The advantage of low cost labour is negated due to lower productivity level of Indian work
force. Indian Labour productivity is lower relative to the rest of the world. The median level
of labour productivity in Indian plants is about 1 unit per man-hour. This compares with a
threshold figure of 6 units per man-hour for the plants with world class performance.
Inferior Technological capabilities
The sector has been dependent on the OEM segment for product design and did not develop
the engineering capability on its own. Most of the technology improvements made by Indian
manufacturers are through joint ventures or technological collaborations. If the Indian
suppliers wish to upgrade technology they will have to increase the global Tier-1 players
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operating in India up from 4 to 15/20 and develop relationships with large global tier-1
suppliers. Visteon and Delphi have a large number of joint ventures and technology
collaborations leading to up gradation of technology. Over time there has to be a shift of
design and development capability to Tier 11 and tier-111 suppliers. Indian suppliers in these
categories must eventually raise their research and design expenditure from current level of
0.5% to global level of 5%.
Taxation Structure
The present structure of multiple and cascading taxation presents an obstacle for systems
procurement and discourages the tiring of the supply chain. Consequently, Indian firms suffer
from an inherent disadvantage compared to global competition that has additional income
advantage of tiering. Over 20-30% of all parts were uneconomically sourced due to central
sales tax distortions, which have no Modified Value Added Tax (MODVAT) relief
Confederation of Indian Industry-A.T. Kearney MNC Survey (2005). Indeed the vat system
as adopted by many European nations will open vast opportunities for competitive sourcing
and in component Industry.
Higher Cost of Finance In India
India has one of the highest interest rates for Capital and working capital. These can range
from 12% to 18% and higher. Most of the Indian companies work for financial institution.
Where as in countries like USA and Europe funds are available at 1/3 rd the cost. This makes
big difference on the health of the company. Though the financial institutions are flushed with
funds, more funds are available for investment in Non-performing assets.
High Cost of logistics
The Cost to transport parts within the country is high due to high cost of fuel, and poor turn
of vehicles. The cost to export can be around 5 to 25% depending on the commodity. Ports in
India are inefficient and the ship-turnaround time is higher than international standards. A
finished product takes additional week to leave the Indian shores due to various
documentation and other port formalities. A container load may cost 3000 US $ to USA. It is
inefficient for individual suppliers to export small container loads. The uncertainties in
Logistics prevent Indian companies to supply just in time.
High Cost and poor Quality of Raw materials
Raw material like steel, polymers, castings etc are at times 20% to 50% more expensive than
other countries and the quality of these raw materials also are not comparable to international
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standards. Steel is the major raw material used for automotive applications and the same is
increasing every quarter.
Lacking economies of scale
Despite being around 60 years old, the domestic auto industry is even behind countries like
South Korea, Brazil and Mexico in terms of production and sales, thus depriving it the benefit
of economies of scale. It is difficult for companies to invest extensively in research and
development, a key competitive tool in the global market.
OPPORTUNITIES
Huge Growth potential
Global auto components market is worth over US$ 1 trillion and, considering India's market
size, which is just 0.8% of the total market size, there exists tremendous growth opportunity
for the domestic auto players to exploit. Players with technical competence and necessary
scale of production will benefit from the global outsourcing opportunities. To give an
example, around 70% of the total exports in 2006 were OEMs or Tier-1 players as compared
to around 35% in early 1990s (ACMA)
Outsourcing owing to cost arbitrage
Due to cost related pressures on global auto players and Tier-1 suppliers, a lot of them have
started outsourcing components from low cost countries like India, China and some of the
Latin American and ASEAN countries. However, the technical capabilities of the Indian
players have given them the edge in high precision and critical activities. The industry, which
exported components worth over US$ 1.4 bn in FY05, is also benefiting from strong
domestic sales.
Learning from the multinational corporations
The entry of global players such as Ford, General Motors, Toyota and Honda into the Indian
market has allowed the Indian manufacturers to work with these players on global
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production, quality and delivery systems. It has also helped the global players to see for
themselves the evolution of many auto components manufacturers and they are therefore now
entrusting them (Indian companies) with more work.
Information Technology (IT) advantage
Thanks to the country's IT advantage, the industry is capable of becoming a full-fledged

service provider (research, design, development, testing) to global OEMs and thus score over
other low cost countries like China. This, combined with low cost quality manpower
strengthens our stand in the global arena.
THREATS
Competitive threats
Though the Indian players have demonstrated their technical competencies, countries like
China can spring in surprises in the long run considering the fact that with global auto players
increasing their presence in China, the next logical step would be to rise up the value chain
(high end auto ancillaries).
Increasing FTA
The growing number of (Free Trade Agreements) FTAs that are being signed by India with
ASEAN countries is likely to hurt the domestic players as they pay a relatively higher excise
duty of around 25% as compared to 1%-10% being paid by their ASEAN counterparts.
CHALLENGES
The growth prospects for the industry are bright, however to continue to report healthy
growth the industry has to overcome certain challenges facing them. The challenges include:
Technological capability not enough to match global standards
Surging raw material prices putting pressure on profit margin
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Slowdown in global economy affecting exports
Players losing bargaining power with larger OEMs
Increasing rivalry among players with numerous small firms targeting the same customer
segments
FTAs signed with other developing countries increasing bulk imports of cheaper auto
components.
Infrastructure challenges Roads, Ports & power
R&D Competence
Raising capital and scaling capacities
OUTLOOK
The Indian auto components industry is well poised to achieve strong growth in coming
years owing to rising domestic demand in the OEM market and expanding replacement
market. The export market for auto components is also likely to see strong traction once the
global market stabilises and the economic uncertainty diminishes. According to the Auto
Components Manufacturers Association (ACMA), the Indian auto components industry is
likely to grow to US$ 110 billion by 2020 with the domestic market share of ~US$ 80 billion.
The share of the auto components industry in the countrys GDP is likely to increase to 3.60%
by 2020, up from 2.40%.
Given good long term demand prospects in the domestic market and with India emerging
as a favoured low-cost sourcing destination, auto component manufacturers are likely to
invest in increasing production capacities and technological capabilities. Further, companies
would continue to diversify their product portfolio to de-risk their businesses. However,
competition is expected to increase and prices of raw material are likely to follow an upward
trend. This is expected to exert pressure on the industrys profit margins. In such a scenario,
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cost control programmes would assume greater significance for the industry players, both big
and small.
COMPETITIVE RIVALRY
The presence of many players of about the same size, little differentiation between
competitors, and a very mature industry with very little growth are the features of a highly
competitive industry. Higher the competition in the industry lower would be the profit
margin. To remain ahead in competition, automakers were tempted to offer value added
services to the customers incurring more costs. Easy finance options and long term warranties
were offered to lure the customers. But these measures cut into the profit margins.
The level of actual demand in India should not be overstated. Most automakers that enter
the Indian market can count on a low volume of sales at the outset, with the expectation that
demand will eventually increase. They therefore must be willing to produce a number of
product types to find a wider initial market.
Thus the Indian automobile industry in the face of global competition from foreign firms
was offering better deals to cater to diverse needs of customers.
Trans-national mergers and acquisitions have complicated the issue of competition in

Porters model. In the 1980s and 1990s, the auto industry was slow to respond to pressures
for mergers despite excess capacity. Consolidation, automakers felt, would undermine brand
recognition and loyalty, considered in the industry to be a key weapon in the fight for market
share. In the Indian market, Suzuki, through its joint venture with the state owned Maruti
holding company, had been able to increase its market share from 33% in 1987 to over 43%
by 1996.Driven both by continued overcapacity in the 1990s and by intense competition in
the Indian market, cross-national consolidation began to eclipse cross-national competition.
Indeed, the problem of overcapacity had grown worse: in 1999, the average worldwide
plant utilization was only 69%, compared with 80% in 1990. By the end of the decade, most
national firms were pushed by lower profit margins to merge. An example to illustrate the
changed structure of the industry at the turn of the century was Daimler Chryslers purchase
of a one third interest in Mitsubishi Motors, which merged German, American, and Japanese
firms into the third largest auto company in the world. Now, the competition is not between
national firms but between consolidated firms, often acquired for their competitiveness in
specific market niches. Even more radical strategies have been envisioned. The large
manufacturers have begun to sub-contract the design and production of entire sub-assemblies,
such as brakes, steering, and suspension.
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INVESTMENTS
The cumulative Foreign Direct Investment (FDI) inflows into the Indian automobile
industry during the period April 2000 December 2015 were recorded at US$ 14.32 billion,
as per data by the Department of Industrial Policy and Promotion (DIPP).
Some of the major investments made into the Indian auto components sector are as follows:
Auto components maker Bharat Forge Ltd (BFL), the flagship company of the US$ 3
billion Kalyani Group, has formalized agreement with Rolls-Royce Plc which will
supply BFL with critical and high integrity forged and machined components.
Canadas Magna International Incorporated has started production at two facilities in
Gujarats Sanand, which will supply auto parts to Ford Motor Co in India
Everstone Capital, a Singapore-based private equity (PE) firm, has purchased 51
per cent in Indian auto components maker SJS Enterprises for an estimated Rs 350 cr
(US$ 51.35 million).
ArcelorMittal signed a joint venture agreement with Steel Authority of India Ltd
(SAIL) to establish an automotive steel manufacturing facility in India.
German auto components maker Bosch Ltd opened its new factory at Bidadi, near
Bengaluru, which is its fifth manufacturing plant in Karnataka. The company has also
signed a memorandum of understanding (MoU) with Indian Institute of Science
(IISc), Bengaluru with a view to strengthen Boschs research and development in
areas including mobility and healthcare thereby driving innovation for India-centric
requirements.
French tyre manufacturer Michelin announced plans to produce 16,000 tons of truck
and bus tyres from its Indian facility this year, a 45 per cent rise from last year.
Amtek Auto Ltd acquired Germany-based Scholz Edelstahl GmbH through its 100 per
cent Singapore-based subsidiary Amtek Precision Engineering Pte Ltd.
MRF Ltd plans to invest Rs 4,500 cr (US$ 660.231 million) in its two factories in
Tamil Nadu as part of its expansion plan.
German luxury car maker Bayerische Motoren Werke AGs ( BMW s) announced it
will start sourcing parts from at least seven India-based auto parts makers in response
to promote Make in India.
Hero MotoCorp is investing Rs 5,000 cr (US$ 733.59 million) in five manufacturing
facilities across India, Colombia and Bangladesh, to increase its annual production
capacity to 12 million units by 2020.
Government Initiatives
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The Government of Indias Automotive Mission Plan (AMP) 20062016 has come a
long way in ensuring growth for the sector. It is expected that this sector's contribution to the
GDP will reach US$ 145 billion in 2016 due to the governments special focus on exports of
small cars, multi-utility vehicles (MUVs), two and three-wheelers and auto components.
Separately, the deregulation of FDI in this sector has also helped foreign companies to make
large investments in India.
Road Ahead
The rapidly globalizing world is opening up newer avenues for the transportation
industry, especially while it makes a shift towards electric, electronic and hybrid cars, which
are deemed more efficient, safe and reliable modes of transportation. Over the next decade,
this will lead to newer verticals and opportunities for auto-component manufacturers, who
would need to adapt to the change via systematic research and development.
The Indian auto-components industry is set to become the third largest in the world by 2025.
Indian auto-component makers are well positioned to benefit from the globalization of the
sector as exports potential could be increased by up to four times to US$ 40 billion by 2020.
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REFERENCE:
www.ACMA.com AUTO COMPONENTS MANUFACTURER ASSOCIATION

4. COMPANY PROFILE
4.1 HISTORY
In 1975, Mr. R. K. Behera, a young mechanical engineer from NIT, Jamshedpur,
hailing from a humble service oriented middle class family, shunned the security of a job and
plunged into the hurly burly of high-risk and high-reward business arena and founded
International Auto in Jamshedpur with 15 people and 500 square feet of workspace.
Inspired and motivated by the benevolent ideals of the legendry JRD and obsessed
with an incorrigible and irrepressible passion to create a world class industrial edifice, R. K.
Behera along with his brother S. K. Behera set about meticulously crafting the present-day
RSB enterprise brick by brick. Toughened by the early trials and tribulations and propelled by
nothing-is-impossible spirit of the Behera brothers, RSB has now blossomed into a pulsating
and throbbing global engineering institution in automotive components and systems and
construction equipment aggregates.
RSB now boasts of manufacturing facilities in six different locations in India and one
in the USA with 85,000 square meters of workspace. Latest technologies and human
resources are working together around the world passionately to create an enduring
institution.
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Founder and Chairman Mr. R. K. Behera, Co-Founder and Managing Director Mr. S. K.
Behera and Joint Managing Director Mr. Sailendra Behera now spearhead RSB.
All RSB manufacturing units are ISO / TS16949, ISO: 14001 and OHSAS: 18001 certified.
4.2 Vision
To be amongst the most admired organizations with a significant global presence.
4.3 Mission
To be the market leader by providing customer delight through world-class quality, service
and cost-effectiveness in a progressive, innovative and challenging environment. We
endeavour to provide an enriching, rewarding and environment friendly work experience to
our employees in an achievement-based, high-performance culture. We will provide
maximum satisfaction to all our stakeholders.
4.4 Mission Auto Vertical
Be a socially responsible leading manufacturer of Transmission components and Systems and

fulfil prosperity of all Stakeholders.
4.5 Partners
The Group has entered into various technological agreements like:
Technical collaboration with Eugen Klein GmbH, Germany for propeller Shaft
Pressure Die Casting and Continuously Variable Transmission Systems
I-Design - Partners for Prototyping and Designing
Ivitesse Technologies - Partners for IT Solutions and ERP
4.6 Group Companies
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RSB comprises of four different companies, namely, RSB Transmissions (I) Ltd., RSB
Transmissions North America Inc. (Formerly known as Miller Brothers Manufacturing), I-
Design Engineering Solutions Ltd. and Ivitesse Technologies Pvt. Ltd. The Group Companies
function with the philosophy of providing quality products and efficient services.
Each of the Group companies is equipped with state-of-the-art technology and latest IT
infrastructure that enables smooth functioning. The Group's core capabilities range from
design to manufacturing of aggregates and systems related to commercial vehicles, passenger
cars, construction equipments f farm and off-highway equipments.
The Group is also in the trailer manufacturing business. The Group has chalked out an
ambitious plan keeping the future in mind. IL&FS has partnered to facilitate expansion and
growth plans of the Group.
The Group clientele includes the leading names of industry. Some of major Group clients are:
TATA Motors
Mahindra
Telcon
CATERPILLAR
ITEC
JOHN DEERE
FIAT
JCB
LOMBARDINI and AGCO.
4.7 Philosophy and Human Face

A) Knowledge Enterprise:
They strongly believe that the power of knowledge and information is supreme and
these are the most precious assets of an institution. They enable optimum decision-making,
inspire innovation, increase responsiveness, reduce costs, improve performance and
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ultimately confer competitive edge. To build a knowledge enterprise RSB constantly

encourage and provide opportunities to all employees to unlearn and relearn to sharpen their
innate capacity and remain perpetually relevant to the organization and the society. Learning
is an endless mission across the Group so that it is imbued with an innate capacity to
continually reinvent itself to remain relevant to the different times.
B) Benevolent Creative Leadership:
RSB echo deep concern for their employees. The group practice fair employee engagement
and disengagement practices and emphasize on empowerment of people, creating a culture of
trust and honest and above all encourage a mind set in pursuit of excellence. The tenets of our
leadership are anchored on sensitivity, openness, encouragement, forgiveness and discipline.
C) Road to Perfection is Endless:
The organization firmly believes that all human endeavours will always have scope for
improvement. That is why 100-metre sprint record is regularly broken and Everest repeatedly
scaled in lesser time. As an institution, it is perpetually restless to improve and innovate. To
encourage innovation, it consciously practices out-of-the box or blue ocean thinking. It aims
to attain the status where lateral thinking is all pervasive and automatic.
D) Corporate Social Responsibility:
Employees of this organization are very passionate about preserving environment and
developing human capital in their immediate neighbourhood in their own little way. Social
responsibility and obligation is a valuable goal for them rather than being a mere self-serving
b usiness means.
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ACHIEVEMENT/REWARDS
CATERPILLAR
BUILDING CONSTRUCTION PRODUCTION DIVISION Appreciation
award on quality 2013-14
TELCO CONSTRUCTION EQUIPMENT COMPANY LTD

Active Support In New Product Development 2011-12

I-Prize For Reduction Of Setup Time 2012.

Significant Contribution To Sustained Excellence On Delivery-Fabrication
2011-12

Significant Contribution On New Product Development
2010-11.
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To Reduce Customer Complaints In Mainframe Of Zx-120h In 2010-11.

Significant Contribution To Consistent Performance On Delivery 2010-
11
4.8 ORGANIZATIONAL STUDY

Organizational chart
Chairman
MD
President
GM
HR Purcha Maintena
Producti Qualit Sales Accoun R&D
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4.9 DEPARTMENTAL STUDY

4.9.1 HUMAN RESOURCE (H.R)
Human resource is the one of most important asset of an organization no matter what comes it is only
asset that goes on appreciating where as other assets have been counted on depreciation, thats why it
becomes most important and vital to maintain the work force that is human resource for an
organization thats where this department of an organization comes into picture.
H.R
Assist
ant
Safety
in-
charge
CSR
in-
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Ms Asha leads this team of HR with the span of control of two members. Mr parindra as an assistant
HR and Mr Anand as an associate HR.
Some of functions that H.R department does in our organization are:
Determining the needs of the staff

Maintains the performance record of the employees
Involved in recruitment and placement activities of an organization
Conducting training and development programs
Motivation of employees
Relation management within an organization
Corporate social responsibility
As RSB transmission is a manufacturing firm and has heavy equipment that are used
for the production purpose, hence the major function of a HR team is safety and
maintenance of safety measures in an organization. The safety measure includes
wearing of shoes, helmets, gloves and fibre glasses which keeps the employees safe
from accidents happening on the shop floor. As I have seen these rules are strictly
followed and no employee is allowed to enter the shop floor without these safety
instruments and even when I was in the shop floor I was also instructed to wear shoes
and helmet.
Recruitment process is carried on in the main branch that is Jhamsedpur, but the HR
department here does the screening of the resumes and curriculum vita which they
receive online through the web portal which opened during the vacancies.
The employees performance is evaluated by their superiors only and this is done
online through website which the company employees only are accessible and based
upon this performance, evaluation of the employees is done.
Based upon the results the training is given and it includes on the job training, off job
training which further includes lectures, class room training, and simulation.
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4.9.2 PRODUCTION DEPARTMENT

An organization exists only when it is able to meet the customers demand and need, for this
the production department plays a vital role. Organization can sustain in the prevailing
market conditions when it can bring the goods or service to an existence and this process of
converting raw materials into finished or the goods which acts as raw material for some other
firms is done by production department.
As far as RSB transmission is considered it produces CATERPILLAR buckets which directly

go to CATERPILLAR assembly units and it is also indulged in the production of axels for the
TATA Hitachi earth movers.
This department of production is headed by Mr.Ashok and has 250 workers working in this
department. It is also manufacturing parts of JCB which includes 7 different types of links.
The flow chart of this department is as follows:
Production
Shift
co-
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Area
in
Associa
The production department in RSB may be split in 3 lines:
CATERPILLAR line
TATA Hitachi line
JCB line
CATERPILLAR line
CATERPILLAR is the one of the most reputed manufacturing company of earth movers. This
strongly believes in delivering high quality and powerful machines to their customers. The
vehicles of this particular company are divided further into In RSB the parts which are
manufactured are : and the operations that are carried out to manufacture these parts are:
TATA Hitachi line
TATA Hitachi is another company which manufactures earth movers and RSB Transmission
(I) ltd, Dharwad supplies them the subassemblies of the following parts.
Main frame
Centre frame
Tell frame
o I beam
o Bracket (engine)
A series bracket
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Arm
EX100
Track frame
Lower center frame
Side frame
Main frame
(a) Centre frame (b) Tell frame (c) Bracket
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(a) Centre frame 2d diagram
ARM
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Track frame
These are for the models of ZX120, EX200, EX110 and ATG.
The operations that are carried out to produce these parts are
Gas cutting (as per the specification depending upon the model)
Gas used is oxyacetylene which is used to cut the metal plates of 25 mm as per the
specifications.
Welding
It is the operation of joining two metals at high temperature, which is more than the
melting point of joining metals.
Dressing
Operation of giving the new surface to the metal plates. Here in RSB metal plates are
dressed with anti rust chemicals to prevent it from rust.
Facing
It is the operation of cutting the face so that it is made plane and leveled.
Drilling
This operation is carried out to drill the holes on the plates at specified locations as
shown in the controlled copy of the CAD diagrams.
Boring
This is operation done to increase the size of hole drilled with standard drill .Hole
alignment is also done in this particular operation because if the alignment of the
holes is not proper it would create problem in the further assembly process.
Tapping
This operation is carried out to generate threads in the holes drilled and bored so that
bolt can be turned and fitted into it
4.9.3 QUALITY DEPARTMENT
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Quality in the general terms is fit for use, more precisely quality is the measure of
excellence or a state of being free from defects, deficiencies and significant variations. For
an instance when purchasing diapers its important to find the brand with high quality to
protect the babys skin and avoid diaper rash. Similarly it is important for the products that
are produced in the company like manufacturing units of RSB hence the quality department
takes care of the quality of the raw materials they receive from their suppliers as well as the
products that they receive from the vendors.
The flow chart of quality department is as shown below:
Quality
HOD
Quality
Assistant
Department of quality is looked after by Mr. Ramesh with his assistant Mr. shankar
RSB has the quality measures of ISO 9001:2008 completely meant for the quality
management which is huge milestone achieved by the company.
The organization practices TQM (total quality management). The documentation thats is
done once is valid for 3 years.
To maintain the quality every month end an audit is conducted and even the yearly
surveillance is carried out so that if any deviation the corrective actions are carried out.
And as far as certification is considered third party that is DQS (Detuch Quality Services)
maintains the certification of an organization.
Functions performed by the quality department:
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Approve or reject the procedures, specifications, methods and results.

Approve or reject the raw materials from the vendors and suppliers.
Approve or reject the products going to the customers.
Review all production records and maintain the accuracy.
Equipment calibration.
Basically quality being measured id divided into two
Quality assurance ( process oriented)

Quality control (product oriented)
In RSB quality assurance is being followed. Here they believe if the process that is carried
out to produce a product is measured and maintained then obviously the final product that
they produce would be meeting the specifications as per the requirements and hence can be
tagged as a good quality product.
There are basically 3 modes in this quality assurance:
1. Incoming inspection
Material received is being checked in the initial stages, when it reaches the company
and the report is being maintained.
2. In-process inspection
The process that is carried on to convert the raw material to the finished product of
that company which is the component of assembly for other companies like TATA
hitachi, JCB. Various processes are inspected.
3. Final inspection
Once the product is ready for the dispatch another inspection is carried out with the
checklist that is attached and product is sent out to the customer only when it passes
the final inspection.
As far as RSB is considered quality department is inseparable from the stores department
because both of these are undertaken by single unit which helps to reduce the cost as well as
time. Store manager is well equipped with high precision tools to check quality of the
products that he receives and also checks the quality that is sent to the production line from
him.
Mainly RSB receives materials from 2 sources and they are named as
Job work
RSBs purchase department buys the raw materials as per the requirements of their
customers and then sends this raw material to the local vendors along with drawing
so that they get to know what is the requirement in terms of diameter, thickness,
length, breadth, width, etc.
Some of the local vendors are:
1. Ashoka
2. 5s engineering
3. Perfect laser
4. V.G.duracoat
These people supply the required material as and when required by the RSB.
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Bought out
Here in this source RSB just gives the specification of the material required, the
supplier himself purchases raw material and does all the machining work and sends
the required material to the RSB as per the specifications.
Some of the bought out vendors are:
1. G & S company
2. KAMAT tech solutions
3. SAI udyog
4. GP space
4.9.4 MAINTENANCE DEPARTMENT
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The plants maintenance department is responsible for making sure that all machines are
running properly, such that workers are safe and plant performs its functions efficiently. The
department indulges itself in fixing the machines if any problem persists and also give the
ground service if required.
Basically manufacturing industries are very much complex systems that rely on the
efficient work of many machines which are aligned to perform particular operations
according to the schedule or plan. The parts of plant include all of workers and staff and the
manufacturing machines themselves. The machines are very important assets as far as
manufacturing firms are considered and maintaining of these machines and operations is the
main job of the maintenance department.
The flow chart of the maintenance department is as shown:
Maintenance
HOD
maintenance
Maintenance
staff
This department oversees the functionality of the machines and building itself. As we
have been observing throughout our intern duration the department has plan or more
precisely we can say made routine to fix machines, make sure they are safe and perform their
functions.
Similarly if the machine breakdown the responsibility of the department is not only to fix the
problem, but also do it in a timely manner so that the production department is not hampered.
Functions performed by the maintenance department:
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Proper selection of equipment for the plant and proper design of that particular
equipment so that it is safe and easy to use for the workers.
Ensures that equipment is performing effectively and efficiently.
Monitors the critical equipments such as high sensitive pressure gauge.
Analyzing and making use these sensitive equipments and supervising the use of
these sensitive devices.
Making a report on the deficiency observed during the period check up and taking
the corrective measures.
Providing guidance and working methodology to the workers, so that functions of
the others department are not affected and whole organization works efficiently
Promotes equipment standardization and provides certification to the equipment
which meets the standards as per government rules and regulations.
Consults the shop floor worker if any problem persists and makes use of it to make
equipment ready for the operations.
To look after the new equipment and technology.
Makes cost effective benefit review of the maintenance programs.
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4.9.5 ACCOUNTS DEPARTMENT

An accounts department provides accounting services and financial support to the
organization it belongs to. The department records accounts payable and receivables,
inventory, payroll, fixed assets and all other financial elements. The department accountants
review the records of each department to determine the companys financial position and any
changes required to run the organization cost effectively.
In order to the account payables and receivable section of an accounting department

records goods and services that it receives and the payments it owes, such as inventory from a
supplier or other expenses. So Account department is mainly made to control the organization
by maintaining the records of each transaction takes place in the organization related
manufacturing the good and services. The maximum days are requiring to accounts
receivables and payable is 30 days from the date of goods receivables note (GRN).
Flow chart of the accounts and finance department:
Accounts
HOD
Accounts
Department of Accounts is looked after by Ms. Anita Gupta and has five assistants working in
the department.
The main functions performed by the accounts department are as follows:
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First and foremost duty of accounts department of an organization is to make budget

before sanctioning the actual money to ant department.
Getting money to satisfy the needs of organization from the capital market at very low
cost and risk in the second important function of this particular department.
Accounts department analyzes all the sources of funds from the capital market and
creates a good financial structure of the company.
Plans for the investment of shareholders and debentures money in best projects so that
highest return on investment is achieved.
Takes up the investment decisions with help of capital budgeting techniques and
investment analysis techniques.
Management of taxes is also a function of accounts department.
Accounts department watches the updates in tax laws and also tries to build up good
relationship with government by paying return of corporate tax on time.
Managing the financial risk is another important function performed by the accounts
department.
Accounts department takes many measures for managing the financial risk of
company so that loss of fund is reduced happening because of liquidity, solvency or
financial disasters.
It also makes a good plan and also takes a help of debt collectors, insurance
companies and other agencies for reducing financial risk.
For maintaining and creating the good brand in market accounts department joins
hand with marketing department and both takes the steps of mergers and acquisition.
Accounts department provides money for takeover any other firm for estimating its
long run return.
Looking forward the accounts department will work with managers to prepare the
organizations budgets and forecasts and to report back on the progress against these
throughout year. This information can be used to plan staffing levels, asset purchase and
expansions and cash needs, before they become necessary.
Finally, the accounts department should be called upon to provide information to assist
managers in making key strategic decisions, such as which marketers or projects to pursue or
the pay-back period for larger capital purchases. The account department can often contribute
an objective perspective based on special financial assessment techniques.
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4.9.6 PURCHASE DEPARTMENT

Most major companies and even some government organizations have a purchasing or
procurement department as part of everyday operations. These departments provide a service
that is the backbone of many manufacturing, retail, military and other industrial
organizations. Purchasing departments are responsible for procuring supplies.
Until the 1960s, this largely involved order-placing and was primarily a clerical
position. However, as the development of strategic planning and the advent of just-in-time
purchasing made purchasing a more crucial business function. Today, purchasing is often
referred to as supply chain management and the purchasing department has taken on a
larger and more vital business role.
As I observed during two months of stay in the RSB transmissions (I) ltd, many individuals,
even some who work in a company, are unaware of what the purchasing department does,
why it exists or what purposes it serves.
The flow chart of purchase department
Purchase
HOD
Purchase
To understand better what the role of the purchasing department is, consider some functions it
performs.
Procuring Materials
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One role of the purchasing department is to procure all necessary materials needed for
production or daily operation of the company. For a manufacturing company, such as
RSB this might include raw materials such as iron, steel, aluminum or plastics, but it
also might include tools, machinery, delivery trucks or even the office supplies needed
for the secretaries and sales team. The purchasing department makes sure there is
always sufficient product on the shelves or in the warehouses to keep the customers
happy and keep the store well-stocked.
Evaluating Price
A purchasing department also is charged with continuously evaluating whether it is

receiving these materials at the best possible price in order to maximize profitability.
This can be challenging for a small business that may purchase in lesser quantities but
as far as RSB is considered it always buys materials in bulk quantities which make it
to take advantage of the discount being given for the bulk quantity purchases. The
department staff communicates with various vendors about which I have mentioned in
earlier part and makes the selection of the cheaper vendor and materials being
supplied by the particular vendor is sent to the quality department which checks the
quality so that the quality of the finished goods produced by the company are not
compromised.
Paperwork and Accounting
Purchasing departments handle all of the paperwork involved with purchasing and
delivery of supplies and materials. Purchasing ensures timely delivery of materials
from vendors generates and tracks purchase orders and works alongside the receiving
department and the accounts payable department to ensure that promised deliveries
were received in full and are being paid for on time.
Policy Compliance
The purchasing department also must ensure that it is complying with all company
policies. For example, in RSB, if individual staff members communicate with the
purchasing department about purchasing needs for things such as office supplies or
computers. Before making a purchase, the purchasing department ensures that it heeds
the proper protocols for purchase and budget approval and that any items are
purchased in accordance with the overall purchasing policy of the organization.
Supply Sourcing
Another main role of the purchasing department is to source supplies and parts, and
then purchases them. In companies like RSB, it also includes deciding whether to
make the item in-house. Purchasing departments often work alongside product
development teams to source materials and determine cost of the finished product.
Purchasing departments make use of trade publications to source suppliers, or go
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straight to the manufacturer. Finding the correct item at the correct price can be
difficult, and purchasing departments may also work to assist suppliers in
manufacturing the item needed.
Bidding
For items needed in bulk, or specialist items, purchasing departments often use
competitive bidding to chose a supplier. The department will then be responsible for
all aspects of the bidding process. For instance, when the purchasing department of
the RSB transmissions (I), ltd chooses a supplier, it publishes a public notice, writes
detailed instructions on the bidding process, accepts companies onto the approved list
of bidders, handles bid security money, opens and reads the bids publicly and makes a
recommendation on which bid to accept.
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4.9.7 SALES DEPARTMENT

A Sales department plays a key role in the success and failure of an organization. It is
the one which plays a pivotal role in achieving the sales targets and eventually generates
revenue for the organization.
A sales manager must be very clear about his role in the organization. He should know
what he is supposed to do at the workplace and this place is held by Mr. Praveen who looks
after this particular department.
Sales department is responsible for meeting the sales targets of the organization
through effective planning and budgeting. Sales manager alone cant achieve these targets all
alone, he needs the support of his sales team where each one contributes in his best possible
way and works towards the goals and objectives of the organization. He is the one who sets
the targets for the sales executives and other sales representatives. A sales manager must
ensure the targets are realistic and achievable.
However, a company without a sales department or at least a department in charge of

sales and marketing is unconceivable. All companies are being aware that they need to get
their message to the client through the marketing department, hence the presence of sales
department as part of marketing team.
Flow chart of sales department is as shown below:
Sales
HOD Sales
Sale
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Functions of the sales department that are performed in RSB transmissions are stated
as below:
A sales department understands who can perform a particular task in the most
effective way. It is role of this department to extract the best out of each employee.
A sales department devises strategies and techniques necessary for achieving the sales
targets. It is the one which decides the future course of action for team members of
sales department.
It is the sales department which maps potential customers and generate leads for the
organization. Sales department also look forward to generating new opportunities for
the organization.
A sales department is also responsible for brand promotion. It makes the product
popular amongst the costumers and makes the organization ready to take orders from
companies like JCB. Even though RSB has orders of several links of JCB they are
working on getting the orders for the main components of it such as arms, buckets etc.
Motivating team members is one of the most important duties of a sales department.
People here in this department make the sales team to work together as a single unit
towards the common objective and it also ensure team members dont fight amongst
themselves and share cordial relationship with each other.
Another important function of sales department in RSB is that they are delivering
goods on time and according to specified quality, appreciation of their team is also
important function that is being performed.
Executives, at jhamsedpur ask the sales team head of department to submit the report
what they have done through-out month and make sure each one of in the team is
living up to expectations of an organization.
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4.9.8 RESEARCH AND DEVELOPMENT DEPARTMENT (R&D)

Manufacturing innovation is fostered by research and development of technologies that
are aimed at increasing the competitive capability of manufacturing concerns. Broadly
speaking, manufacturing-related R&D encompasses improvements in existing methods or
processes, or wholly new processes, machines or systems.
In RSB, basically there are 4 main areas on which the research and development department
concentrate on:
Unit process level technology
In general we can say that this team basically works on improving manufacturing
processes. In which the team works on the fundamental improvements in the existing
manufacturing processes that delivery substantial productivity, quality or
environmental benefits and these processes are looked and inspected so that quality of
the products being manufactured are not hampered or affected.
This team also works on the development of new manufacturing processes, including
new materials, coatings, methods and practices with these processes. Along with these
the team also decides sequence of operations that are best suited so that consumption
of power is to minimum and sequence is cost effective as well.
Machine level technologies
This area of R&D department is the one which create or improve manufacturing
equipment, including:
Improvements in capital equipment that create increased capability (such as accuracy
or repeatability), increased capacity (through productivity improvements or cost
reduction), or increased environmental efficiency (safety, energy efficiency,
environmental impact).
New apparatus and equipment for manufacturing, including additive and subtractive
manufacturing, deformation and molding, assembly and test.
Systems level technologies
This area of research and development looks for innovation in the manufacturing
enterprise, including:
Advances in controls, sensors, networks, and other information technologies
that improve the quality and productivity of manufacturing cells, lines, systems, and
facilities innovation in extended enterprise functions critical to manufacturing, such as
quality systems, resource management, supply chain integration, and distribution,
scheduling and tracking.
Technologies that enable integrated and collaborative product and process

development, including computer-aided and expert systems for design, tolerance,
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process and materials selection, life-cycle cost estimation, rapid prototyping, and
tooling.
Environment or societal level technologies
This area of R&D works for improvement of workforce abilities and manufacturing
competitiveness, including:
Technologies for improved workforce health and safety, such as human factors and
ergonomics technologies that aid and improve workforce manufacturing skills and
technical excellence, such as educational systems incorporating improved
manufacturing knowledge and instructional methods.
The flow chart of the department is as shown below:
R&D
HOD of
Executives
A company's research and development department plays an integral role in the life cycle of a
product. While the department usually is separate from sales, production and other divisions,
the functions of these areas are related and often require collaboration. A thorough
understanding of the functions of the research and development department can be done as
follows
New Product Research
Before a new product is developed, a research and development department conducts

a thorough study to support the project. The research phase includes determining
product specifications, production costs and a production time line. The research also
is likely to include an evaluation of the need for the product before the design begins
to ensure it is a functional product that customers want to use for their further
assemblies of the earth movers.
New Product Development
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The research paves the way for the development phase. This is the time when the new
product is actually developed based on the requirements and ideas created during the
research phase. The developed product must meet the product guidelines and any
regulatory specifications as specified by the customers (JCB, caterpillar and TATA
hitachi).
Existing Product Updates
Existing products of the company also fall under the scope of research and
development. The department regularly evaluates the products offered by the
company to ensure they are still functional. Potential changes or upgrades are
considered. In some cases, the research and development department is asked to
resolve a problem with an existing product that malfunctions or to find a new solution
if the manufacturing process must change.
Quality Checks
In RSB Company, the research and development team handles the quality checks on
products created by the company. The department has an intimate knowledge of the
requirements and specifications of a particular project. This allows team members to
ensure the products meet those standards so the company puts out quality products.
The company also has a quality assurance team, which is collaborated with research
and development on quality checks. Along with these the quality team also co-
operates and engages itself in the quality check of the products being manufactured.
Innovation
The research and development team aids the company in staying competitive with
others in the industry. Competitors for RSB are APEX pvt ltd, ABEX pvt ltd and JMT
which are located in the local and also have capacity to produce the same products as
that of RSB. The department is able to research and analyze the products other
businesses are creating, as well as the new trends within the industry. This research
aids the department in developing and updating the products created by the company.
The team helps direct the future of the company based on the information it provides
and products it creates.
REFERENCE
www.rsbglobal.com
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5. ANALYSIS AND INTERPRETITION

5.1 COMPARATIVE BALANCE SHEET (CBS)
The CBS shows the different assets and liabilities of the firm on different dates to
make comparisons of absolute balances and also of changes if any, from one date of another.
The CBS may be helpful in analysing and evaluating the financial position of the firm over a
period of number of years.
COMPARATIVE BALANCE SHEET
Table showing comparative Balance sheet (Amt. in Crore Indian Rupees)
PARTICULARS As at 31st As at 31st INCREASE/ INCREASE/D

March 2015 March 2014 DECREASE ECREASE IN
%
1. SOURCES OF
FUNDS
(a) Share capital
(b) Reserves Surplus 57.93 54.06 3.87 6.68

Total Liabilities 57.93 54.06 3.87 6.68
APPLICATION OF
FUNDS
Fixed assets
Gross Block 32.2 29.84 2.36 7.32
Net Block 32.2 29.84 2.36 7.32
CWIP 1.08 0.31 0.77 71.29
Net fixed assets 33.28 30.15 3.13 78.61
Inventories 8.63 9.01 -0.38 -4.40
S. Debtors 0.59 0.65 -.06 -10.16
Cash & Bank balance 0.35 1.01 -0.66 -188.57
Loans & Advance 0.58 1.95 -1.37 -236.20
Total current assets 10.15 12.62 -2.47 -24.33
Current Liabilities 3.47 3.91 -0.44 -12.68
Provisions 0.082 0.078 0.004 4.87
Total current 3.52 3.84 -0.32 -9.09
Liabilities
Net current assets 6.63 8.78 -2.15 -32.42
TOTAL 57.93 54.06 3.87 6.68
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ANALYSIS AND INTERPRETATION
1. Current assets
The investments in the current assets are high and it has decreasing trend over the
period under study. The current assets have increased by Rs.-2.47 (crores) i.e. -24.33% in
2015 when compared to 2014. So it is significantly effects on the liquidity position of the
company and it also decreases the working capital of the company. These shows there are
huge investments in the inventories.
2. Net fixed assets
The net fixed assets increased by 3.13 (crore) i.e.,78.61 in 2015 when compared to
2014 the reason is payment is less amount to the depreciation.
3. Current liabilities
Current liabilities include current liabilities and provisions. Current liabilities and
provisions are decreased by -.32 (crore) i.e., about -9.09% in 2015 when composed to 2014
because of decrease in sundry creditors and provision for taxation.
4. Reserve and surplus
The Reserve and Surplus has increased by Rs.3.87(crore) i.e. 6.68% about in 2015 as
compared to 2014. The company kept more reserve and surplus to meet a future uncertainty.
5.2 COMPARATIVE INCOME STATEMENT (CIS)
A CIS shows the figure of different items of the IS of the firm in absolute terms, the
absolute changes from one period to another and if desired, the changes in percentage form.
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The CIS is helpful in deriving meaningful conclusions regarding changes in sales volume,
cost of goods sold, different expenses items etc. from the CIS, a financial analyst can quickly
ascertain whether sales are increasing or decreasing and by how much amount or by how
much percentage.
Table showing comparative income statement (Amt. in crore Indian Rupees)
PARTICULARS Year Year Increase/Decrease Increase/decrease

Ended 31st Ended 31st amt in %
March March
2015 2014
INCOME
Revenues (Net) 53.96 65.7 -11.74 -21.75
Other Income 0.04 0.03 0.01 33.33
TOTAL 53.99 65.74 -11.75 11.58
Expenditure
Cost of goods sold 35.33 50.20 -14.87 -42.08
Gross Profit 18.66 15.54 3.12 16.72
Selling and 8.51 10.5 -1.99 -23.38
administration exps
Selling and 1.52 2.06 -0.54 -35.52
administration exps
Depreciation 2.52 2.26 0.26 10.31
EBIT 6.11 0.72 5.39 88.21
Less: Interest - -
EBT 6.11 0.72 5.39 88.21
Taxes - -
EAT 6.11 0.72 5.39 88.21
On the basis of comparative income statement it can be said that gross profit for the
year 2014-15 has increased by 16.72% over the profit for the year 2013-14 during the same
cost of goods sold decreased by 42.08%. The basic reason is to decrease in company sales.
The selling and Administrative expenses decreased by (-23.38)% Other income for the year
2014-15 is increased by 33.33%. The EBIT is increased by 88.21% during the year2014-15.
The Net profit is also increased by 88.21% during the year 2014-15.
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5.3 (i) TREND ANALYSIS (Amt in millions)
Table showing Trend Analysis
Particulars 2012-13 2013-14 2014-2015

Net sales 107.69 65.81 54.00
Gross profit 36.12 15.61 18.67
EBIT 18.37 1.17 3.87
EBTs 18.37 1.17 3.87
EAT 18.37 1.17 3.87
Current assets 14.54 12.78 10.23
Current liabilities 9.00 13.73 9.62
Fixed assets 30.79 30.32 33.50
Net worth 36.33 29.37 34.11
5.3 (ii) TREND ANALYSIS IN PERCENTAGE
The TPA is a technique of studying several financial statements over a series of years.
In TPA the trend percentage are calculated for each item by taking the figure of that item for
some base year as RS. 100. So, the trend percentage is the percentage relationship which each
item of different years bears to the same item in the base year. Any year may be taken as the
base year, but generally the starting/initial year is taken as the base year. So, each item for
base year is taken as 100and then the same item for other years is expressed as a percentage
of the base year.
Table showing Trend percentage analysis
Particulars 2012-13 2013-14 2014-15
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Net sales 100 138.88 117.94

Gross profit 100 156.78 119.60
EBIT 100 193.63 233.33
EBT 100 193.63 233.33
EAT 100 193.63 233.33
Current assets 100 112.10 119.95
Current liabilities 100 47.44 270.06
Fixed assets 100 101.52 110.48
Net worth 100 119.15 116.13
5.4 ANALYSIS OF FINANCIAL STATEMENT
1. SALES
TABLE NO: 5
Details 2013 2014 2015
Revenues(Net 107.69 65.81 54.00

)
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There is an increase in the sales of a company compared last year. The company
registered a growth of 107.69 (crore) in 2012-2013,but it has decreased to 65.81 (crore) in
2013-14. Even the year 2014-15 again sale has decreased to 54(crore). The net sale of the
company is decreasing year to year the reason is competitors in the business market.
2. GROSS PROFIT:
The gross profit is calculated by following formula
Gross Profit= Net sale cost of goods sold
Details 2012-13 2013-14 2014-15
Gross Profit 36.12 15.61 18.67

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The gross profit for the year 2012-13 was 36.12(crore). But this gross profit of the
company has decreased in the year 2013-14 i.e. 15.61(crore). And in the year 2014-15 it has
slightly decreases i.e. 18. 67(crore) as compared to year 2013-14.it includes sales- cost of
goods sold.
In the year of 2013-14 the total sales of the company has decreased at half of the
previous year. And the same it has increased a slight variation in the year of 2014-15.
3. OPERATING INCOME: (EBIT)
The following table shows the three years EBIT (the earnings before interest and tax)
Details 2012-13 2013-14 2014-15
EBIT 18.37 1.17 3.37
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EAT
EAT
The operating income of the company is Rs. 18.37 (crore) in the year 20012-113. The
companys income has decreased for the year 2013-14 it was Rs. 1.17(crore). But in the year
of 2014-15 it has slightly increased to Rs.3.37(crore). The decrease in operating income in
2014 is due to decrease in the sales of the company.
4. PROFIT BEFORE TAX:
Details 2012-13 2013-14 2014-15
EBT 18.37 1.17 3.37
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EAT
EAT
The profit before tax is showing non progressive in their profit taxes during the few
years. The companys profit before tax was in 2013 18.37(crore) but it has decreased by 18 to
1(crore) in the year of 2014 it shows the sales of the company has been decreased. But in the
year 2015 the sales got increased in a slight variation. The company need to take care of the
sales to perform better in the market.
4. PROFIT AFTER TAX:
Details 2012-13 2013-14 2014-15
EBT 18.37 1.17 3.37
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EAT
EAT
The company is showing variations in their profit after tax since past few years. The
profit of the company is Rs. 18.37 (CRORE) in 2012-13 and it is decreased Rs1.17 (crore) in
2013 -14 & it has increased to Rs.3.37 in the year 2014-15.
6. CURRENT ASSETS
Details 2012-13 2013-14 2014-15
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Total Current Assets 14.54 12.78 10.23
CURRENT ASSETS
CURRENT ASSETS
The Total current assets for the year 2012-13 is Rs. 14.54 (crore) decreases in the
year 2013-14 Rs. 12.78(crore) and it is again decreased in the year 2014-15Rs. 10.23 (crore).
The major portion of current assets consists of inventories, cash & Bank balance and sundry
debtors. Out of current assets the has paid their current liabilities for an short term.
7. CURRENT LIABILITIES
Details 2012-13 2013-14 2014-15
Current
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Liabilities 9 13.73 9.63
CURRENT LIABILITIES
CURRENT LIABILITIES
The current liabilities and provisions of the company stood at Rs 9 (crore) in 2012-13.
But in 2013-14 it has increased to 13.73(crore) i.e, almost 30% of the previous year.
Compared to 2013-14 the current liabilities have slightly decreased from RS 13.73 to 9.63
(crore) in20114-15 because of repayment of liabilities in current year.
8. FIXED ASSETS
Details 2012-13 2013-14 2014-15
FIXED ASSETS 30.79 30.32 33.5

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FIXED ASSETS
FIXED ASSETS
The above table shows that the fixed assets of the company. By referring above table
we come to know that there is a slightly variation in year to year. So in the year of 2012-13
the assets was 30.79 (crore)but in the year 2013-14 it has decreased to 30.32(crore). but in the
year 2014-15 it has increased to 30.32 to 33.5(crore).
9. NET WORTH
Details 2013-13 2013-14 2014-15
Net worth 36.33 29.37 34.11

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NET WORTH
NET WORTH
The net worthies a total of total assets-total liabilities. so in the year of 2012-13 it is
36.33 (crore). But because of increase in total liabilities in the year 2013-14 the it has become
36.33 to 29.37(crore). But in the year 2014-15 it has increased from 29.37 to 34.11(crore).
5.5 RATIO ANALYSIS
1) PROFITABILITY RATIO
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operating profit
Profitability ratio= 100
capital employed
Details 2012-13 2013-14 2014-15
Operating profit 18.37 1.17 3.37
Operating capital 34.11

employed 30.79 3.32
profitability Ratio 59.66 3.85 11.34
PROFITABILITY RATIO
PROFITABILITY RATIO
Profitability is means overall measures of efficiency. So the above table that efficiency of the
business. In the year 2013 the profitability of the company was 59.66 but in the year 2014 it
has reduced to 3.85 because of operating profit. It has reduced from 18.37 to 1.17 almost 90%
of the previous year. And in the year of 2015 it has slightly increased from 1.17 to 3.87. but
the capital employed is getting slight variation.
2) RETURN ON INVESTMENT
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net operating profit

return on investment = 100
capital employed
Details 2012-13 2013-14 2014-15
Net Operating profit 18.37 1.17 3.37
capital employed 51.10 52.08 60.94
Return on investment 35.94 2.24 5.53
RETURN ON INVESTMENT
RETURN ON
INVESTMENT
Return on investment ratio refers the overall profit of the company means return on capital
employed. The above table gives the net profitability of the firm in the year 2013 it was 35.94
but it has reduced in the year 2013 to 2.24 it means the company is not generating actual
profit than expected. And in the year of 2015 it get increased at lower rate.
3) RETURN ON SHARE HOLDERS FUND
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Net profit after interest tax

Return on shareholders fund= 100
Shareholders funds
Details 2012-13 2013-14 2014-15
Net profit after tax 18.37 1.17 3.87
Share funds 52.08 54.06 57.93
Return on shareholders 6.68

fund 35.27 2.16
RETURN ON SHAREHOLDERS FUND
RETURN ON
SHAREHOLDERS
FUND
Return on share holders fund is referred to as return on net worth. Every share holders wants
to earn the profit or to get back their investment. So in this case the above table shows that in
the year 2013 the net worth was 35.27 it means on every 1 rupee the share holders get 35.27
but in the 2013 it has reduced to 2.16. almost 95% of previous year. But in the case 2015 it
has increased to 6.68.
4) RETURN ON ASSETS
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Net profit after tax

Return on Assets= 100
Total assets
Details 2012-13 2013-14 2014-15
Net profit after tax 18.37 1.17 3.87
Total assets 40.67 43.1 44.03
Return on assets 45.16 2.71 8.78
RETURN ON ASSETS
RETURN ON ASSETS
Return on assets is the relationship between net profit and assets. It shows the assets being
properly utilised or not. So the above the shows that in the year 2013 it has utilised in a
proper way. But in the year 2014 it has reduced from 45.16 to 2.71it means the assets are not
been utilised to generate the profit for the company but in the year 2015 it has increased
comparing to previous year but comparing to 2013 and 2015 there is lot of difference has
generated.
5) PROFIT RATIO
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1) Gross profit margin
The Gross profit ratio is also called the average mark up ratio.
Gross Profit Ratio = Gross profit/ Net sales *100
Details 2012-13 2013-14 2014-15
Gross profit 36.12 15.61 18.67
Net Sales 107.69 65.81 54.00
Gross profit Ratio 33 23 34
GROSS PROFIT RATIO
GROSS PROFIT RATIO
From the above calculations, the gross profit ratio in 2013 it was 33 and it has
decreased in the year 2014 to 23 and again it has increased in the year 2015 to 34. This is
mainly because of increase in sales for which huge loans has been borrowed.
2. NET PROFIT MARGIN RATIO
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Net profit margin ratio establishes between net profit and sales and indicates
Manufacturing, Administration and selling the products.
profit after tax

Net profit margin ratio= 100
sales
Details 2012-13 2013-14 2014-15
PAT 18.37 1.17 3.37
Net Sales 107.69 65.81 54.00
Net Profit Margin Ratio 17.05 1.77 6.24
NET PROFIT RATIO
NET PROFIT RATIO
ANALYSIS AND INTREPRETATION
The net profit ratio for the three years is 0.17%, 0.017% and 0.06%. Here the sales of
the company has decreasing year by year. And the expenses of sales is increased the same.
Here the borrowed loans has increased. And it has decreased in the net profit in the current
year that is 2014, 2015. As compared to 2013.
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3) OPERATING RATIO
Operating cost
Operating Ratio= 100
Net sales
Details 2012-13 2013-14 2014-15
Operating cost 64.63 89.32 50.12
Net Sales 107.69 65.81 54.00
Operating ratio 98.20 82.94 92.19
OPERATING RATIO
OPERATING RATIO
Operating ratio is refers all operating expenses been used to produce and sell the goods. It
shows the cost contents of the goods has increased. It is necessary that the management
should know which element of the cost has gone up. In the year 2013 the cost is more than
comparing to 2014 and 2015. But comparing to net sales of company is incurring the cost
been used to produced the goods.
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LIQUIDITY RATIO
1) CURRENT RATIO
currnt assets
Current ratio=
current liabilities
Year 2012-13 2013-2014 2014-2015

Current assets 14.54 12.78 10.23
Current liabilities 9.00 13.73 9.63
Current ratio 1.61 0.93 1.06
CURRENT RATIO
CURRENT RATIO
ANALYSIS AND INTEREPRETATION
As a matter of policy or as referred to as bankers rule of thumb, the current ratio of

2:1 is considered to be satisfactory. That is, from the last three years the companys liquidity
position of the firm is not good that the firm shall not be able to pay its current liabilities. In
the year 2013 for every RS 1 of current liability there is RS 1.61 current assets to meet their
obligations. And in the year 2014 there every RS 1 of current liability there is RS 0.93 and in
the year 2015 is 1.06 current assets to repay every RS 1 current liabilities. The lower ratio of
current ratio is mainly effects on the business.
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2) QICK RATIO
Quick assets
Current ratio 100
Qick liabilities
QUICK ASSETS: - Current assets-Inventories.
QUICK LIABILITIES: - Current liabilities-Bank Over Draft
Detail 2012-13 2013-14 2014-15

Quick assets 5.49 3.77 1.6
Quick liabilities 9.00 13.73 9.63
Quick ratio 0.61 0.27 0.16
QUICK RATIO
QUICK RATIO
ANALYSIS AND INTEREPRETATION
As a rule of thumb or as a conversion, quick ratio of 1:1 is considered satisfactory. The

Company having an excellent liquidity. However, this traditional rule should not be used
blindly since a firm having quick ratio of more than 1, may not be meeting its short-term
obligations in time. Since past three years it is less than1. The short term obligation is not met
in time.
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REFERNCE
Cost and Management Accounting, Vikas Publication-10 edition,2015 By M N Arora.
Financial Management, Himalaya Publication, 3rd edition, 2008-Khan & Jain.
6. FINDINGS AND SUGGESTION

6.1 FINDINGS
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The sales of the company decreased compare to previous years

The gross profit and net profit have decreased because of decreases in the sales.
During the year 2014-15, the current ratio has increased from 0.93 to 1.06 it means that
the company have good liquidity.
The quick ratio has decreased in the year 2014-15.
The company is not generating adequate profit by comparing 2012-13.
The over all profitability of the company is at lower level.
The assets are not been utilizing in proper way.
In the year 2015 the return on investment is very by comparing to 2013.
6.2 SUGGESTIONS
The company should improve its sales.

The company should need to improve its current ratio and quick ratio which shows
inefficiency in the use of liquid and current assets. They should improve the utilization
of current and liquid assets.
The company also needs to control on current liabilities.
The company is need to utilize the assets to get return on assets.
The company need to control over all expense including operating.
The company should balance its debt which increases its value of the firm.
The Company can select profit-oriented projects.
As it has a strong position in the Southern zone of India. It can also think of expansion
of its business in northern zone of India as well as diversification of its business.
6.3 LEARNING EXPERINCE
This project has helped me to know the importance of different management functions
such as planning, organizing, staffing, and directing and controlling these guides the
organization to face tough competition from the competitors.
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This project has helped me to know the work flow model process of CATERPILLAR
and other by-products.
It has helped me know how work and things are getting done through others.
This project has helped me to know what are the strengths, weakness, opportunities and
threats of the organization.
This project has helped me to know the working environment and work culture of the
organization.
This project has helped me to know the following the rules and regulations of the
organization and timely report submitting to top management.
This project has helped me to know the how information technology and various systems
have reduced the time of an activity and documentation also.
This project helped me to know the importance of group effort when compared to
individual effort in organization.
This project helped me to know about importance of leadership which guide in achieving
personal as well as organization goals.
This project has helped me to know the organization structure which helps the
organizing work by determining authority and responsibility for staff.

6.4 CONCLUSION
RSB transmissions (i) Ltd. Together with its subsidiaries, operate as an caterpillar
business in India and USA. The company operates in segments: TATA Telco, TATA Hitachi,
and JCB it produces and sales caterpillar items like bucket, main frame, base, arms and it will
send to the company to assemble.
As we know the auto-components industry is growing industry. The day by day the
demand of auto-components is increasing. So the company has more opportunities in the
coming days.
RSB transmissions (i) Ltd. also growing with the expectations of the customers demand.
The companys, Net profit and sales are also slightly growing.
The RSB transmissions (i) Ltd. financial statement analysis says that the company
financial performance is not doing well in last two-three years there are fluctuations in their
sales and revenue.
RSB transmissions (i) Ltd. have state of the art equipment and a highly competent
technical team that produces one of the highest quality caterpillars. It is growing very
fast in the industry.
RSB transmissions (i) Ltd. is not only concentrating on production of quality auto-
components, but also engaged in developing new product which will be more suitable to
the TATA Telco, TATA Hitachi, and JCB .
Company's financial performance is very poor because of sales and more liabilities and
expenses, so the company is growing slowly in the industry.
RSB transmissions (i) Ltd cash ratio is below the standard but by utilizing the idle
portion of cash it is generating profit for the RSB transmissions (i) Ltd Company. By
using an idle portion of cash it is increasing their sales through converting inventories
into finished goods.

Overall company performance is better than the other companies in the industry because
of quality products are producing on time in the market
BIBLIOGRAPHY
BOOKS
1. Khan & Jain, Financial Management, Himalaya Publication, 3rd edition, 2008
2. L.M. Bole, Volume 2. Vikas publication, 5th edition, 2009.
3. M N Arora, Cost and Management Accounting, 10th addition
4. Media Reports and Press Releases, Department of Industrial Policy and Promotion
(DIPP), Automotive Component Manufacturers Association of India (ACMA), Union
Budget 2015-16
5. www.businessdicitionary.com
6. www.Industryweek.com
7. www.Plantservice.com
8. Smallbusiness.chrom.com
9. www.Cron.com
10.RSB global
11.www.ACMA.com

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INTRODUCTION AND STUDY DESIGN

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The primary objective of financial statement is to provide information to present and

1.2 PROBLEM STATEMENT:

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1.3 SIGNIFICANCE OF THE STUDY

1.4 OBJECTIVE OF THE STUDY

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The specific objectives of the study are

To understand the Liquidity and Profitability status of the firm.

1.5 SCOPE OF THE STUDY

Sources of data collection

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1.7 COMPANY PROFILE

1.8 LIMITITIONS OF THE STUDY

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performance analysis of the central public sector enterprises in Indian automobile

1.10 Chapter Schemes:

2. Theoretical Study: Meaning of financial statement analysis, methods being

3. Industry profile: Introduction of automotive components, component market

4. Company Profile: Introduction of the company, Nature of the business

6. Findings, Suggestion and Conclusion: Findings of the can be made on the

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Altman and Eberhart- article on financial statement analysis(2008)

2. FINANCIAL STATEMENT ANALYSIS

2.1 MEANING OF FINANCIAL STATEMENT

Balance sheet (statement of financial position)

Profit and loss account (or income statement)

Funds flow statement

Cash flow statement

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2.2 NATURE OF FINANCIAL STATEMENTS

The financial statement provides a summary of the accounts of a business enterprises.

(a) Recorded facts

(b) Accounting conventions

(c) Personal judgments

Although an accountant is guided by accounting concepts and conventions in preparing the

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2.3 MEANING OF ANALYSIS AND INTERPRETATION

Analysis of financial statements means to critically examine the composition of an item or

2.4 PARTIES INTERESTED IN FINANCIAL STATEMENT ANALYSIS

Information contained in financial statements is useful to different categories of users of

Management of a company is interested in its in financial condition, profitability and

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6. Other interested groups

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2.5 SIGNIFICANCE AND PURPOSE OF FINANCIAL STATEMENT

4. Judging the efficiency of management

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5. Inter firm comparison

6. Forecasting and budgeting

2.6 LIMITATIONS OF FINANCIAL STATEMENTS:

1. Effect in accounting concepts and conventions:

2. Effect of personal judgments:

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3. Recording only monetary transactions:

5. Ignores human resources:

6. Ignores social costs:

3.7 PRINCIPLES TOOLS OF ANALYSIS

1. Comparative financial statements,