chanchal kumari

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CHAPTER 1

INDUSTRY PROFILE



THE INDISPENSABLE VALVE

A valve is a product rarely noticed by the average person, yet it

plays an important role in the quality of our life. Each time you

turn on awater faucet, use your dishwasher, turn on a gas range

or step on the accelator of your car, you operate a valve. Without

modern valve syatems, there would be no fresh pure water or

automatic heat in your home. There would be no public utilities,

and beyond wood and coal, almost no energy of any kind. Plastics

would be unheard of, as would many inexpensive consumer

products.

A valve is a device that regulates the flow of afluid (gases, liquid,fluidized solids, or slurries) by opening, closing, or partially

obstructing various passageways. Valves are technically pipe

fittings, but are usually discussed as a seprate category. In an

open valve, fluid flows in a direction from higher pressure to lower

pressure.

Valves are also found in the human body . for example, there are

several heart valves which control the flow of blood in the

chambers of the heart and maintain the correct pumping action.

Valves are used in a variety of contexts, including industrial,

military, commercial, residential, transport.

HISTORY

For centuries, throughout the Dark Ages, there were no advances

in valve design. Then during the Renaissance, artist and inventor

Leonardo da Vinci designed canals, irrigation projects, and

other large hydraulic systems, which included valves for use in

these projects. Many of his technical sketches are still in

existence.



The modern history the valve industry parallels the Industrial

Revolution, which began in 1705 when Thomas Newcomer

invented the first industrial steam engine. Because steam built up

pressures that had to be contained and regulated, valves

acquired a new importance.

And as Newcomer’s steam engine was improved upon by James

Watt and other inventors, designers and manufactures also

improved the valves for these steam engines. Their interest,

however, was in the whole project, and the manufacture of valves

as a separate product was not undertaken on a large scale for a

number of years.

AUTOMOBILE INDUSTRY

The history of the automobile begins as early as 1769, with the

creation of steam engine automobiles capable of human

transport. In the 1806, the first cars powered by an internal

combustion engine running on fuel gas appeared, which led to the

introduction in 1885 of the ubiquitous modern gasoline- or petrol-

fueled internal combustion engine.

The internal combustion engine is an engine in which the

combustion of fuel (normally a fossil fuel) occurs with an oxidizer(usually air) in a combustion chamber. In an internal combustion

applies direct force to some component of the engine, such as

pistons, turbine blades, or a nozzle. This force moves the

component over a distance, generating useful mechanical energy.

Applications

Internal combustion engines are most commonly used for mobile

propulsion in vehicles and portable machinery. In mobileequipment, internal combustion is advantageous since it can

provide high power-to-weight ratios together with excellent fuel

energy density. Generally using fossil fuel(mainly petroleum),

these engines have appeared in transport in almost all vehicles



(automobiles, trucks, motorcycles, boats, and in a wide variety of

aircraft and locomotives).

Internal combustion engines can be classified by their

configuration.

Four stroke configuration

As their name implies, operation of four stroke internal

combustion engines have four basic steps that repeat with every

two revolutions of the engines:

Intake: Combustion mixtures are emplaced in the combustion

chamber

Compression: The mixtures are placed under pressure

Combustion: The mixture is burnt, almost in variably a

deflagration, although a few systems involve detonation. The hot

mixture is expanded, pressing on and moving parts of the engine

and performing useful work.

Exhaust: the cooled combustion products are exhausted into the

atmosphere.

Many engines overlap these steps in time; jet angines do all stepssimultaneously at different parts of the engines.

Two stoke configuration

Engines based on the two-stroke cycle use two strokes(one up,

one down) for every power stroke.

Worldwide production

In 2007, worldwide production reached a peak of 73.3 million newmotor vehicles.

In 2009, production dropped 13.5 percent to 61 million. In 2010,

world markets mostly recovered.



In 2009, India being the top seventh Motor Vehicle Manufacturing

country has produced of about 2,632,694 units.

Consumption trends

About 250 million vehicles are in use in the United States. Around

the world, there were about 1006 million cars and light trucks onthe road in 2009. The Detroit branch of Boston Consulting Group

predicts that, by 2014, one-third of world demand will be in the

four BRIC markets (Brazil, Russia, India and China). Other

potentially powerful automotive markets are Iran and Indonesia.

Tus, it can be said that valve industries have a very good future.



CHAPTER 2

COMPANY PROFILE



INTRODUCTION

KAR mobiles limited manufacture valves for internal combustionengines. The company manufactures valve of all sizes and ranges

used in various vehicles like motorcycle, cars, trucks, railway

engines, defense tanks, generator sets and marine engines.

Aiming to achieve and sustain product excellence, KML has

corners in establishing comprehensive world class facilities for its

entire range of products. The test laboratories and other

manufacturing shops are well equipped with the state-of-the-art

facilities for reliable manufacturing and testing operations.

KML has also got well equipped classrooms with the facilities of

LCDs and OHPs, which are used to train the employees and

trainee students. It has got a very good transportation facilities

and canteen facilities for the employees and for trainees.



THEY BELIEVES IN:

K-Knowledge

A-Application

R-Reliability

M-Motivation

O-Opportunity

B-Brilliance

I-Innovation

L-Leadership

E-Excellence

S-Service



Rane Group – Companies

Sl.

No.

Company Products

1 Kar Mobiles Limited

(KML)

Medium & Large

Valves for diesel

engines. Specialize inLocomotive, Power

generation, Off-road

vehicles &defense

applications.

2 Rane Brake Linings

Limited (RBL)

Brake linings, Disc

pads, Composite brake

blocks, Clutch facings

3 Rane Diecast

Limited (RDL)

High Pressure Die

Casting Products

4 Rane Engine Valve

Limited (R EV L)

Valves, Valve Guides,

Tappets



5 Rane (Madras)

Limited (R M L)

Manual Steering &

Suspension Systems

6 Rane NSK SteeringSystem Limited

(R NSS L)

Energy AbsorbingSteering Columns

7 Rane TRW Steering

Systems Limited

(R TSS L)

Power Steering

Sy stems & Seat Belt

Systems

A.BACKGROUND AND INCEPTION OF THE COMPANY

➢ Kar valves limited was born out of an electric supply

undertaking in the old Maharaja’s state of cochin under the

name of cochin state power and light corporation limited.

➢ This company was started in the year 1936 and was

engaged in distribution of electricity.

➢ In 1971 this business was nationalized so the company

received compensation from the government and the

shareholders decided to invest in the new business activity.

➢ The company was name as “KAR Valves Limited” and

incorporated in the year 1972 under India companies Act,

with licensed capacity of 1.5 million valves per annum.

➢ Mr. L.L. Narayan laid the foundation stone on 30th August

1973 and established as private organization and started as

a manufacturing unit. Sri. V. P. Aghoram was appointed as

the Managing Director of the company in 1972.



➢ The company commenced its commercial production in the

year 1975 and the first invoice was made on 12-03-1975 to

M/S. convert private limited, Delhi.

➢ Large valves for Diesel Loco Application & Export came into

focus. This success led the company to expand its licensed

capacity from 1.5 million to 5 million per annum.➢ In 1981 the company set up a 100% export oriented unit at

Tumkur. In the year 1997, the company entered into

technical collaboration with TRW inc, USA, to upgrade its

product and process technology.

B. NATURE OF THE BUSINESS CARRIED

It manufactures valves for all internal combustion engines. The

company is one

the diesel oriented unit which supplies valves for all engines

both petrol and

diesel and is fully equipped to support its developing market

needs. A valve is a

product rarely noticed by the average person, yet it plays an

important role in

the quality of our life. Each time you turn on water faucet, use

your dishwater,



or turn on water faucet, use your dishwater, or turn on a gas

range, or step in the

accelerator of your car, you operate a valve.

Valves made from chrome-silicon alloy steel and exhaust from

chrome-nickel-

silicon alloy steel (to operate under high temperature and high

stress conditions).

Valves are also supplied with liquid nitrating process or hardchrome plating which

increases the surface hardening the stem. This improvesresistance with

consequent sliding ease.

Valves are used to regulate the flow of fluids in piping system

and machinery the flow phenomenon is frequently of pulsating

or intermittent character and the valve, with its associated

gear, contributes a timing feature. The valves commonly used

in piping systems are gate valves, usually operated closed or

globe valves, frequently fitted with a renewable disk and

adaptable throttling operations check valves, for automatically

limiting flow in a piping system.

To control the kinematics of the cycle, system engine valves

range from D-slide and piston valves to multicoated types.

Many type of reversing gear have been perfected which use

the same slide valve or piston valve for both forward backward

rotation of an engine, as in rail road almost exclusively in

internal combustion receipt locating engines because of the

demands for tightness with high operating pressures and

temperatures,. Two-cycle engines utilize ports, alternately

covered and uncovered by the main piston, for inlet or exhaust.

A structure in a hollow organ (like the heart) with a flap to

ensure one way flow of fluid through it, Device in a brass wind

instrument for varying the length of the air column to alter



pitch of a ton control consisting of a mechanical device for

controlling the flow of a fluid.

Application: Engine valves for high performances locomotives,

marine engines, heavy duty engines, battle tanks, Tractors,

Agriculture/Industry/ stationery, Automotive passenger cars/

Light commercial vehicles/ heavy commercial cars.

C. VISION, MISSION AND QUALITY POLICY

Vision

To be highly profitable and socially responsible leadingmanufacturer of engine

valves for customers in global markets.

Mission

Provide superior products and service to our customers

and maintain market leadership.

Evolve as an institution that serves the best interest of

all stakeholders.

Ensure the highest standard of ethics and integrity in all

our action.

Pursue excellence through total quality management.

Motto

“Customer satisfaction through-on-time delivery of superior

quality valves”.

A testimony to the company’s commitment to quality system

through.

QS 9000 Quality certificate from BVQI.

Well-equipped standards room with testing facilities.

Negligible warranty claims.

Initiation like TQM, TPM and employees involvement.



Concern for environment and initiatives for ISO 14000

certificate.

Quality policy

KML is committed to comply with ISO/TS 16949 systemrequirements and

improve customer satisfaction by –

Identifying and fulfilling all requirements of the clients/

customers.

Complying with all applicable statutory and regulatory

requirements.

Providing training to all employees to particle total

quality management and achieve continualimprovement in all areas.

Build awareness amongst all employees on

environmental issues through continuous training.

Operate under an environmental management system

as specified in ISO 14001.

D. PRODUCTS PROFILE

Product classification

The auto ancillary industry can be further divided into six

main segment.

➢ Engine parts

➢ Electrical Parts

➢ Transmission and

Piston, piston rings, engine

valves, fuel pumps,carburetors and bimetal

bearings.

Starter motors, generators and

spark plug.



steering

➢ Suspension and

breaking

➢ Equipment

➢ Others

Gears, steering gears and

system, wheel, clutch plate

and disc.

Leaf springs, shock absorbers,brake assembly and facings.

Head light and dashboard

instruments.

Sheet metal parts, pressure

disc castings.

MANUFACTURING

KML has 2 world class manufacturing plants in Bangalore &

Tumkur

Manufacturing valves of all sizes for internal

combustion engines for automated and non –

automated applications.

Valves are being used in engines having 5 H.P to 4000

H.P.

For production of these valves different sophisticated

and modern equipment’s are being used such as

McGrinders,

Lathe cutters, welders, Heat treatment, CNC machine

etc.

Engine ValvesApplications ranging from 5 H.P. to 4000 H.P. engines in

segment such as:

➢ Agricultural/Industrial/ Stationary

➢ Marine

➢ Locomotives



➢ Battle Tanks

➢ Farm Tractors

➢ Automotive – Passenger cars / Light

Commercial vehicle / Heavy

Commercial vehicles

➢ High performance cars

Manufacturing capability:

Min Max

Head Dia 18mm 105mm

Stem Dia 5mm 22mm

Overall Length 50mm 450mm

Configuration:

Monometal

Bimetal Friction welded

Projection welded

Head Finish Machine finish

Forge finish

Seat Hardfaced

Induction Hardened

Tip end Flame Hardened

Induction Hardened

Stellite faced

MONOMETAL

In Monometal only a single metal or material is used to

manufacture the



Valve. The head to tip of valve is produced using the single

material. This

type of valve is comparatively costlier.

BIMETAL

In Bimetal two metals or materials are used. Bimetal is usedfor increasing the

length of the valve. If any vehicles requires the valves of long

length then

Starting material of the valve will be of high alloy and ending

material will be

of low alloy. The main aim of this process is to reduce the

cost of the valve.

Surface Treatment :

➢ Hard Chrome Plated

➢ Tufftrided

➢ Phosphated

Material used :

➢ Low Carbon Steel

➢ Martensitic Valve Steel

➢ Austenitic Valve Steel

➢ Nickel Alloy

➢ Stainless Steel



D. AREA OF OPERATIONS

Location Total

Geographic

al

Area(Sq.mt

s)

Built Up

Area

(Sq.mts)

Production

Valve

(million)

Export

Bangalore 2430 14000 6 5%

Tumkur 40450 2200 2.5 95%

The company has its network all over the globe, and

the manufacturing process entirely takes place in India.

They have agents who market their products behalf of

the company and even they sell their product directly

to the customers according to their needs and

satisfaction.

D. OWNERSHIP PATTERN

Pattern of shareholdings as on March 31, 2011

Sl.

No.

Category No. of

Shares

% of share

holdings

A PROMOTERS 979337 43.72%

B GOVT. OF KERALA 37500 1.67%

C BANKS 3978 0.18%



D PRIVATE BODY

CORPORATE

230786 10.30%

E NRIs & OBCs 4800 0.21

F INDIVIDUALS AND

OTHER

983599 43.91%

G TOTAL 2240000 100

Rane Group is the main promoter of the company with

43.72% share in the company. Remaining share is

divided among private body corporate, banks,

government of Kerala, individual and others.

D. COMPETITORS INFORMATION

There is several numbers of competitors of KML in the

industry.

Rane Engine Valves Limited

Shriram Piston & Rings Limited

Auto Field Engineers

Benera Udyog

Gratco Valves Limited

Duro Valves Limited

Vikram Valves Limited

The range of products manufactured with each broad

product segment having different market structure and

technology has neglected any possible concentration of the

market in a few hands. The market is so large and diverse

that a large number of players can be absorbed toaccommodate buyer needs.

However there are a few large companies that have

integrated their operations across the valve chain. The key

to compete in this industry is through specialization by



product type and integrating operations across the related

area of specialization.

D. INFRASTRUCTURE FACILITIES

The basic physical systems of a country’s or community’spopulation, including roads, utilities, water, sewage, etc.

These systems are considered essential for enabling

productivity in the economy. Developing infrastructure often

requires large initial investment, but the economies of scale

tend to be significant.

Canteen Facilities: Hygienic nutritious foods are

facilitated to the employees according to standardsprescribed by the organization and factories act. 1948.

Ambulance: 24 hours ambulance facilities are provided to

the employees in case of any damage to employees or

health upset during the working hours.

Sports/Clubs: The Company has its own team of sports

such as cricket team and indoor games are facilitated such

as carom, table tennis.

Library: A Library facility is available with books, journals,

and articles, technical books etc., with related to the

company.

E. ACHIEVEMENTS/AWARD

Award is parts of the evolution and growth of every

company. They look at these recognitions as a source of

motivation that drives them to pursue higher level of

performance and excellence. They are proud of every award

they have received and they greatly value the role they



played in transforming Kar Mobiles Limited into a high

performance organization.

➢ 1988- Excellence of export award (E&PC)

➢ 1995- ISO 9000 Certification➢ 2001-Received QS9000/98 certification from BVQI

➢ 2004-JIPM award (Japan institute of plant maintenance)

➢ 2004-Achieving for DEMING award

➢ 2004-ISO/TS/16949 Certification

➢ 2005-06-ISO 14000 Certification

MILESTONES OF KAR MOBILES LIMITED

1973 Foundation stone laid

1975 Commercial production started and made forays

into OEM segment.

1976 Developed large valves for diesel low applications.

1977 First exports made to RA lister &Co.

1983 set up plant II, a 100% EOU, with a capacity of 1.5

million valves.

1988 Capacity enhanced from 1.5 million to 5 million

numbers.

1991 Promoted “ ETA Technologies ” for developing

special purpose machines.

1995 Received ISO 9000 Certification.

1996 Business process Re-engineering implemented

1997 Entered into technical collaboration with TRW Inc.,

USA.

1999 Approved by Electro Motive Division [EMD] of

General Motors Corporation, USA as first vendor from

India.

2000 TQM and TRM initiated.

2001 Received QS 9000 Certification.



D. WORK FLOW MODEL

Accounts Receivable Process

The Accounts Receivable Process starts with the shipment of

the goods to the customer. When this occurs, the shipping

department automatically causes Systems Applications andProducts(SAP) to send a bill to the customer by

interchanging customer master data with the shipment data.

This transcation also posts to the Accounts Receivable

subsidiary ledger and also to the reconciliation account.The

billing to the customer may be on paper or by Electronic

Data Interchange (EDI).

The next step of accounts receivable is setting up of clientaccount record. This information may come from a sales

receipt, a sales contract, a form from the sales/credit

department or whatever documentation is used to record a

sale. Contract information such as names, addresses, phone

numbers and references ( to name but a few ) are compiled

and entered into an accounts receivable software program

and/or a hard copy file is organized and stored for later use.

After the sale is made or the service has been provided, a

bill can be produced using the client account record. Bills are

sent to clients on a regular basis and include such things as

the date of the bill, a description of the product or service,

the price of each item, any additional fees or taxes and a

due date. Penalties for missing the due date is listed on

every bill, as well as instructions on where and how to send a

payment.

With the accounts receivable software, the orders/contracts

are all entered and identified by a client ID and then the bills

are printed and sent to each customer. If accounts are not



paid in full before the due date, accounts receivables

collection measures are taken.

As the clients send in payments are posted to the correct

accounts. Each payment is identified either by account

number or client ID in order to be posted accurately.

E. FUTURE GROWTH AND PROSPECTS

Looking forward, the industry displays tremendous potential

in generating employment and boosting entrepreneurship in

country. The spate of new investment plans announced by

global and domestic automobile manufacturing promises the

emergency of India as a global hub for auto components.

The industry is transforming and the boost in demand will

see the emergency of several new payers in industry. The

vast market for auto components, and the diverse products

and technology involved ensure a place and role for many.

At the same time, the entry of several global automobile

manufacturing will bring in more regulation into the industry

and see a pruning of the spurious market. Among the small

players in the unorganized segment, this implies moving

away from being standalone companies to entering into

either contact manufacturing or being ancillary units. The

newly defined rules are specialized, development and

delivery that hold the key of the success in the auto

component industry.

At KAR MOBILES LIMITED, they have always taken a long

term perspective when preparing their business strategies.

They expected robust all-round growth in the global

economy in the next 10 years. They also believe that the

global economy has more inclusive. Countries like India and



China are now poised to play a larger role in determining the

course of the global economy.

Their manufacturing presence in India, the US, Europe and

China has positioned them to capture global growth

opportunities, and helping downturns, should they occur. In

view of this, they are very optimistic about the future.

KAR MOBILES LIMITED is a 37 years old company. Since their

inception they have believed in setting challenging

milestone and have worked hard to achieve their goals.

While scale of operation is an important parameter for

manufacturing company like KAR Mobiles, there are critical

areas like:-

➢ Technology

➢ Product development

➢ Customer service

➢ Human resource

In which they are striving to excel. Their goal is to be the

industry bench mark in all

these area, to be an end-to-end service provided to global

customers and provide

them with unassailable value. The company in its continuous

guest for excellence

seeks new frontiers, delivering best-of-breed products that

meet global quality

standards and adopts innovative techniques to further improve

customer services.

3. McKensy’s 7S MODEL

McKensy’s 7S FRAME WORK



INTRODUCTION

Background of the model

The 7’s framework was developed by the consultants at the McKensy Company, a

very well management consultancy firm the United States,

towards the end of 70’s

to diagnose the course of organizational problems and to

formulate programs for

improvement.

The model starts on the premise that an organization is not justStructure, but

consists of seven elements:



The 7s frame of Mckensey is a value based management model

that describes how

one can holistically and effectively organize a company.

Together these factors

determine how a company operates.

The ‘3 ’ S across the top the model are described as “Hard S”

Strategy: the plan devised to maintain and build competitive

advantage over the competition.

Structure: the way the organization is structured and who

reports to whom.

Systems: the daily activities and procedures that staff members

engage in to get the job done.

The 4S across the bottom of the model are less tangible, more

culture in the nature and were termed as “Soft S” by McKinsey:



Skills: the capabilities and competencies that exist within the

company.

Shared values: the capabilities and beliefs of the company.

Ultimately they guide

employees towards ‘valued’ behavior.

Staff: the Company’s people resources and hoe they are

development trained and

motivated.

Style: the leadership approach of top management and the

company’s overall

operating approach.

STRUCTURE

In Kar Mobiles Limited functional organization structure exists

under which all employees reports to their respective head of

department reports directly to the president.

a) Overall organization structure details

Level 1 Chairman (1)

Level 2 President (1)



b) Substructure dealing with each functional discipline

Finance department

Level 3 General Manager/ Deputy General Manager/Senior

Manager (12)

Level 4 Manager/Assistant manager/Deputy manager (40)

Level 5 Senior executive/Executive/Deputy Executive/

Assistant executive (180)

Level 6 Staff (20)

Level 7 Workmen (285)

President

General

Senior Manager



Marketing department

HR department

Assistant

Senior

Executive

Deputy

President

General Manager

Senior Mana er Senior Mana er Senior Mana er

Executives Office

Administration

Executives

Field staff

President

Senior Manager HR

Senior Executive Assistant Mana er(Tum



IT department

Quality Assurance department

Production Planning & Control department

Executives

President

Senior

In charge IT

Plant Head 1

Head Plant Quality

Product Audit Process Audit Raw Material Audit

Gauge

Room

Material

Labs

Customer

complaint

Plant Head

Head PC



Materials department

Maintenance department

In charge PPC Forge

Shop

In charge PPC Machine

Shift In charge1 PPC Machine

Shift In charge 2PPC Machine

Shift In

charge 1 PPC

Shift In

charge 2 PPC

President

Senior Manager

Purchases Stores Consumable Raw Materials Sub Contracting

Plant Head

Plant Head

Utilities Shop In charge



STRATEGIES

Kar Mobiles Limited has maintained a good position in the value

industry through its good strategies in the market. Because of its

innovative strategies KML is the second largest valve

manufacturing company. Continuously cost reduction and

consistent quality helps to Kar Mobiles limited in the maintenance

of good position in the valve industry.Company is focusing more on cost reduction and inventory

control in order to increase the efficiency of firm by periodically

review the system of the organization.

Kar Mobiles limited also review the management structure of the

organization as well as different of departments in order to know

whether to increase or decrease staff and makes new structure of

top management also. Apart from this company continuously

focus on the development of existing product as well as tries toenter in new market segment. KML continouously review and

adjust the policies of different department i.e, financial policies,

Human resource policies, Distribution system and Marketing

Strategies etc. to respond the environment of business.

SYSTEMS

Management system of KML is as follows:

➢ Preparation of budget for the different activities, every year

in the month of February for the next financial year.

➢ Quarterly auditing of financial records.

Forge Shop Machine Shop



➢ Pay scale revision for the top management once in a year.

➢ Pay scale revision for the employees once in four years.

➢ Performance analysis report of company is prepared for

every financial year.

➢ Continuous training program for the employees in its own

training institute as well as outbound training.➢ Insurance for all employees on the basis of team.

➢ Sales of valves in replacement market through 500 dealers

only spreading in all

over the India.

➢ Incentives are given on the basis of performance appraisal

system only.

➢ All major decision are takes by president subject to the

discussion with Board of Director.

SHARED VALUES

➢ Provide superior products and services to company’s

customer and maintain leadership.

➢ Evolve as an institution that serves the best interests of all

stakeholders.

➢ Pursue excellence through total quality management.

➢ Ensure the highest standards of ethics and integrity in all

actions.

STAFF

Staff of KML is efficient but not highly qualified. Mostly male

workers are there in Kar Mobiles Limited. Kar Mobiles Limited is

not a big company so there is no more opportunity for career

growth. Kar Mobiles Limited’s workers belong to different

geographical areas but most of them are from Karnataka state

only.

SKILLS



The staff of KML can be divided into 3 categories i.e skilled non

skilled and semi-skilled. There is less number of highly competent

employees. There are lacks of multi-tasks employees and most of

employees are specialized in particular area only.

STYLECulture of KML is very good there is a democratic environment

exists within the organization. Relationship amongst the

employees and between the employees and manager is not very

formal. All employees day to day reports to the respective head if

necessary and get suggestion and recommend them without any

restriction. In the some types of decision making process ideas

are invited from the employees. Culture of KML is very open and

all employees enjoy freedom at the work place.

4. SWOT ANALYSIS

The SWOT analysis is the foundation for developing your

strategies and tactics

that then becomes the road map for writing your business

operating plan. Prior

to defining the company’s strengths, weaknesses, opportunities

and threats you

need to:

Have a written Vision, Mission and Values statement.

Have completed a through internal and external

business status evaluation.

So SWOT analysis plays an important role in comparing between

the competitors, and problems within the company, this helps the

management to make changes with regard to these factors.

STRENGTHS

➢ High brand equity

➢ Vast dealer network and field force



➢ Capability to manufacture large valves

➢ Skilled manpower

➢ Wide range of products at industry level

➢ Experience in handling overseas customers

WEAKNESS➢ Low productivity

➢ Changing product/ market mix

➢ Poor process capability

➢ Inadequate focus on exports

➢ Poorly maintained machines

➢ Weak in technological innovation

➢ Lack of pride in workmanship

➢Insensitivity to customers

➢ High wages cost

➢ Inadequate systems

➢ Low competencies

OPPORTUNITIES

➢ Win market shares from high cost competitors in overseas

market

➢ Exploit large and growing domestic two wheeler market in

global outsourcing

➢ Manufacturing/trading of related engine components

THREATS

➢ Dumping from china and cheaper imports from other low

cost countries

➢ Strengthening of Rupee affecting exports

➢ More competition since there are no growth opportunities for

MNC’s elsewhere



CHAPTER 5

ANALYSIS OF FINANCIAL STATEMENT



Current Ratio:

Current Ratio measures the ability of an entity to pay its near-

term obligations.“Current” usually is defined as within one year.

Formula: Current Ratio= Current Assets /Current Liabilities

The company’s current ratio is 1.85 which can be read as 1.85:1

Though the ideal current ratio depends to some extent on the

type of business, ageneral rule of thumb is that it should be at least 2:1.

As the current ratio is lower the company will not be able to pay

its bills on time,

while with a higher ratio the company has money in cash or safe

investments that

could be put to better use in the business. So, the company is

suggested to work onits Current Ratio.

Inventory Turnover Ratio:



Inventory Turnover Ratio shows how efficiently the company is

managing its

production, warehousing, and distribution of product,

considering its volume of

sales.

Formula: Cost of Goods Sold for the year / Average Inventory

The company’s inventory turnover ratio is 9.88

Higher ratios-over six or seven times per year-generally thought

to be better.

Extremely high inventory turnover will indicate a narrowselection and possibly lost

sales. A low inventory turnover rate, on the other hand, means

that the company is

paying to keep a large inventory, and may be overstocking or

carrying obsolete items.

therefore, the company is suggested retain the Inventory

Turnover Ratio for further

years.

Debt to equity ratio:

Debt to equity shows the ratio between capital invested by the

owners and the funds provided by lenders.

Formula: (Debt)/(Equity)

The company’s Debt Equity Ratio is 0.76 which is 76%

A company is generally considered safer if it has a low debt to

equity ratio i.e, higher proportion of owner-supplied capital-



through a very low ratio can indicate excessive caution. In

general, debt should be between 50 and 80 percent of equity. The

company is maintaining very less Debt Equity Ratio when

compared with the standards which shows that it’s playing safe.

On the other hand, too little debt means the company is not

realizing the full potential of the business – and actually hurts theoverall profitability.

Return on Net Sales:

Return on Net Sales shows how munch profit comes from every

rupee of sales.

Formula: (Net Profit)/ (Total Sales)

The company’s Return on Sales is 8.15%

Compare to other businesses in the same industry to see if the

business is operating as profitably as it should be. Look at the

trend from month to month. Is saying the same? Improving?

Deteriorating? Are you generating enough sales to leave an

acceptable profit? Trend from month to month can show how well

the company is managing the operating or overhead costs.

Investment Turnover Ratio:

Investment turnover ratio measures a company’s ability to use

assets to generate sales.

Formula: Net Sales/Total Assets

The company’s Investment Turnover Ratio is 1.35 times

Although the ideal level for this ratio varies greatly, a very low

figure may mean that the company maintains too many assets or

has not deployed its assets well, whereas a high figure means

that the assets have been used to produce good sales numbers. It

can be justified that the company is using its assets efficiently.



PART B



GENERAL INTRODUCTION

THEORITICAL BACKGROUND OF THE STUDY

Accounts Receivable is the money owed by a customer

(individuals or corporations) to another entity in exchange forproducts and services that have been delivered or used, but not

yet paid for. Receivables usually come in the form of operating

lines of credit and are usually due within a relatively short time

period, ranging from a few days to a year.

On a public company’s balance sheet, accounts receivbles is often

recorded as an asset because this represents a legal obligation

for the customer to remit cash for its short-term debts.

Accounts receivables(alternately “receivables”) are created when

a customer purchases goods or services from a company but do

not pay for them at the time of purchase. Instead, the company

issues an invoice for the goods or services at a later date, often at

the end of the month. The amount due on the invoice is

considered accounts receivables for the company. Receivables

are treated as current assets on a company’s balance sheet.

Receivables are entered into a company’s books when theyreceives an invoice for good or service provision (and not before),

as the invoice proves that money is legally owed to the company

by an outside entity.

Receivables are typically issued by companies to reliable

customers, since they are selling their goods on credit.

Objectives

The sales of goods on credits is an essential part of moderncompetitive economic systems. In fact, credit sales and therefore,

receivables, are treated as a marketing tool aid the sales of

goods. Management should weigh the benefits as well as cost to

determine the goal of receivables management. The objective of

receivables management is to promote sales and profits until that



point is reached where the return on investment in further

funding receivables is less than the cost of funds raised to finance

that additional credit (i.e. cost of capital ). The specific cost and

benefits which are relevant to the determination of objectives of

receivables management are examined below.

Costs

The major categories of cost associative with the extension of

credit and account receivables are:

• Collection costs

• Capital cost

• Delinquency cost

• Default cost

Benefits of Receivables management

• Increase sales

• Market share increase

• Increase in profit

• Enhanced customer services

• Control bad debts



TITLE OF THE STUDY “A study on account receivables management of Kar Mobiles Ltd,

Bangalore.”

Statement of Problem

Accounts Receivables Management means planning,

organizing, directing and controlling of receivables. Generally,

account receivables refer to the total amount due and areconsidered in calculating the value of a business or the business’

problems in paying its own debts.

Poor administering of credit policies by the company to its

customers: By following a relaxed credit policy the liquidity

decision is seriously affected. The company is locking funds in idle

assets resulting in improper cash management. This problem

spills into another serious issue such as longer operating cycle

resulting in increased working capital requirement. Hence, the

study is conducted to know the accounts receivables

management of Kar Mobiles Ltd.

Objectives of study

• To study the present receivables management procedure in

the organization.

• To calculate various ways in which the debtors can be

managed efficiently.

• To study the trends in bad debts for the last 5years.

• To determine different ways in which the customer service

can be increased by redefine the collection process.



• To analyze the impact of present credit policy on the

company.

Scope of the study

The scope of study is confined to the manufacturing industry andthere by suggesting ways by which an auto ancillary company

such as Kar Mobiles Ltd can optimally manage its accounts

receivables.

• The study has been carried out with data for five years.

• Information has been collected after a study on the existing

system of management of accounts receivables and also by

interviewing the concerned authorities in financedepartment.

Research Methodology

The system of collecting data for research projects is known as

research methodology.

The data may be collected for either theoretical or practical

research. For example management research may be

strategically conceptualized along with operational planning

methods and change management.

Descriptive research is the type of research used in the

collection of data.

Descriptive research includes surveys and fact-finding enquiries

of different kinds. The major purpose of descriptive research is

description of the state of affairs as it exists at present. The main

characteristic of this method is that the researcher has no control

over the variables; he can only report what has happened or what

is happening.

Collection of Data



The data is collected through both primary and secondary

sources.

Primary data is collected by approaching related personal in the

finance department , production department, HR department and

so on…

Secondary data is collected through various sources such as from

company’s annual report, company library, previous projects,

internet, text books, etc…

Tools Used

Critical data with respect to accounts receivables will be analyzed

by using various tools such as:

Graphs – To analyze data this follows a trend or a pattern.

Ratios – To analyze the various components in financial

statements.

Correlation Analysis – The data that will be collected will be

analyzed in the following ways:

○ Trend Analysis: the growth of sales and the receivables

position for the financial years○ 2006-07, 2007-08, 2008-09, 2009-10, 2010-11 will be

calculated.

○ Excepts from annual reports and other statements have

been used for making the analysis

○ A study has been made on the reasonableness of credit

sales of the company

Sample size

This study which has been carried out on accounts receivables

management of Kar Mobile Ltd., and has taken into consideration

the entire aspect of accounts receivables of Kar Mobiles Ltd.,



therefore the sample size is Kar Mobiles Ltd., in total. And the

sample amount is annual report of 5 year period.

Limitation of the study

➢ The study on accounts receivables management of the

company is time based.➢ Other components of working capital management such as

cash management, inventory management are not

considered for the study.

➢ The confidentiality of some facts and figures and the non-

availability of relevant information is one of the limitations.



ANALYSIS & INTERPRETATION



Table no. 1

1.Determination of growth in sales

(‘000)

Year Sales Changes in

sales

Percentage

2006- 2007

670354

(37928)

(5.35)

2007-2008 853613 183259 27.34

2008-2009 935556 81943 9.61

2009-2010 807579 (127977) (13.68)

2010-2011 923106 115527 14.31

Analysis:



Tables no. 22. Determination of growth in Accounts receivables

Year Receivables Changes in

Receivables

Percentage

2006-2007 170703 12127 7.65

2007-2008 195105 24402 14.30

2008-2009 215235 20130 9.35

2009-2010 163758 (51477) 23.92

2010-2011 203691 39933 24.39

Analysis



Table no. 3

3. Determination of growth in profits

Year Profit Change in

profit

Percentage

2006-2007 65340 (12368) 15.92

2007-2008 71189 5849 8.95

2008-2009 52587 (18602) (26.13)

2009-2010 73715 21128 40.18

2010-2011 75211 1496 2.03

Analysis



Table no. 4

4. Determination of Debtors Turnover Ratio

Year Gross Sales Average

Debtors

Times

2006-

2007

728746 170703 4.27

2007-

2008

920439 195105 4.72

2008-2009 998370 215235 4.64

2009-

2010

855767 163758 5.22



2010-

2011

981914 203691 4.82

Analysis

Table no. 5

5. Determination of Average Collection Period

Year Debtor

turnover

No. of

working

days

Average

Collection

period

2006-2007 4.27 365 85

2007-2008 4.72 365 77



2008-2009 4.64 365 79

2009-2010 5.22 365 70

2010-2011 4.82 365 75

Analysis

Table no. 66. Percentage of Debtors in total Current Assets

(‘000)

Year Debtors Total Percentage



Current

Assets

2006-2007 170703 317878 53.70

2007-2008 195105 404977 48.18

2008-2009 215235 355051 60.62

2009-2010 163758 266935 61.34

2010-2011 203691 393200 51.80

Analysis



Table no.

7. Percentage of Debtors in total Current Assets

(‘000)Year Debtors Total Assets Percentage

2006-2007 170703 479610

2007-2008 195105 584637

2008-2009 215235 578161

2009-2010 163758 502563

2010-2011 203691 679717

Analysis

chanchal kumari

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