Benchmarking Report of Manufacturing companies

“BENCHMARKING REPORT ON FINANCIAL

PERFORMANCE OF MANUFACTURING

COMPANIES”

(With reference to

MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED,

PUNE MAHARASHTRA)

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF

DEGREE OF

BACHELOR OF BUSINESS MANAGEMENT (2011-2014)

SUBMITTED BY

CH.PADMAVATI

Regd No: (1214111113)

UNDER THE ESTEEMED GUIDANCE OF Ms. P.SOBHA RANI

Assistant Professor

GITAM INSTITUTE OF MANAGEMENT

GITAM UNIVERSITY(Declared as deemed to be university u/s 3 of the UGC Act 1956)

(Accredited with “A” Grade by NAAC)

VISAKHAPATNAM

DECLARATION BY THE STUDENT

I, CH.PADMAVATI hereby declare that this project entitled “BENCHMARKING REPORT ON FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES” (With reference to MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED, PUNE MAHARASHTRA) submitted for the partial fulfilment of the requirements of Bachelor of Business Management, GITAM Institute of Management, Visakhapatnam, Andhra Pradesh is a bonafide record of my project work carried out during the period from 12th May 2013 to 30th May 2012 at MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED, PUNE MAHARASHTRA. It is carried out on my own and has not been submitted to any other institution or university earlier.

Date:

Place: CH.PADMAVATI

CERTIFICATE BY THE GUIDE

This is to certify that the project report entitled “BENCHMARKING REPORT ON

FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES” (With

reference to MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED, PUNE

MAHARASHTRA) in partial fulfilment of the requirements for the degree of

Bachelors of Business Management is a bonafide work carried out by

CH.PADMAVATI and has been carried out under my guidance.

Place:

Date:

P.Sobha Rani Assistant Professor

ACKNOWLEDGEMENTS

I would like to express my profound gratitude to Prof. K. Siva Rama Krishna, Dean &

Principal, Prof P. Sheela, Vice-Principal and Dr. K. Manjusree Naidu, Program

Coordinator of Bachelors of Business Management, GITAM University for giving me this

opportunity to successfully complete my project work.

With immense pleasure I would like to express my sincere thanks to my project guide

Mrs.P.Sobha Rani for necessary cooperation extended to carry out my project work.

I take this opportunity to acknowledge my sincere thanks to Mr.Nitin Karve, Senior

Manager, Finance, Mahindra Navistar Engines Pvt Ltd, my Project Mentor who has been

a staunch pillar to support for my data collection and analysis.

I would humbly thank Mr Anil Mangalvedhekar, Chief Financial Officer for his

cooperation and valuable guidance to enhance my knowledge in the subject of

“BENCMARKING REPORT ON FINANCIAL PERFORMANCE OF

MANUFACTURING COMPANIES”.

I would humbly thank the representatives and employees of Mahindra Navistar Engines

Pvt Ltd. and all those individuals who made this study a grand success, giving their support

directly or indirectly.

Date: CH.PADMAVATI

CONTENTS

S.No. Topic Page No.

1. Executive Summary 2. Chapter-I

Conceptual Framework on benchmarking3. Chapter –II

3.1 Need Of The Study 3.2 Limitations Of The Study 3.3 Scope Of The Study 3.4 Research Methodology

4. Chapter –III Organization Profile

4.1 Private Limited Companies 4.2 MNEPL 4.3 Benchmarking of Manufacturing Companies

5. Chapter –IV Data Analysis and Interpretation Chapter -V

5.1 Findings 5.2 Observations and Recommendations 5.3 Conclusion

6. Bibliography

CHAPTER-ICONCEPTUAL

FRAMEWORK

ON

BENCHMARKING

What Is Benchmarking?

“Benchmarking is the continuous search for an adaptation of significantly better practices that leads to superior performance by investigating the performance and

practices of other organisations (benchmark partners). In addition, it can create a crisis to facilitate the change process.”

Benchmarking goes beyond comparisons with competitors to understanding the practices that lie behind the performance gaps. It is not a method for 'copying' the practices of competitors, but a way of seeking superior process performance by looking outside the industry. The term benchmark refers to the reference point by which performance is measured against. It is the indicator of what can and is being achieved. The term benchmarking refers to the actual activity of establishing benchmarks and 'best' practices.

Benchmarking is a quality improvement tool that identifies:

What you're doing

How you're doing it

How others do it

How well you're doing it in reference to measures

What and how to improve

Why do you need to benchmark?

There are many benefits of benchmarking. The following list summarises the main benefits:

Provides realistic and achievable targets

Prevents companies from being industry led

Challenges operational complacency

Creates an atmosphere conducive to continuous improvement

Allows employees to visualize the improvement which can be a strong motivator for

change

Creates a sense of urgency for improvement

Confirms the belief that there is a need for change

Helps to identify weak areas and indicates what needs to be done to improve.

Types of Benchmarking

Benchmarking is simply the comparison of one organization's practices and performance

against those of others. It seeks to identify standards, or "best practices," to apply in

measuring and improving performance.

There are four types of benchmarking. They are not mutually exclusive and companies can

choose any one or a combination to meet their objectives. It is recommended that strategic

benchmarking is conducted first to create a context and rationale that will enhance all other

benchmarking efforts.

STRATEGIC BENCHMARKING

Concerned with comparing different companies' strategies and assessing the success of

those strategies in the marketplace.

Analyses the strategies with particular reference to:

Strategic intent Core competencies Process capability Product line Strategic alliances Technology portfolio

Should begin with the needs and expectations of the customer. This can be achieved through

surveys to measure customer satisfaction and the gaps between a company's performance and

its customers' standards. Ensures a co-ordinated strategic direction regarding benchmarking

and reduces the possibility that one improvement project will cancel out the effect of another.

Benchmarking candidates are normally direct competition. The main difficulty is persuading

the benchmark partner to discuss their strategy. However, there is a great deal of information

which can be obtained from customers, common suppliers and public domain information.

FUNCTIONAL BENCHMARKING

Investigates the performance of core business functions. Does not need to focus on direct competition but, depending on the function to

be benchmarked, the benchmark partner may need to be in a similarly characterized industry for useful comparisons to be made.

BEST PRACTICES BENCHMARKING

Applies to business processes. It breaks the function down into discrete areas that are the targets for

benchmarking and is therefore a more focused study than functional benchmarking.

Some business processes are the same regardless of the type of industry. Attempts to benchmark not only work processes, but also the management

practices behind them.

PRODUCT BENCHMARKING

Commonly known as reverse engineering or competitive product analysis. Assesses competitor costs, product concepts, strengths and weaknesses of

alternative designs and competitor design trade-offs, by obtaining, stripping down and analyzing competitors' products.

Procedure of Benchmarking

There is no single benchmarking process that has been universally adopted. The wide appeal

and acceptance of benchmarking has led to the emergence of benchmarking methodologies.

The 12 stage methodology consists of:

1. Select subject

2. Define the process

3. Identify potential partners

4. Identify data sources

5. Collect data and select partners

6. Determine the gap

7. Establish process differences

8. Target future performance

9. Communicate

10. Adjust goal

11. Implement

12. Review and recalibrate

CHAPTER-II

NEED OF THE STUDY

The present survey can be considered very important because of its academic and professional importance.

1) Academic importance

Only few empirical surveys are made on the subjects in Indian background. So the researcher is interested to know more about the subject.

2) Professional importance

The researcher being a student of 2ND year BBM student, GITAM

University requires some practical training combined with classroom

theoretical teaching and to submit a dissertation for that the researcher

performed this study on the topic “BENCHMARKING REPORT ON

FINANCIAL DEVELOPMENT” at MAHINDRA NAVISTAR

ENGINES PRIVATE LIMITED, Pune, Maharashtra.

LIMITATIONS OF THE STUDY:

The project was done within a limited duration. So a detailed and comprehensive study could not be made.

Since the information about the companies (except MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED) was collected from secondary sources (i.e. internet), so it may not be reliable.

Most of the companies do not reveal data related to financial statements, as they are kept confidential.

SCOPE OF THE STUDY

A project on benchmarking different manufacturing companies with respect to

MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED on the basis of

their financial performance.

Benchmarking of manufacturing companies is done on the basis of financial

ratios. Financial ratios are among the most important measures by which the success

of a business is determined.

In specific, the project includes engine manufacturing companies and auto

ancillaries namely, Swaraj India Limited, WABCO India Limited, Cummins

India Limited, Kirloskar Oil Engines Limited, and Greaves Cotton Limited.

These companies are benchmarked with respect to Mahindra Navistar Engines

Private Limited.

The purpose of the study was:

To benchmark the engine manufacturing companies and auto ancillaries with respect to MNEPL.

To identify the weak areas and recommend what needs to be improved.

RESEARCH METHODOLOGYResearch Methodology is a way to systematically solve a problem. In it we study the

various steps that are generally adopted by a researcher in studying his research

problem along with the logic behind them. The methodology of this study consists of

primary data.

PRIMARY DATA-

There are several ways of collecting appropriate data which differ considerably in

context of money costs, time and other resources at the disposal of the researcher.

Primary data can be collected either through experiment or through survey. In case of

a survey, data can be collected by observation, personal interviews, telephonic

interviews, questionnaires or through schedules.

The data for this project was collected by observation and meeting people personally.

SECONDARY DATA

Secondary data, on the other hand, is basically primary data collected by someone

else. Researchers reuse and repurpose information as secondary data because it is

easier and less expensive to collect. However, it is seldom as useful and accurate as

primary data.

Many experienced researchers use a combination of both primary and secondary data,

conducting secondary research first, and then following up with primary research to

fill any gaps in the study. This gives researchers a more comprehensive picture.

The main source of secondary data for this project was internet and company’s

brochure.

CHAPTER-IIIINDUSTRY PROFILE-

PRIVATE LIMITED COMPANIES

PRIVATE LIMITED COMPANIES

A private limited company is a voluntary association of not less than two and not more than

fifty members, whose liability is limited, the transfer of whose shares is limited to its

members and who is not allowed to invite the general public to subscribe to its shares or

debentures.

FEATURES

It has an independent legal existence. The Indian Companies Act, 1956 contains the

provisions regarding the legal formalities for setting up of a private limited company.

Registrars of Companies (ROC) appointed under the Companies Act covering the

various States and Union Territories are vested with the primary duty of registering

companies floated in the respective states and the Union Territories.

It is relatively less cumbersome to organize and operate it as it has been exempted

from many regulations and restrictions to which a public limited company is subjected

to. Some of them are :-

It need not file a prospectus with the Registrar.

It need not obtain the Certificate for Commencement of business.

It need not hold the statutory general meeting nor need it file the statutory report.

Restrictions placed on the directors of the public limited company do not apply to its directors.

The liability of its members is limited.

The shares allotted to its members are also not freely transferable between them. These companies are not allowed to invite public to subscribe to its shares and debentures.

It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it.

Hence, a private company is preferred by those who wish to take the advantage of limited

liability but at the same time desire to keep control over the business within a limited circle

and maintain the privacy of their business.

These companies are closely held businesses, usually by family, friends and relatives. Private

companies may issue stock and have shareholders. However, their shares do not trade on

public exchanges and are not issued through an initial public offering.

Shareholders may not be able to sell their shares without the agreement of the other

shareholders.

ADVANTAGES

Limited Liability: It means that if the company experience financial distress because

of normal business activity, the personal assets of shareholders will not be at risk of

being seized by creditors.

Continuity of existence: business not affected by the status of the owner.

Minimum number of shareholders need to start the business are only2.

More capital can be raised as the maximum number of shareholders allowed is 50.

Scope of expansion is higher because easy to raise capital from financial institutions

and the advantage of limited liability.

DISADVANTAGES

Growth may be limited because maximum shareholders allowed are only 50.

The shares in a private limited company cannot be sold or transferred to anyone else

without the agreement of other shareholders.

Not allowed to invite public to subscribe to its shares

Scope for promotional frauds

Undemocratic control

ORGANIZATION

PROFILE-

Mahindra Navistar

Engines Private Limited

Mahindra embarked on its journey in 1945 by assembling the Willy’s Jeep in India

and is now a US $6.3 billion Indian multinational. It employs over 1,00,000 people

across the globe and enjoys a leadership position in utility vehicles, tractors and

information technology, with a significant and growing presence in financial services,

tourism, infrastructure development, trade and logistics.

The Mahindra Group today is an embodiment of global excellence and enjoys a strong

corporate brand image.

Navistar International Corp. is a holding company whose individual units provide

integrated and best-in-class transportation solutions. Based in Warrenville, Ill., the

company produces International® brand commercial trucks, mid-range diesel engines

and IC brand school buses, and Workhorse brand chassis for motor homes and step

vans. It is a private-label designer and manufacturer of diesel engines for the pickup

truck, van and SUV markets. The company also provides truck and diesel engine parts

and service. A wholly owned subsidiary offers financing services.

Mahindra & Navistar have signed the 51:49 joint venture agreements on 1st Nov 2007

laying the foundation for Mahindra Navistar Engines Pvt Ltd.

The state of the art manufacturing plant has been established and geared up for serial

production of medium & high speed diesel engines. The plant has been set up in 22.8

acres land at Chakan. The installed capacity of the plant is 45 K engines/ annum with

an investment.

Navistar Engine group’s global line-up ranges from 2.8 L to 13 L engines which

delivers performance while meeting emission standards for diesel engines.

With a state of the art product line for on highway and off highway applications,

MNEPL has progressive and cutting edge technology that power this array of

products. To aid in this, MNEPL’s R&D facilities are supremely equipped with the

finest of resources.

Every product and the technology or knowhow is ideated, designed and subjected to a

comprehensive validation program to guarantee the utmost level of reliability and

quality before the product introduction into the market.

PLANT PROFILE

Mahindra Navistar Engines (P) Ltd has set up a world class facility for the

exclusive manufacture of MAXXFORCE diesel engines at Chakan, near Pune,

Maharashtra.

The plant is spread across 23 acres of land with a capacity to produce 45000

engines P.A.

The Plant is equipped for serial production of medium speed diesel engines.

Latest in line robotic controlled machines produce critical components with

high precision and speed.

Modern material handling systems facilitate online movement of

components to the Assembly Section. The engine assembly line is equipped

with modern material handling systems that enable stress-free handling of

components and sub assemblies.

PRODUCT PROFILE

MNEPL manufactures the famous MAXXFORCE(R) range of engines using the

MWM technology. MNEPL has the MAXXFORCE(R) 7.2 and MAXXFORCE(R)

4.8 L Actoen series of engines which Powers the heavy commercial vehicles, trucks,

tippers and busses. MAXXFORCE engines provide clean diesel solutions, following

stringent emission norms with strict compliance to the latest Euro V Norms.

TOPIC PROFILE –BENCHMARKING REPORT ON

FINANCIAL PERFORMANCE

OF MANUFACTURING

COMPANIES

Benchmarking is a process companies use to compare themselves to other companies. One

company in a similar industry will find a more successful company and then use statistics and

data from that company to see how it compares. The company then strives to reach these

benchmarks in hopes to better emulate the business formula the more successful company

has.

Financial ratios are among the most important measures by which the success of a business is

determined. Financial ratios are relative magnitudes of two financial values, typically taken

from the company's balance sheet or the income statement, also known as the profit and loss

statement. In order to know whether a company does well or is under-performing, however, it

is not enough to look only at the absolute values of its financial ratios. What you need to do is

to benchmark its financial ratios with the same ratios of companies operating in the same

industry.

In the project the following engine manufacturing companies and auto ancillaries are taken

for benchmarking with respect to Mahindra Navistar Engines Private Limited:

SWARAJ ENGINES LIMITED -

Promoted 1986 in technical and financial collaboration with Kirloskar Oil Engines Lt.

(KOEL) for manufacture of Diesel Engines. Swaraj Engines Limited supplies 5 types of

Engines from 20HP range to 50HP range to PTL. Addition to engines SEL also manufactures

high-tech engine components for Swaraj Mazda. As on date more than 200,000 Swaraj

Tractors fitted with engines produced at SEL are in the field.

GREAVES COTTON LIMITED-

Greaves offers a wide range of versatile, fuel-efficient engines in the range of 1-700 HP for a

host of applications in:

Marine

Agricultural Equipment

Fire fighting pump sets

Mining & Construction

Material Handling (Cranes, Forklifts)

Rail Cars, Road Sweepers etc

These engines are manufactured at state of the art manufacturing facilities in Pune,

Aurangabad (Maharashtra) Gummidipoondi and Ranipet (Tamil Nadu).

KIRLOSKAR OIL ENGINES LIMITED-

Incorporated in 1946, Kirloskar Oil Engines Limited (KOEL) is a part of the Kirloskar

Group. KOEL specialises in the manufacture of both air-cooled and liquid-cooled diesel

engines and generating sets across a wide range of power output from 5kVA to 3000kVA.

They also offer engines operating on alternative fuels such as bio-diesel, natural gas, biogas

and straight vegetable oil (SVO). The “Kirloskar Green Genset” is the market leader and

most preferred brand among customers in the power generation and telecom industry in India.

WABCO LIMITED-

WABCO is a leading global supplier of technologies and control systems for the safety and

efficiency of commercial vehicles. Founded nearly 150 years ago, WABCO continues to

pioneer breakthrough mechanical, mechatronic and electronic technologies for braking,

stability and transmission automation systems supplied to the world’s leading commercial

truck, bus and trailer manufacturers.

CUMMINS INDIA LIMITED-

Cummins has been associated with the Indian subcontinent for five decades. The stage was

set way back in 1962, when a partnership between Kirloskar and Cummins crystallized into a

100-acre manufacturing campus in Pune. Within a span of three years from commencing

operations, the business venture started to generate profits. Thereon, the partnership

continued to flourish, till up till 1997, when the Kirloskar sold their ownership; resulting in

Cummins Inc. increasing its stake to 51% and the rest being traded on the Bombay Stock

Exchange. This led to the formation of Cummins India Limited, a consolidated subsidiary of

Cummins Inc.

Cummins India Limited has grown to become the country’s leading manufacturer of diesel

and natural gas engines. It is only one of the eight legal entities (including four joint ventures)

of the Cummins Group in India, signifying Cummins increasing presence in the country.

Comprising of four business units - Industrial Engine, Power Generation, Distribution, and

Automotive, Cummins India Limited is also the largest entity of the Cummins Group in

India.

CHAPTER-IV

Financial Statements of Manufacturing Companies

1. SWARAJ ENGINES LIMITED

BALANCE SHEET (in lakhs)EQUITY & LIABILITIES 2012 2011SHAREHOLDERS' FUNDSshare capital 1,242 1,242 reserves and surplus 17,386 18,628 13,980 15,222

NON CURRENT LIABILITIESdeferred tax liabilities 320 192 long term provisions 126 446 146 338

CURRENT LIABILITIEStrade payables 4,349 3,585 other current liabilities 905 512 short term provisions 2,009 7,263 1,544 5,641 TOTAL 26,337 21,200

ASSETSNON CURRENT ASSETSfixed assetstangible assets 4,177 2,391 intangible assets 3 5 capital work in progress/capital spares 872 49 non current investments 1,184 - long term loans and advances 842 7,078 595 3,040

CURRENT ASSETScurrent investments 6,928 5,779 inventories 3,344 3,512 trade receivables 1,191 806 cash & cash equivalents 6,970 7,620 short term loans and advances 826 19,259 445 18,160 TOTAL 26,337 21,200

PROFIT AND LOSS ACCOUNT (in lakhs)

2012 201149,561 39,804

4,703 3,701

Net Revenue 44,858 36,103

Other income 1,224 819

Total revenue 46,082 36,922

Material consumption 34,049 26,853 Employee Benefit Expenses 1,917 1,696 Total expenses 35,966 30,037

Profit before exceptional and extraordinary items and tax 10,116 6,886 Exceptional items - -

PBIDTA 10,116 6,886 Finance costs 8 4

PBDTA 10,108 6,882 Depreciation and amortisation expense 426 446

PBT 9,682 6,436 Tax expenses 2,445 2,044

Profit for the period 7,237 4,392

Revenue from operationsLess: Excise duty

2. GREAVES COTTON LIMITED BALANCE SHEET

EQUITY & LIABILITIES 2012 (in crores) 2011

SHAREHOLDERS' FUNDSshare capital 49 649 49 526 reserves and surplus 601 477

NON CURRENT LIABILITIESlong term borrowings 0 0 deferred tax liabilities 30 26 other long term liabilities 3 54 3 55 long term provisions 20 25

CURRENT LIABILITIESshort term borrowings 20 2 trade payables 194 214 other current liabilities 79 389 105 400 short term provisions 96 1,092 79 981 TOTAL

ASSETSNON CURRENT ASSETSfixed assets

tangible assets 321 258 intangible assets 5 6

capital work in progress/capital spares 17 9 intangible assets under development 4 -

non current investments 53 67 long term loans and advances 21 422 22 364 other non current assets 1 1

CURRENT ASSETScurrent investments 59 17 inventories 170 187 trade receivables 256 258 cash & cash equivalents 70 60 short term loans and advances 114 670 94 617 other current assets 0 1 Total 1,092 981

PROFIT AND LOSS ACCOUNT

(in crores) 2012 2011Revenue from operations 192,632 136,994 Less: Excise duty 17,288 11,777

Net Revenue 175,344 125,217

Other income 598 1,238

Total revenue 175,942 126,455

Material consumption 123,268 86,855 Employee Benefit Expenses 12,751 8,315 Total expenses 136,175 95,281

Profit before exceptional and extraordinary items and tax 39,767 31,174 Exceptional items 4,329 -

PBIDTA 44,096 31,174 Finance costs 348 105

PBDTA 43,748 31,069 Depreciation and amortisation expense 311 2,098

PBT 43,437 28,971 Tax expenses 6,509 5,640

Profit for the period 36,928 23,331

3. KIRLOSKAR OIL ENGINES LIMITED

BALANCE SHEET (in crores)EQUITY & LIABILITIES 2012 2011SHAREHOLDERS' FUNDS 29 29 share capital 1,004 860 reserves and surplus 1,033 889

NON CURRENT LIABILITIES 78 169 long term borrowings 38 32 deferred tax liabilities 46 18 other long term liabilities 31 48 long term provisions 193 268

CURRENT LIABILITIES 8 short term borrowings 249 273 trade payables 179 190 other current liabilities 105 114 short term provisions 1,768 1,733 TOTAL


tangible assets 570 583 intangible assets 6 8

capital work in progress/capital spares 9 9 intangible assets under development 7 -

non current investments 10 3 long term loans and advances 72 88 other non current assets 10 26

CURRENT ASSETScurrent investments 517 295 inventories 132 138 trade receivables 299 382 cash & cash equivalents 27 23 short term loans and advances 57 26 other current assets 51 154 TOTAL 1,768 1,733

PROFIT AND LOSS ACCOUNT (in crores)

2012 2011232,603 242,302

- -

232,603 242,302

3,613 1,236

236,216 243,538

139,079 142,567 17,537 17,892

157,071 160,459

79,145 83,079 4,771 (373)

83,916 82,706 1,596 1,985

82,320 80,721 9,129 8,484

73,191 72,237 8,918 7,000

64,273 65,237

Material consumptionEmployee Benefit ExpensesTotal expenses

Profit before exceptional and extraordinary items and taxExceptional items

Profit for the period

Depreciation and amortisation expense

PBTTax expenses

PBIDTAFinance costs

PBDTA


Net Revenue

Other income

Total revenue

4. WABCO INDIA LIMITED BALANCE SHEET

EQUITY & LIABILITIES 2012 2011SHAREHOLDERS' FUNDSshare capital 948 948 reserves and surplus 51,962 37,724

52,911 38,673 NON CURRENT LIABILITIESdeferred tax liabilities 1,093 815 other long term liabilities 6 4 long term provisions 1,162 1,325

2,262 2,145

CURRENT LIABILITIESshort term borrowings 88 57 trade payables 10,802 8,400 other current liabilities 252 202 short term provisions 1,469 1,380 TOTAL 67,783 50,856


tangible assets 22,975 18,030 intangible assets 48 10

capital work in progress/capital spares 1,276 992 non current investments 220 220 long term loans and advances 1,827 1,582

26,347 20,833

CURRENT ASSETScurrent investments 2,100 1,000 inventories 11,576 7,986 trade receivables 15,750 17,118 cash & cash equivalents 8,187 1,286 short term loans and advances 3,813 2,628 other current assets 11 5

41,436 30,023 Total 67,783 50,856

(In lakhs)


2012 2011114,336 97,769

9,772 8,518

104,564 89,252

1,206 536

105,770 89,788

57,234 49,496 9,429 7,119

66,663 56,615

39,107 33,172 -

39,107 33,172 12 12,572

39,095 20,600 1,564 20

37,531 20,579 6,283 6,394

31,248 14,185

Material consumptionEmployee Benefit Expenses

Finance costs

PBDTADepreciation and amortisation expense


PBIDTA

Total expenses


Net Revenue

Other income

Total revenue

PBTTax expenses


(In lakhs)

5. CUMMINS INDIA LIMITED BALANCE SHEET

EQUITY & LIABILITIES 2012 2011

SHAREHOLDERS' FUNDSshare capital 5,544 3,960 reserves and surplus 198,771 176,667

204,315 180,627 NON CURRENT LIABILITIES long term liabilities 1,470 1,979 long term provisions 9,870 10,048

11,340 12,027

CURRENT LIABILITIESshort term borrowings - - trade payables 51,856 56,943 other current liabilities 15,165 11,084 short term provisions 27,492 25,885

94,513 93,912 TOTAL 310,169 286,566

NON CURRENT ASSETSfixed assets

tangible assets 45,895 34,825 intangible assets 596 812

capital work in progress 4,967 6,467 non current investments 7,551 5,865 long term loans and advances 695 1,873 Deferred tax assets(net) 34,294 18,988

93,998 68,830 CURRENT ASSETScurrent investments 52,204 66,681 inventories 56,761 51,896 trade receivables 67,834 71,816 cash & cash equivalents 22,350 10,373 short term loans and advances 16,525 16,772 other current assets 497 198

216,171 217,736 Total 310,169 286,566

(In lakhs)


2012 2011441,053 428,785

29,331 24,532

411,722 404,253

12,333 8,037

424,055 412,290

264,542 258,037 30,394 25,463

341,997 327,914

82,058 84,376 5,144 -

87,202 84,376 541 475

86,661 83,901 4,198 3,664

82,463 80,237 23,336 21,138

59,127 59,099

PBDTA

Exceptional items



Net Revenue

Other income

Total revenue


Profit before exceptional and extraordinary items and tax

Depreciation and amortisation expense

PBTTax expenses

PBIDTAFinance costs

(In lakhs)

6. MAHINDRA NAVISTAR ENGINES PRIVATE LIMITED

BALANCE SHEET

EQUITY & LIABILITIES 2013 2012SHAREHOLDERS' FUNDSshare capital 26,500 19,500

NON CURRENT LIABILITIESlong term borrowings 12,604 13,279 other long term liabilities (19,839) (13,647)

(7,235) (368)

CURRENT LIABILITIESshort term borrowings 2,048 2,687 trade payables 2,854 3,139 other current liabilities 1,010 846

5,912 6,672 Total 25,177 25,804 ASSETSNON CURRENT ASSETSfixed assets 18,368 16,874

CURRENT ASSETSinventories 1,499 2,693 trade receivables 3,202 4,336 cash & cash equivalents 165 324 other current assets 1,943 1,577

6,809 8,930 Total 25,177 25,804

(In lakhs)


2013 201210,267 11,301

10,267 11,301

326 352

10,594 11,653

8,373 9,417 1,932 1,720

12,829 14,492

(2,236) (2,839)

(2,236) (2,839) 2,004 1,734

(4,239) (4,573) 1,953 1,858

(6,192) (6,431)

(6,192) (6,431)

PBTTax expenses


PBIDTAFinance costs

PBDTADepreciation and amortisation expense


Total revenue

Revenue from operations


Less: Excise duty

Net Revenue

Other income

(In lakhs)

INTERPRETATION

AND ANALYSIS OF

DATA

PARAMETERS FOR BENCHMARKING

1. CURRENT RATIO The ratio is mainly used to give an idea of the company's ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher

the current ratio, the more capable the company is of paying its obligations. A ratio under 1

suggests that the company would be unable to pay off its obligations if they came due at that

point. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

Current Ratio = Current Assets

Current Liabilities

swaraj Greaves KOEL WABCO Cummins MNEPL0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2.11

1.32

3.45

2.39

1.611.34

1.641.4

4.52

2.67

1.74

1.14999999999999

20112012

Current Ratio

CURRENT RATIO/ COMPANY’S NAME

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.

KIRLOSKAR OIL ENGINES LTD

WABCO LIMITED

CUMMINS INDIA LIMITED

MNEPL

2011 2.11 1.32 3.45 2.39 1.61 1.34

2012 1.64 1.4 4.52 2.67 1.74 1.15

GRAPH NO-1

TABLE NO-1

2. QUICK RATIO

The quick ratio measures a company's ability to meet its short-term obligations with its

most liquid assets. The higher the quick ratio, the better the position of the company. The

quick ratio is more conservative than the current ratio, a more well-known liquidity

measure, because it excludes inventory from current assets. Inventory is excluded because

some companies have difficulty turning their inventory into cash.

Quick Ratio= (Current Assets - Inventories)

Current Liabilities


0.51

1.52

2.53

3.54

4.55

1.520.940000000000

001

3.45

1.73

1.08 0.931.2 1.06

4.52

1.911.180000000000

010.9

20112012

Quick Ratio

QUICKRATIO/ COMPANY’S NAME

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 1.52 0.94 3.45 1.73 1.08 0.93

2012 1.2 1.06 4.52 1.91 1.18 0.90

GRAPH NO-2

TABLE NO-2

3. RETURN ON CAPITAL EMPLOYED

Return on capital employed (ROCE) is a measure of the returns that a business is achieving

from the capital employed, usually expressed in percentage terms. Capital employed equals

a company's Equity plus Non-current liabilities (or Total Assets − Current Liabilities), in other

words all the long-term funds used by the company. ROCE indicates the efficiency and

profitability of a company's capital investments. ROCE should always be higher than the rate

at which the company borrows; otherwise any increase in borrowing will reduce

shareholders' earnings.

ROCE = EBIT / Capital Employed

= EBIT / (Total Assets - Current Liabilities)

swaraj Greaves KOEL WABCO Cummins MNEPL

-30

-20

-10

0

10

20

30

40

50

60

70

41

50

64

5042

-25

40

62 61

39 36

2

20112012

ROCE

ROCE (in %)/ Company’s name

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 41 50 64 50 42 -25

2012 40 62 61 39 36 2

TABLE NO-3

GRAPH NO-3

4. EBIDTA TO SALES RATIO

A financial metric used to assess a company's profitability by comparing its revenue with

earnings. More specifically, since EBITDA is derived from revenue, this metric would

indicate the percentage of a company is remaining after operating expenses.

Sometimes referred to as "EBITDA margin".


-30

-20

-10

0

10

20

30

40

17

23

34

21 20

-26

16

23

36

20 20

-22

20112012

EBIDTA Margin

EBIDTA Margin/ company’s name(In %)

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 17 23 34 21 20 -26

2012 16 23 36 20 20 -22

5. EBIT MARGIN RATIO

TABLE NO-4

GRAPH NO-4

EBIT stands for "earnings before income and tax." The EBIT margin is EBIT divided by net

revenue. Investors use EBIT margin to see how earnings of the company grow from year to

year. Since EBIT does not include interest or tax, it shows how the firm operates. Interest

has no bearing on the firm's operation and the effective tax rate can vary from year to year.

Therefore, EBIT may be more accurate than net income in determining operational

efficiency.

EBIT Margin = EBIT

Revenues


-50

-40

-30

-20

-10

0

10

20

30

40

1621

30

21 19

-42

1623

32

19 18

-41

20112012

EBIT Margin

EBIT Margin (in %)/ company’s name

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 16 21 30 21 19 -42

2012 16 23 32 19 18 -41

6. WORKING CAPITAL TURNOVER RATIO

TABLE NO-5

GRAPH NO-5

A company uses working capital (current assets - current liabilities) to fund operations and

purchase inventory. These operations and inventory are then converted into sales revenue

for the company. The working capital turnover ratio is used to analyze the relationship

between the money used to fund operations and the sales generated from these

operations. In a general sense, the higher the working capital turnover, the better because it

means that the company is generating a lot of sales compared to the money it uses to fund

the sales.

swaraj Greaves KOEL WABCO Cummins MNEPL -

1.00

2.00

3.00

4.00

5.00

6.00

7.00

4.13136289408995

6.4

4.23 3.953.63 3.493.1793335745545

2

6.25

5.49

4.88

3.46

2.29

20112012

WC TURNOVER RA-TIO

WC TUROVER/ Company’s name

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 4.13 6.4 4.23 3.95 3.63 3.49

2012 3.18 6.25 5.49 4.88 3.46 2.29

7. RAW MATERIAL CONSUMPTION (as a percentage to sales)

TABLE NO-6

GRAPH NO-6

The raw material consumption of a manufacturing company should be less in order to

reduce costs. Profit is the difference between sales and cost of production. When the

raw material consumption is less, the cost of production gets reduced, automatically the

profit of the organization increases.


10

20

30

40

50

60

70

80

90

6763

59

51

60

83

6964

60

50

60

82

20112012

RM Consumption

RM CONSUMPTION (IN %)

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 67 63 59 51 60 83

2012 69 64 60 50 60 82

8. GROSS PROFIT MARGIN

TABLE NO-7

GRAPH NO-7

A company's revenue minus its cost of goods sold. Gross profit is a company's residual profit after selling a product or service and deducting the cost associated with its production and sale. To calculate gross profit: examine the income statement, take the revenue and subtract the cost of goods sold. Also called "gross margin" and "gross income".

The relationship of the gross profit made for a specified period and the sales or turnover achieved during that period.


-30

-20

-10

0

10

20

30

40

17

23

34

21 20

-26

1621

34

20 19

-22

20112012

Gross Profit Margin

GROSS PROFIT MARGIN (IN %)/ Company’s name

SWARAJ ENGINES LTD.

GREAVES COTTON LTD.


WABCO LIMITED


MNEPL

2011 17 23 34 21 20 -26

2012 16 21 34 20 19 -22

GRAPH NO-8

TABLE NO-8

CHAPTER-VOBSERVATIONS,

RECOMMEDATIONS AND CONCLUSION

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

2012

Curre

nt Ra

tio2.1

11.6

41.3

21.4

3.45

4.52

2.39

2.67

1.61

1.74

1.34

1.15

Quick

Ratio

1.52

1.20.9

41.0

63.4

54.5

21.7

31.9

11.0

81.1

80.9

3

0.9

0

Roce(

IN %)

4140

5062

6461

5039

4236

-252

EBIDT

A To S

ales(%

)17

1623

2334

3621

2020

20-26

-22

EBIT M

argin

1616

2123

3032

2119

1918

-42-41

WC Tu

rnover

4.13

3.18

6.46.2

54.2

35.4

93.9

54.8

83.6

33.4

63.4

92.2

9

RM Co

nsump

tion(%

)67

6963

6459

6051

5060

6083

82

Gross P

rofit

1716

2321

3434

2120

2019

-26-22

MNEP

LSW

ARAJ

GREA

VES C

OTTO

NKIR

LOSK

ARWA

BCO

CUMM

INS

OBSERVATIONS & RECOMMENDATIONS

From the above information about different manufacturing companies the following are the observations and recommendations made regarding Mahindra Navistar Engines Private Limited:OBSERVATION 1-RM CONSUMPTION (IN %)

SWARAJ

GC

KIRLOSKAR

WABCO

CUMMINS

MNEPL

2011 67 63 59 51 60 83

2012 69 64 60 50 60 82

RECOMMENDATION-

From the above data it is clear that the raw material consumption (as a % of sales) of MNEPL is very high. This can be reduced by following the following methods:

Localization of import content

Reducing manufacturing costs by reducing cycle time.

Value addition value engineering(VAVE)

Standardization

Sourcing from a strategic location

OBSERVATION 2-

Manpower costs(as a % to sales)

Swaraj GC KOEL WABCO Cummins MNEPL

2011 4 6 7 7 6 152012 4 7 8 8 7 19

RECOMMENDATION-

The company can look for new sources of revenue for manpower

OBSERVATION 3-

STOCK TURNOVER RATIO (in %)

SWARAJ GC KOEL WABCO CUMMINS MNEPL

2012 9.93 6.91 10.29 5.85 4.87 3.99

RECOMMENDATION-

From the given data the stock turnover ratio in case of MNEPL is high. So the inventory has to be controlled/reduced. This can be done by any of the following analysis:

ABC Analysis- A category materials and its control

In these category materials, we include 10% of total material, but its cost will be high, so its investment requirement will also be very high and it may be 70% of total investment in inventory.

B category materials and its control

In this category, there are many normal materials can be included which are needed for production. Store keeper can classify 20% of material and we need 20% of total investment in this type of inventory for buying.

C category materials and its control

There is no need to control this type of material but normal care is needed for keeping this material in right position before using it for production. Its quantity is of 70% of total quantity but cost is 10% of total investment in inventory.

Just In Time Analysis-Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. In other words, an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

Fast moving ad slow moving goods analysis

Re order level/ re ordering quantity

CONCLUSION

In the vast majority of the industries, it has been a long time since the “NOT

INVENTED HERE” syndrome was overcome. Benchmarking, a comparative

analysis with best practices, is now–a-days a standard procedure in those

activities where looking to neighbours in order to learn from them is considered

as intelligent option.

In this project different engine manufacturing companies and auto ancillaries

are benchmarked with respect to MAHINDRA NAVISTAR ENGINES RIVET

LIMITED on the basis of financial ratios such as current ratio, quick ratio,

EBIDTA Margin, Gross profit margin etc…

Different types of benchmarking are adopted by different companies depending

upon the objectives they have to meet. It helps these companies to identify their

weak areas and indicates what needs to be done to improve. People usually have

a misconception regarding benchmarking. According to them, benchmarking

means comparing the performances of different companies. But in reality,

benchmarking goes beyond comparisons with competitors to understanding the

practices that lie behind the performance gaps.

Documents

Benchmarking Report of Manufacturing companies