Eic Analysis (Capital Goods)

EIC ANAYLYSIS

CAPITAL GOODS INDUSTRY

COMPANIES STUDIED:

BHEL; BHARAT FORGE

KIRLOSKAR; CROMPTON GREAVES

ACKNOWLEDGEMENT

We express our gratitude towards our madam for guiding us in completing this project. Without her constant support it would not

have been possible for us to carry this project.

INDEX

1. ECONOMIC ANALYSIS

2. INDIA’S CAPITAL GOODS INDUSTRY ANALYSIS

3. COMPANY ANALYSIS:

BHARAT HEAVY ELECTRICALS LIMITED

BHARAT FORGE

KIRLOSKAR OIL ENGINES LTD.

CROMTON GREEVES LTD.

ECONOMIC ANALYSIS

India economic analysis provides various inputs on economic condition of this south-east Asian country. It can be done both at a microeconomic as well as a macroeconomic level. India economic analysis could also be described as being an explanation of various economic phenomena going on in this country.

In April 2008, industrial sector in India had recorded a growth of 7 percent. However, this figure is lesser than 11 percent development, which had been achieved in April 2007. Much of this critical condition could be attributed to an increase in prices of oil. Measures that have been taken by Reserve Bank of India, like upward revision of repo rate and CRR, have also contributed to decrease in industrial production.

Manufacturing and electric sector have suffered as well in recent times. Their growth rates have come down too. For manufacturing sector it was 7.5 percent and for electricity sector, rate of development stood at 1.4 percent in April 2008. This rate is significantly low when compared to statistics of April 2007, when rates of development for manufacturing and electricity were 12.4 percent and 8.7 percent respectively.

In case of manufacturing sector much of this slump could be attributed to increase in input costs like expenses of oil, raw materials, rates of interest and prices of goods and services. Mining sector has been comparatively better off as it has managed to grow at a rate of 8 percent in April 2008 compared to 2.6 percent that was achieved in April 2007.

In core infrastructural industries, there has been deceleration as well, but it is still better off compared to non infrastructural industries in India. Growth in April 2008 has been around 3.6 percent, which is less than 5.9 percent achieved in April 2007. Industries like crude oil production, electricity and petroleum refinery have been performing below expectations but coal, finished steel and cement have performed better than April 2007.

In financial year 2007-08, average inflation in India was around 4.66 percent. This rate was lower than average inflation of financial year 2006-07. In 2007-08, fiscal high prices of food items were primary cause behind high rates of inflation. That high rate of inflation had to be controlled by banning a number of necessary commodities as well as various financial steps. High prices of oil were responsible for proportionately high rate of inflation in 2008-09.

Some of the key points that have been suggested by the India Economy Survey 2009:

Economy can grow around 7 percent in 2009/10. This off course is largely dependent on how the US

Economy recovers over next few months. If US economy bottoms out around December, as many

analysts are expecting, India can easily look at 7% upwards growth.

The Economy will get back to its growth path of around 9% in medium term.

The government has shown its eagerness for Fiscal consolidation. The Fiscal deficit target is

suggested to be set at 3 percent of GDP at the earliest.

Inflation is suggested to be a non-issue moving forward.

The Economic Survey suggested allowing the public to hold greater equity in public sector

banks and aligning of voting rights in banks with equity holdings.

Calibrated monetary policy approach is suggested for early return to high growth path.

The Economic Survey has suggested that quality Foreign Direct Investment should be allowed to

seek regulatory reforms in higher education.

INDUSTRY ANALYSIS

THE INDIAN CAPITAL GOODS INDUSTRY

Origins

The development of a strong and vibrant engineering and capital goods sector has been at the core of the industrial strategy in India since the planning process was initiated in 1951. The emphasis that this sector received was primarily influenced by the erstwhile Soviet Union model, which had made impressiveprogress by rapid state-led industrialization through the development of the core engineering and capital goods sector.

Owing to these historical factors, today India has a strong engineering and capital goods base. The Indian capital goods sector is characterized by a large width of products (almost all major capital goods are domestically manufactured) – a legacy of the import substitution policy. Even nations with advanced capital goods sectors do not produce the entire range of capital goods, but instead focus on segments, or sub segments. The range of machinery produced in India includes heavy electrical machinery, textile machinery, machine tools, earthmoving and construction equipment including mining equipment, road construction equipment, material handling equipment, oil & gas equipment, sugar machinery, food processing and packaging machinery, railway equipment, metallurgical equipment, cement machinery, rubber machinery, process plants & equipment, paper & pulp machinery, printing machinery, dairy machinery, industrial refrigeration, industrial furnaces etc. However, the raw materials used are largely domestic in origin and in many instances, the quality of domestic raw materials is not up to the international standards in terms of dimensional tolerances and metallurgical properties, which in turn affects the quality of the final product.

Current Status

The capital goods industry’s annual production stood at Rs.500 billion in 2003-04. Its contribution to the exchequer in terms of customs, excise and sales tax are estimated to be in excess of Rs.150 billion. From CMIE data it is noticed that though there was a 15% increase in the market size in 2003-04, the production growth of 2003-04 over 2002-03 was only negligible at 2.7%. Consequently there was a 55%jump in imports .The imports in the capital goods sector are gradually going down as seen in the graph over the last few months. Most Indian capital goods are functionally at par with equipment made elsewhere in the world, but in some cases they rank poorly as far as finish is concerned. The limited presence of Indian capital goods firms in the value chain leads to diminished cost and differentiation advantage. An emerging trend among capital goods companies around the world is the transformation of these engineering companies to a more service based organization.

Technology

The technological tie-ups in the different sectors of the capital goods industry as evident from the table below gives a picture of the technical and financial collaborations which have taken place from 1992 to 2004.

Capital Investments

Investment in the manufacturing sector and the capital goods sector has both showed a declining trend in the period of recession. The investment in the capital goods sector has gradually picked up from 2001-02. However, the rise in investment in the capital goods sector is more than the rise in investment of the manufacturing sector.

The investment pattern in the Capital Goods sector under implementation from April1995 to April 2005 has shown an overall rising trend. If the trends in the outstandinginvestment in the capital goods and the manufacturing sector, over the period of 1995 to2005, are studied it is found that both are showing an increasing trend.

Credit to the engineering sector has shown an increasing trend after 1996 but has gone down slightly between 1997 to 2002 and has again started rising from 2003 onwards.

Exports

Exports of capital goods has seen a growth starting from 2000-01 however the percentage change in IIP of capital goods fell drastically during this phase at –3.4% in 2001-02.

The growth in capital goods exports has gained momentum from 2001 to 2004 but hasshown a sharp decline in 2004-05 reflecting a growth in demand in the domestic market,which led to a fall in exports.

Existing Concerns

The capital goods sector in India faces a number of difficulties namely: -

Low Tariffs (Below WTO Bound Rate) Inverted duty structure and lack of level playing field Domestic policy constraints Lack of demand growth due to delayed / shelved projects Inadequate Government spending on infrastructure Removal of restrictions on the import of second hand machinery Foreign financiers and contractors favouring home country suppliers High working capital requirement Lack of thrust on export

Infrastructure Issues

The manufacturing sector and in particular the four sectors under study arefacing disadvantages when compared to their International competitors due tothe poor infrastructure available in India in terms of

Unreliable power and high cost per unit. Port congestion and high turnaround time High cost of fuel and poor road connectivity of port/airports with hinterland

leading to higher transportation cost.

Research and Development

To encourage domestic companies to invest more into R&D the customs duties / excise duties of laboratory testing equipment should be reduced to make it affordable.

150% weighted deduction on R&D expenditure should be allowed under the Income Tax Act Section 35 to encourage companies to set up full fledged R&D departments with requisite manpower and laboratory.

Customs duty or excise duty for laboratory testing equipment should be reduced to 5 %, or exempted respectively. (A separate notification giving details of laboratory and testing equipment may be issued.

Information and Communication Technology (ICT)

To encourage higher investment into ICT the following may be considered.

Higher depreciation on IT hardware and software to encourage more companies to use ICT.

Computer software is present attracting a 60% rate of depreciation under Rule 5, Clause III (5) of Appendix I to I.T. Rules. However, since the product life of software is very short and software is very expensive yet essential in today’s competitive world, it is therefore proposed that the depreciation ratebe increased.

National Campaign

Government jointly with Industry should initiate a national campaign to create awareness of next generation practices as well as undertake various initiatives to promote the development of the manufacturing industry and in particular the capital goods sector

Potential & Growth Prospects

Since the capital goods industry and its major constituents are fairly diverse, not only in terms of product range, but also in terms of their user sectors, to appreciate the industry’s potential and growth prospects over the next few years, it is necessary to understand some of the key sectors in greater detail.

The five major sectors in the capital goods industry which have a significant IIP weightage i.e. a total of 37.5816 that is 56.78% of the total are electrical machinery, process plant equipment, mining & construction machinery, machine tools and textile machinery.

BHARAT HEAVY ELECTRICALS LIMITED

ABOUT THE COMPANY

Company was set up at Bhopal in the name of M/s Heavy electrical (India) Ltd. in collaboration with AEI, UK. Subsequently, three more plants were set up at Hyderabad, Hardwar and Trichy. The Bhopal Unit was controlled by the company; the other three were under the control of Bharat Heavy Electricals Ltd.

BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector, today. BHEL was established more than 40 years ago, ushering in the indigenous Heavy Electrical Equipment industry in India - a dream that has been more than realized with a well-recognized track record of performance. The company has been earning profits continuously since 1971-72 and paying dividends since 1976-77.

BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry, Transportation, Telecommunication, Renewable Energy, etc. The wide network of BHEL's 14 manufacturing divisions, four Power Sector regional centers, over 100 project sites, eight service centers and 18 regional offices, enables the Company to promptly serve its customers and provide them with suitable products, systems and services -- efficiently and at competitive prices. The high level of quality & reliability of its products is due to the emphasis on design, engineering and manufacturing to international standards by acquiring and adapting some of the best technologies from leading companies in the world, together with technologies developed in its own R&D centers.

BHEL has acquired certifications to Quality Management Systems (ISO 9001), Environmental Management Systems (ISO 14001) and Occupational Health & Safety Management Systems (OHSAS 18001) and is also well on its journey towards Total Quality Management.

BHEL has

Installed equipment for over 90,000 MW of power generation -- for Utilities, Captive and Industrial users.

Supplied over 2,25,000 MVA transformer capacity and other equipment operating in Transmission & Distribution network up to 400 kV (AC & DC).

Supplied over 25,000 Motors with Drive Control System to Power projects, Petrochemicals, Refineries, Steel, Aluminum, Fertilizer, Cement plants, etc.

Supplied Traction electrics and AC/DC locos to power over 12,000 km Railway network.

Supplied over one million Valves to Power Plants and other Industries.

BHEL's operations are organized around three business sectors, namely Power, Industry - including Transmission, Transportation, Telecommunication & Renewable Energy - and Overseas Business. This enables BHEL to have a strong customer orientation, to be sensitive to his needs and respond quickly to the changes in the market.

http://www.bhel.com/overseasbusiness/international.php

BHEL's vision is to become a world-class engineering enterprise, committed to enhancing stakeholder value. The company is striving to give shape to its aspirations and fulfill the expectations of the country to become a global player.

The greatest strength of BHEL is its highly skilled and committed 42,600 employees. Every employee is given an equal opportunity to develop himself and grow in his career.

VISION, MISSION and VALUES

A world class engineering enterprise committed to enhancing stake holder value. To be an Indian multinational engineering enterprise providing total business solutions through quality

products, systems and services in the field of energy, industry, transportation, infrastructure and other possible areas.

Zeal to excel & zest for change. Integrity and fairness in all matters. Respect for dignity and potential of individuals. Strict adherence to commitments. Ensure speed of response. Foster learning, creativity and team work. Loyalty and pride in the company.

Industry Name Bharat Heavy Electricals Limited

House Name Public Sector

Year Of Incorporation 1964

Registered Address

Address BHEL House, Siri Fort

District New Delhi

State Delhi

Pin Code 110049

Tel. No. 011-26001010 (15 Lines),011-26001046

Fax No. 011-26493021,26001102

Email : [email protected] Internet : http://www.bhel.com

AuditorsB K Ramadhyani & Co.

Registrars

Name Karvy Computershare Private Ltd

Address Cyber Villa, Plot No.17-24, Vittalrao Nagar, Hyderabad - 500081, Andhra Pradesh

Tel. No. : 23420815 - 820 Fax No. : 23431551

FACT SHEET

http://www.bhel.com/

mailto:[email protected]

MANAGEMENT

Name Designation

Reva Nayyar Non Official PartTime Director

M A Pathan Non Official PartTime Director

Anil Sachdev Director

B P Rao Chairman and Managing director

C S Verma Director

Atul Saraya Director

Name Designation

Rajiv Bansal Part Time Official Director

K Ravi Kumar Chairman and Managing director

Ashok Kumar Basu Non Official PartTime Director

Saurabh Chandra Part Time Official Director

S Ravi Director

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 244.76 244.76 244.76 489.52 489.52

Equity Share Capital 244.76 244.76 244.76 489.52 489.52

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 5,782.13 7,056.62 8,543.50 10,284.69 12,449.29

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Networth 6,026.89 7,301.38 8,788.26 10,774.21 12,938.81

Secured Loans 500.00 500.00 0.00 0.00 0.00

Unsecured Loans 36.98 58.24 89.33 95.18 149.37

Total Debt 536.98 558.24 89.33 95.18 149.37

Total Liabilities 6,563.87 7,859.62 8,877.59 10,869.39 13,088.18



Application Of Funds

Gross Block 3,628.50 3,821.62 4,134.61 4,443.03 5,224.43

Less: Accum. Depreciation 2,584.70 2,839.79 3,146.31 3,462.21 3,754.47

Net Block 1,043.80 981.83 988.30 980.82 1,469.96

Capital Work in Progress 98.12 191.27 306.58 658.47 1,212.70

Investments 8.95 8.29 8.29 8.29 52.34

Inventories 2,916.11 3,744.37 4,217.67 5,736.40 7,837.02

Sundry Debtors 5,972.14 7,168.06 9,695.82 11,974.87 15,975.50

Cash and Bank Balance 1,392.86 1,483.97 2,068.91 1,511.02 1,950.51

Total Current Assets 10,281.11 12,396.40 15,982.40 19,222.29 25,763.03

Loans and Advances 1,921.33 4,186.27 5,517.59 7,366.17 4,616.67

Fixed Deposits 1,785.01 2,650.01 3,740.00 6,875.00 8,364.16

Total CA, Loans & Advances 13,987.45 19,232.68 25,239.99 33,463.46 38,743.86

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 7,248.99 8,905.14 11,957.32 16,632.97 23,415.10

Provisions 1,325.45 3,649.32 5,708.25 7,608.68 4,975.58

Total CL & Provisions 8,574.44 12,554.46 17,665.57 24,241.65 28,390.68

Net Current Assets 5,413.01 6,678.22 7,574.42 9,221.81 10,353.18

Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00

Total Assets 6,563.88 7,859.61 8,877.59 10,869.39 13,088.18

Contingent Liabilities 609.68 769.95 976.05 1,673.19 2,546.25

Book Value (Rs) 246.24 298.31 359.06 220.10 264.32



Net Profit Before Tax 1581.64 2564.35 3736.07 4430.39 4848.85

Net Cash From Operating Activities 818.29 1623.83 2821.37 3477.90 3291.20

Net Cash (used in)/fromInvesting Activities

-35.25 -156.51 -212.66 -12.54 -512.82

Net Cash (used in)/from Financing Activities

-264.82 -511.21 -933.77 -888.25 -849.73

Net (decrease)/increase In Cash and Cash Equivalents

518.22 956.11 1674.94 -2577.11 1928.65

Opening Cash & Cash Equivalents 2659.64 3177.86 4133.97 8386.02 8386.02

Closing Cash & Cash Equivalents 3177.86 4133.98 5808.91 5808.91 10314.67

Cash Flow ------------------- in Rs. Cr. -------------------

Key Financial Ratios of Bharat Heavy Electricals

------------------- in Rs. Cr. -------------------

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 8.00 14.50 24.50 15.25 17.00

Operating Profit Per Share (Rs) 53.25 90.85 144.84 76.54 85.55

Net Operating Profit Per Share (Rs) 393.81 549.17 709.38 399.19 543.68

Free Reserves Per Share (Rs) 219.29 267.56 348.80 209.99 254.23

Bonus in Equity Capital -- -- -- 50.00 50.00

Profitability Ratios

Operating Profit Margin(%) 13.52 16.54 20.41 19.17 15.73

Profit Before Interest And Tax Margin(%) 10.90 14.36 18.47 16.73 13.96

Gross Profit Margin(%) 15.38 18.11 22.41 17.65 14.47

Cash Profit Margin(%) 11.78 13.97 14.88 15.59 12.12

Adjusted Cash Margin(%) 9.18 11.71 15.07 15.59 12.12

Net Profit Margin(%) 9.58 12.19 13.51 13.87 11.36

Adjusted Net Profit Margin(%) 6.98 9.92 13.70 13.87 11.36

Return On Capital Employed(%) 21.22 29.35 42.84 41.56 37.00

Return On Net Worth(%) 15.82 23.00 27.48 26.53 24.25

Liquidity And Solvency Ratios

Current Ratio 1.63 1.53 1.43 1.38 1.36

Quick Ratio 1.22 1.17 1.13 1.09 1.02

Debt Equity Ratio 0.09 0.08 0.01 0.01 0.01

Long Term Debt Equity Ratio 0.09 0.08 0.01 0.01 0.01

Debt Coverage Ratios

Interest Cover 17.11 39.28 87.78 127.55 157.71

Total Debt to Owners Fund 0.09 0.08 0.01 0.01 0.01

Financial Charges Coverage Ratio 19.80 43.46 93.42 135.94 168.59

Financial Charges Coverage Ratio Post Tax 15.40 33.77 62.37 90.12 114.07

Management Efficiency Ratios

Inventory Turnover Ratio 3.41 3.68 4.24 3.88 3.70

Debtors Turnover Ratio 1.82 2.05 2.06 1.80 1.90

Investments Turnover Ratio 3.79 4.15 4.64 3.88 3.70

Fixed Assets Turnover Ratio 8.31 11.87 14.62 4.48 5.20

Total Assets Turnover Ratio 1.47 1.72 1.97 1.81 2.05

Asset Turnover Ratio 2.67 3.54 4.27 4.48 5.20

Average Raw Material Holding 76.99 75.00 78.98 88.75 80.96

Average Finished Goods Held 12.48 11.47 10.27 12.03 9.74

Number of Days In Working Capital 202.17 178.86 157.05 169.89 140.04

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 23.33 24.09 28.67 30.54 31.02

Dividend Payout Ratio Cash Profit 18.97 21.02 26.04 27.66 28.03

Earning Retention Ratio 68.01 70.40 71.73 70.07 67.69

Cash Earning Retention Ratio 75.67 74.91 74.30 72.83 70.92

Adjusted Cash Flow Times 0.59 0.35 0.03 0.03 0.04

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09

Earnings Per Share 38.95 68.60 98.66 58.41 64.11

Book Value 246.24 298.31 359.06 220.10 264.32

ANALYSIS

DEBT EQUITY RATIO

A higher debt equity ratio indicates a riskier financial position than a lower debt equity ratio, with 1:1 considered as ideal.

Debt-Equity ratio 0.09 0.08 0.01 0.01 0.01

Debt –Equity ratio has been under control since 2005.

CURRENT RATIO

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

A higher ratio indicates poor investments policies of the management and poor inventory control, while low ratio indicates lack of liquidity and shortage of working capital, with 2:1 considered as ideal because current assets should be two times to current liabilities.

Current ratio 1.63 1.53 1.43 1.38 1.36

Current ratio has been kept at lower levels since last five year.

QUICK RATIO

Quick ratio of 1:1 is considered as ideal. It indicates short term debt paying capacity of the organization.

Quick ratio 1.22 1.17 1.13 1.09 1.02

INVENTORY TURNOVER RATIO

Higher ratio indicates that higher sales are being made by a unit of investment in stock. High ratio shows that the company works on comparatively low margin of profit. Ratio shows better performance if it increases, it shows that investment in stocks leads to higher sales and vice versa.

Inventory turnover ratio 3.41 3.68 4.24 3.88 3.70

Inventory turnover ratio has remained at lower levels since last five years and has moved in both directions in the past five years.

DEBTORS TURNOVER RATIO

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

The ratio shows how quickly debtors are converted into cash. A standard ratio is set by the company. The resulting ratio if turns out to be lower than the standard ratio, indicates inefficient working by the company.

Debtors turnover ratio 1.82 2.05 2.06 1.80 1.90

The ratio has remained at relatively lower levels since last five years.

ASSET TURNOVER RATIO

The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars.

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue - the higher the number the better. It also indicates pricing strategy: companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.

Asset turnover ratio 2.67 3.54 4.27 4.48 5.20

Although at lower levels the ratio has increased uptill 2009.

OPERATING PROFIT MARGIN

A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt.

Operating profit margin(%) 13.52 16.54 20.41 19.17 15.73

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Over the past five years operating profit margin peaked in 2007 but since then has declined, reflecting not a healthy margin as compared to 2007.

NET PROFIT MARGIN

The ratio of net profits to revenues for a company or business segment - typically expressed as a percentage – that shows how much of each dollar earned by the company is translated into profits.

Net Profit Margin = Net Profit / Revenue

Net profit margin(%) 9.58 12.19 13.51 13.87 11.36

Net profit margin have declined in 2009, when they saw a constant from 2005 to 2008.

EARNINGS PER SHARE (EPS)

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability.

Earnings per share 38.95 68.60 98.66 58.41 64.11

The EPS indicates a good performance by the company.

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

BHARAT FORGE

ABOUT THE COMPANY

The Company was incorporated on 19th June 1961 at Mumbai. The main object of the Company is to manufacture forgings and finished crankshafts.

Business:

Bharat Forge Limited (BFL), the flagship company of the USD 2.4 billion Kalyani Group, manufactures various forged and machined components for the automotive and non-automotive sector.

Since commencement of operations in 1966, BFL has achieved several milestones and is today among the largest and technologically most advanced manufacturer of Forged & Machined components. As one of India’s emerging multinationals, the company has manufacturing operations across 12 locations and 6 countries - 4 in India, 3 in Germany, one each in Sweden, Scotland, and USA & 2 in China.

BFL’s customers include the top five Passenger Car & top five Commercial Vehicle Manufacturers in the world and the total customer list includes almost all the major names in the automotive business. Every second heavy truck manufactured in USA runs on a "Made by Bharat Forge, India" front axle beam.

BFL manufactures wide range of highly engineered critical and safety components for Engine and Chassis applications for the automotive industry.

BFL today is among the few global automotive component manufacturers with capability to offer front line design & engineering, dual shore manufacturing capability and full service supply capability.

Backed by a full service supply capability and dual-shore manufacturing model, Bharat Forge provides end-to-end solutions from product conceptualization to designing and finally manufacturing, testing and validation.

Products:

Bharat Forge is the country’s largest manufacturer and exporter of automotive components and leading chassis component manufacturer in the world. With significant global market share, it is ranked among the leading forging companies in the world.

With manufacturing facilities spread over 12 locations - 4 in India, 3 in Germany, and 1 each in Sweden, Scotland, North America and 2 in China, the company manufactures a wide range of safety and critical components for passenger cars, commercial vehicles and diesel engines.

The company also manufactures specialized components for the aerospace, power, energy, oil & gas, rail & marine, mining & construction equipment, and other industries. It is capable of producing complex large volume parts in both steel and aluminium.

FACT SHEET

Industry Name Forgings

House Name Kalyani Group

Year Of Incorporation 1961

Regd. Office

Address Mundhwa,, Pune Cantonment

District Pune

State Maharashtra

Pin Code 411036

Tel. No. 020-26702777,020-26702476

Fax No. 020-26822163

Email : [email protected] Internet : http://www.bharatforge.com

AuditorsDalal & Shah

Registrars

Name Bharat Forge Ltd.

Address Mundhwa, Pune Cantonment, Pune - 411036, Maharashtra

http://www.bharatforge.com/

mailto:[email protected]

MANAGEMENT

Name Designation

B N Kalyani Chairman and Managing director

S D Kulkarni Director

Uwe Loos Director

Lalita D Gupte Director

Alan Spencer Director

Amit B Kalyani Executive Director

S E Tandale Executive Director

Sunil K Chaturvedi Executive Director

Naresh Narad Additional Director

Name Designation

S M Thakore Director

Pratap G Pawar Director

P C Bhalerao Director

P H Ravikumar Director

G K Agarwal Deputy Managing Director

B P Kalyani Executive Director

P K Maheshwari Executive Director

V K Jairath Additional Director

BALANCE SHEET – BHARAT FORGE

Mar '05Mar '06

Mar '07 Mar '08 Mar '09

12

mths12 mths 12 mths 12 mths 12 mths

Sources Of Funds





Reserves 383.00 1,109.67 1,272.26 1,428.74 1,442.39


Networth 442.56 1,164.13 1,326.80 1,473.28 1,486.93

Secured Loans 383.21 381.60 373.57 461.58 870.66

Unsecured Loans 34.67 610.86 1,028.04 825.91 937.21

Total Debt 417.88 992.46 1,401.61 1,287.49 1,807.87

Total Liabilities 860.44 2,156.59 2,728.41 2,760.77 3,294.80

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09

12

mths12 mths 12 mths 12 mths 12 mths


Gross Block 948.78 1,265.12 1,735.06 2,029.63 2,684.23

Less: Accum. Depreciation 421.33 489.87 583.13 711.77 853.07

Net Block 527.45 775.25 1,151.93 1,317.86 1,831.16

Capital Work in Progress 278.47 372.30 280.71 436.43 232.28

Investments 38.35 444.02 450.71 593.67 367.20

Inventories 186.08 254.27 302.79 338.12 364.24

Sundry Debtors 143.06 188.55 253.95 356.29 260.11

Cash and Bank Balance 26.62 22.05 13.73 15.79 33.94

Total Current Assets 355.76 464.87 570.47 710.20 658.29

Loans and Advances 429.16 591.78 557.08 777.60 748.93

Fixed Deposits 1.50 483.36 722.54 149.20 332.76

Total CA, Loans & Advances 786.42 1,540.01 1,850.09 1,637.00 1,739.98

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 517.21 614.51 695.46 772.86 574.71

Provisions 257.36 361.73 309.80 451.33 301.11

Total CL & Provisions 774.57 976.24 1,005.26 1,224.19 875.82

Net Current Assets 11.85 563.77 844.83 412.81 864.16


Total Assets 860.42 2,156.59 2,728.41 2,760.77 3,294.80

Contingent Liabilities 524.31 444.62 699.45 721.47 671.52

Book Value (Rs) 106.84 51.93 59.14 66.17 66.78

Cash Flow ------------------- in Rs. Cr. -------------------






-268.70 -634.19 -238.62 -618.75 -68.93


150.29 939.55 173.71 -298.17 52.58


19.52 477.29 230.86 -571.29 201.72



Key Financial Ratios ------------------- in Rs. Cr. -------------------

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09


Face Value 10.00 2.00 2.00 2.00 2.00





Bonus in Equity Capital 21.94 19.52 19.49 19.49 19.49



Profit Before Interest And Tax Margin(%)

24.00 19.72 19.15 17.02 14.13









Current Ratio 0.76 1.14 1.18 0.89 1.34

Quick Ratio 0.77 1.31 1.53 1.04 1.55




Interest Cover 11.02 9.26 7.98 5.97 4.95



Financial Charges Coverage Ratio Post Tax 7.39 6.17 5.17 4.93 3.53
















AdjustedCash Flow Times 1.81 3.54 4.05 3.62 5.47

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09


Book Value 106.84 51.93 59.14 66.17 66.78

ANALYSIS

DEBT EQUITY RATIO



Debt –Equity ratio has fluctuated over past five years but has been under control since 2005.

CURRENT RATIO


Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Current ratio 0.76 1.14 1.18 0.89 1.34


QUICK RATIO


Quick ratio 0.77 1.31 1.53 1.04 1.55


Higher ratio indicates that higher sales are being made by a unit of investment in stock. High ratio shows that the company works on comparatively low margin of profit. Ratio shows better performance if it increases, it shows that investment in stocks leads to higher sales and vice versa.


Inventory turnover ratio has increased in last five years. It was highest in 2008.


Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009


= Credit sales / Average amount receivable


The ratio has declined over last five years and is not a healthy sign.





The ratio has declined continously in last five years.



Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009


Over the past five years operating profit margin peaked in 2005 but since has fluctuated in both directions but by 2009 has declined considerably as compared to 2005 and is not a healthy indication.

NET PROFIT MARGIN




Net profit margin have declined sharply by 2009, and depicts companies unhealthiness.



Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009


The sharp decline in EPS over the years show poor permformance by the company.

Crompton Greaves

Introduction

Crompton Greaves (CG) is part of the US$ 3 bn Avantha Group, a conglomerate with an impressive global footprint.

Since its inception, CG has been synonymous with electricity. In 1875, a Crompton 'dynamo' powered the world's very first electricity-lit house in Colchester, Essex, U.K. CG's India operations were established in 1937, and since then the company has retained its leadership position in the management and application of electrical energy.

Today, Crompton Greaves is India's largest private sector enterprise. It has diversified extensively and is engaged in designing, manufacturing and marketing technologically advanced electrical products and services related to power generation, transmission and distribution, besides executing turnkey projects. The company is customer-centric in its focus and is the single largest source for a wide variety of electrical equipments and products.

With several international acquisitions, Crompton Greaves is fast emerging as a first choice global supplier for high quality electrical equipment.

History

The history of Crompton Greaves goes back to 1878 when Col. R.E.B. Crompton founded R.E.B.Crompton & Company. The company merged with F.A Parkinson in the year 1927 to form Crompton Parkinson Ltd., (CPL). Greaves Cotton and Co (GCC) was appointed as their concessionaire in India. In 1937, CPL established, it's wholly owned Indian subsidiary viz. Crompton Parkinson Works Ltd., in Bombay, along with a sales organization, Greaves Cotton & Crompton Parkinson Ltd., in collaboration with GCC. In the year 1947, with the dawn of Indian independence, the company was taken over by Lala Karamchand Thapar, an eminent Indian industrialist. Crompton Greaves is headquartered in a self-owned landmark building at Worli, Mumbai.

Products & Services Offered

The company is organized into three business groups viz. Power Systems, Industrial Systems, Consumer Products. Nearly, two-thirds of it's turnover accrues from products lines in which it enjoys a leadership position. Presently, the company is offering wide range of products such as power & industrial transformers, HT circuit breakers, LT & HT motors, DC motors, traction motors, alternators/ generators, railway signaling equipments, lighting products, fans, pumps and public switching, transmission and access products. In addition to offering broad range of products, the company undertakes turnkey projects from concept to commissioning. Apart from this, CG exports it's products to more than 60 countries worldwide, which includes the emerging South-East Asian and Latin American markets.

Thus, the company addresses all the segments of the power industry from complex industrial solutions to basic household requirements. The fans and lighting businesses acquired "Superbrand" status in January 2004. It is a unique recognition amongst the country's 134 selected brands by "Superbrands", UK.

Acquisitions - Crompton Greaves Ltd., now an Indian MNC

Pauwels Acquisition Crompton Greaves has completed the acquisition of the Belgium-based Pauwels on 13th May 2005. The group has manufacturing facilities in Belgium, Ireland, Canada, USA and Indonesia and well spread distribution network across the globe. The acquisition catapults the company amongst top ten transformer manufacturers in the world. It has truly transformed into an Indian MNC making a long-cherished dream finally come true.

Apart from strengthening it's foothold in the Indian market, Crompton Greaves acquisition of the Pauwels Group and it's transformer manufacturing facilities in five countries is expected to provide a significant impetus to the company's international presence.

The additional turnover of approximately Rs.1,380 crore of Pauwels Group for it's last financial year is expected to increase Crompton Greaves' International business to around 50% of it's turnover, making the company a force to reckon with, in the international market.

Ganz AcquisitionCrompton Greaves have also successfully acquired Hungarian based Ganz (GTV), engaged in the manufacture of EHV Transformers, Switchgear, Gas Insulated Switchgear (GIS), Rotating Machines and Contracting businesses and Transverticum Kft (TV), engaged in the supporting areas of design, erection, commissioning and commercial activities on 17th October, 2006;TV being a subsidiary of GTV.

Microsol AcquisitionThe acquisition of Microsol Holdings Limited (MHL) and its associate companies in May 2007 is yet another significant stride in CG's journey towards positioning itself as a Global T&D Solutions Provider.

MHL, based in Ireland with facilities in UK and USA, is engaged in the business of providing sub-station and distribution automation for the utility industry including MV and HV sub-stations, new sub-stations and retro-fitting solutions for existing sub-stations. The acquisition reinforces CG's ability to design, build and service world-class sub-stations, with state-of-the-art automation & high-end engineering.

Sonomatra AcquisitionCrompton Greaves concluded an arrangement for the acquisition of Societe Nouvelle de Maintenance de Transformateurs (Sonomatra) of France in June 2008. Sonomatra provides on-site maintenance and repair of power transformers and on-load tap changers, oil analysis, oil treatment and retro filling. The approximate enterprise value of this acquisition is €1.30 mn. This acquisition will enhance Crompton Greaves' capabilities in the services segment of its transmission and distribution business and is the company's fourth international acquisition.

Manufacturing, Marketing & Servicing Network.

CG's business operations consist of 22 manufacturing divisions spread across in Gujarat, Maharashtra, Goa, Madhya Pradesh and Karnataka, supported by well knitted marketing and service network through 14 branches in various states under overall management of four regional sales offices located in Delhi, Kolkata, Mumbai and Chennai. The company has a large customer base, which includes State Electricity Boards, Government bodies and large companies in private and public sectors.

Future Outlook.

The quality of households is enhanced when their money is invested into products such as fans and lighting for basic comforts. Their lives are literally touched by delight. Similarly, Crompton helps electricity boards and other utilities to reach electricity to the last home and factory. Therefore, every individual in India who uses electricity can be considered as Crompton customer. Hence, the company continues to further and consolidate the initiatives that Colonel Crompton set into motion by focusing on meeting increasing customer demands for products that are eco-friendly, energy efficient and with intelligent monitoring and control systems.

All economic indicators point towards the manufacturing sector being the future driver of India's economic growth. India is today preferred destination for sourcing various engineering goods not only due to low cost but also due to high quality of products. Although, the climate for the manufacturing sector is bright, the concern is the threat of imminent competition from global players who are already in the process of setting up manufacturing facilities in India. The market is expected to remain competition with an added element of competition from imported products.

However, several measures that the company has already taken and it's plans for the future, together with business impact of the Pauwels acquisition, will equip the company to respond in adequate measure to this competitive pressure.

Crompton Greaves

Balance Sheet ------------------- in Rs. Cr. -------------------

Mar'05 Mar '06 Mar '07 Mar '08 Mar '09

12mth

s12 mths 12 mths 12 mths 12 mths

Sources Of Funds





Reserves 34.07 468.77 586.01 842.67 1,153.99


Networth 40.88 536.38 674.30 930.75 1,241.89

Secured Loans 24.88 217.12 241.35 62.37 34.52

Unsecured Loans 6.57 32.65 28.69 25.19 19.15

Total Debt 31.45 249.77 270.04 87.56 53.67

Total Liabilities 72.33 786.15 944.34 1,018.31 1,295.56

Mar '05

Mar '06 Mar '07 Mar '08 Mar '09

12mth



Gross Block 80.86 847.41 915.31 1,055.51 1,111.53


Net Block 34.21 349.72 390.00 492.71 510.71


Investments 6.82 102.13 135.11 194.33 265.52

Inventories 17.71 191.81 247.01 262.95 281.32

Sundry Debtors 54.11 659.64 803.89 956.22 1,012.26


Total Current Assets 79.16 920.39 1,188.47 1,328.84 1,475.07


Fixed Deposits 0.00 56.19 36.00 47.98 291.02

Total CA, Loans & Advances 89.08 1,162.51 1,468.57 1,670.97 2,100.28

Deffered Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 57.16 782.30 934.69 1,108.20 1,265.88

Provisions 1.57 59.99 158.04 254.10 328.02

Total CL & Provisions 58.73 842.29 1,092.73 1,362.30 1,593.90



Total Assets 72.33 786.15 944.33 1,018.30 1,295.56


Book Value (Rs) 7.51 99.52 17.99 24.99 33.48

Crompton Greaves

Cash Flow ------------------- in Rs. Cr. -------------------






-29.80 -70.53 -134.42 -179.34 -120.17


-35.19 -119.63 -56.46 -279.67 -137.41


68.08 60.71 48.45 -15.93 314.86

Opening Cash & Cash Equivalents -105.52 64.42 125.13 173.58 157.65

Closing Cash & Cash Equivalents -37.44 125.13 173.58 157.65 472.51

Crompton Greaves


Mar'0

5Mar '06 Mar '07 Mar '08 Mar '09


Face Value 10.00 10.00 2.00 2.00 2.00





Bonus in Equity Capital 30.93 30.93 50.66 50.66 50.66




6.43 7.96 8.86 11.18 15.02









Current Ratio 0.97 1.21 1.09 1.18 1.32

Quick Ratio 1.22 1.12 1.11 1.02 1.13




Interest Cover 5.70 8.16 10.14 15.11 26.49



Financial Charges Coverage Ratio Post Tax

7.86 8.28 8.26 12.25 16.49

















Mar '05

Mar '06 Mar '07 Mar '08 Mar '09


Book Value 7.51 99.52 17.99 24.99 33.48

CROMPTON GREAVES ANALYSIS

DEBT EQUITY RATIO



Debt –Equity ratio has been under control since 2005,but has declined tremendously in 2009.

CURRENT RATIO


Current ratio 0.97 1.21 1.09 1.18 1.32

Current ratio has increased since last five years.

QUICK RATIO


Quick ratio 1.22 1.12 1.11 1.02 1.13

The ratio has shown ordinary levels since last 5 yrs.


Higher ratio indicates that higher sales are being made by a unit of investment in stock. High ratio shows that the company works on comparatively low margin of profit. Ratio shows better

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

performance if it increases, it shows that investment in stocks leads to higher sales and vice versa.


Inventory turnover ratio has remained at lower levels since last five years and has moved in both directions in the past five years.









Although at lower levels the ratio has increased uptill 2009.


Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009



Over the past five years operating profit margin peaked in 2009, reflecting a healthy margin for company.

NET PROFIT MARGIN




Net profit margin have increased in 2009.





Kirloskar Oil Engines Ltd.

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Manufacturer of the wide range of Diesel Engines, Diesel Generating Sets and Engine Bearings and Engine Valves.

Year of incorporation : 1946 Sales Income, year ending March 31, 2007 : Rs. 1,883 Cr. / USD 470 MillionNo. of employees : 2,858

Business Areas We are the acknowledged leader in Engines, Engine Bearings, Engine Valves, and Diesel Generating Sets.

Our engines are the preferred choice when it comes to powering Agricultural Machinery, Construction & Material Handling Machinery, Marine applications and equipment used by Armed Forces (Military).

Our Diesel Generating Sets in the range 2 Kva to 6 MW are preferred by the industry at large, households and the service sector comprising of banks, telecommunication establishments, commercial use buildings, hotels and restaurants. We also offer generating sets over 1 MW that run on Heavy Fuel Oils. Similarly, our Engine Bearings and Engine Valves are the chosen ones for OEM use in automobiles and other engines.

Product RangeOur product range includes Diesel Engines, Irrigation Pump sets, Diesel Generating Sets, Engine Bearings and Engine Valves.

Vision 2012We will become a major Global Player in off–highway engines and power generation businesses by offering winning combinations of Quality, Cost and Delivery through innovation and unmatched service.

We will be amongst the Top Five engine companies of the world.

While pursuing the above, we will continue to enhance the value of engine bearing and valves business.

Career opportunityKOEL is all set to take on challenges of tomorrow. Human capital is the only Sustainable Competitive Advantage we have to do so. We recognize this, and hence the potential performers will get what they truly deserve and not what the Market determines!

Learning Unlimited… Learning does not stop until you wish so! At KOEL, in our continuous strive to Enriching Lives; KOELians are put to test their mettle. It helps us to Learn, Unlearn, & Relearn the facets of business dynamics as well as achieve Personal Mastery.

Work Life BalanceThe Best Place to be: At KOEL we strive not only to make it The Best Place to Work For, but The Best Place To Be where Work is not Job, but a means to achieve Satisfaction, a place where you

come with a smile, and leave with a smile.

Social ResponsibilitySocial Responsibility: at KOEL, we do believe that all our efforts have to be aligned for the betterment of the society that we live in, that we owe to the society. You will get an opportunity to serve the society the way you like to.

Kirloskar Oil EnginesBalance Sheet ------------------- in Rs. Cr. -------------------


12mth


Sources Of Funds





Reserves 542.66 698.96 831.93 876.16 921.25


Net worth 562.08 718.38 851.35 914.99 960.08

Secured Loans 51.49 66.84 99.42 342.77 348.94

Unsecured Loans 0.23 0.17 6.89 0.12 0.05

Total Debt 51.72 67.01 106.31 342.89 348.99

Total Liabilities 613.80 785.39 957.66 1,257.88 1,309.07


12mth



Gross Block 421.51 483.38 530.51 921.32 992.39


Net Block 131.81 169.37 274.92 645.97 654.84


Investments 378.41 499.89 517.39 476.33 471.88

Inventories 86.61 110.94 148.36 194.05 123.88

Sundry Debtors 219.77 308.43 389.25 356.46 292.43


Total Current Assets 312.58 432.40 573.07 612.10 495.42


Fixed Deposits 0.49 4.61 5.85 0.01 0.01

Total CA, Loans & Advances 505.52 679.94 869.91 1,014.11 710.53

Deferred Credit 0.00 0.00 0.00 0.00 0.00

Current Liabilities 266.73 386.73 505.72 609.81 406.02

Provisions 148.10 199.94 256.10 333.64 140.29

Total CL & Provisions 414.83 586.67 761.82 943.45 546.31



Total Assets 613.78 785.37 957.68 1,257.89 1,309.08


Book Value (Rs) 285.99 73.10 87.69 47.12 49.44

Kirloskar Oil Engines

Cash Flow ------------------- in Rs. Cr. -------------------






-78.64 -68.99 -100.59 -363.18 0.48


-2.71 -28.39 -13.39 179.16 -48.65


-19.04 10.95 23.71 20.30 17.51



Kirloskar Oil Engines


Mar'0

5Mar '06 Mar '07 Mar '08 Mar '09


Face Value 10.00 2.00 2.00 2.00 2.00





Bonus in Equity Capital -- -- -- 49.99 49.99




6.55 6.76 8.67 8.55 8.75









Current Ratio 1.08 1.05 1.09 1.01 1.25

Quick Ratio 0.97 0.95 0.93 0.85 1.02




Interest Cover 33.83 25.28 24.69 16.42 6.96



Financial Charges Coverage Ratio Post Tax

29.73 24.47 10.08 9.26 6.22

















Mar '05

Mar '06 Mar '07 Mar '08 Mar '09


Book Value 285.99 73.10 87.69 47.12 49.44

KIRLOSKAR OIL ENGINES ANALYSIS

DEBT EQUITY RATIO



Debt –Equity ratio has been under control since 2005.

CURRENT RATIO


Current ratio 1.08 1.05 1.09 1.01 1.25


QUICK RATIO


Quick ratio 0.97 0.95 0.93 0.85 1.02

Since 2005, in year 2009 company’s ratio is very close to perfection.


Higher ratio indicates that higher sales are being made by a unit of investment in stock. High ratio shows that the company works on comparatively low margin of profit. Ratio shows better

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

performance if it increases, it shows that investment in stocks leads to higher sales and vice versa.


Inventory turnover ratio has remained at lower levels since last five years and has moved in both directions in the past five years. In year 2009 it has increased tremendously.









The ratio has decreased in 2009.


Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009



Over the past five years operating profit margin started picking up in 2007, and has increased till 2009, reflecting a healthy position of company.

NET PROFIT MARGIN




Net profit margin have declined in 2009, company saw a constant decline from 2005 to 2009.





Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Year 2005

Year 2006

Year 2007

Year 2008

Year 2009

Documents

Eic Analysis (Capital Goods)