CASE STUDY PRESENTATION

ONDivya handtools pvt. Ltd(CONCEPTS OF VALUE &

RETURN)BY -:AISHWARYA ANAND A-01Nishi lakra a-24RITESH KUMAR A-30

Introduction of the related industry

SWOT Ananlysis Summarization of the case study Problems Questions and Alternative solutions Conclusion

CONTENTS

HANDTOOLS INDUSTRY Hand tools are those types of non-powered

tools which are designed for use by experts as well as in Do-It-Yourself (DIY) projects, like home repairs, general maintenance, woodworking, building, mechanics and gardening. The hand tool industry is facing new challenges related to worldwide business globalization and the invention and use of electronic business .

Every single manufacturer, irrespective of its size and importance in the market, should watch the movements in its business environment , in order to adjust activities accordingly .

The hand tools are available in varies shapes, sizes and designed for specific purposes.

A LABOR INTENSIVE INDUSTRY : A source of employment to many, hand tools industry is basically labor intensive in nature, whose development is of great importance for a competitive as well as a self-reliant industrial structure. The manufacturers of hand tools produce a comprehensive range of of hand tools, right from carpentry and plumbing tools to striking and cutting tools.

EFFECTIVE CONTRIBUTOR TO THE ECONOMY : Adding positively to the income of a country, hand tools industry has contributed to economy in terms of development and technology up-gradation.

CHARACTERSTICS OF THE INDUSTRY

This depends on the following factors -:

Price sensitivity Supply chain dynamics Rationalization Product quality, design and safety Service Environmental factors

CONSUMPTION PATTERNS OF HAND TOOLS

Generally speaking, hand tools products are applied in the following market segments:

Households Professionals (e.g. carpenters, plumbers,

craftsmen, toolmakers etc).

MARKET SEGMENT

Hand tool industry is a growing one. Developed countries like EU, USA have already been manufacturing and exporting hand tools since a long time. Developing countries like India, China, Japan are coming up. Some factors that are to be considered for the overall development of the industry are as follows:

Manufacturing centers should be equipped with the latest hand tool manufacturing technology.

For small, medium scale entrepreneurs in the developing areas, credit should be made available to them at lower rates of interest.

This industry is usually a part of hand and power tool industry as a whole. Hence, steps should be taken to built up a Hand Tool Industrial Estate, exclusively for the Hand Tools Units, in all countries.

Labor laws of all countries dealing with hand tools should be made more investor friendly, specially for small entrepreneurs.

FACTORS TO CONSIDER FOR THE GROWTH OF THE HAND TOOL

INDUSTRY

SWOT ANALYSIS

STRENGTH :

Competitive Price. Distribution Network. Innovative Design of the Products which can

increase Efficiency. Direct delivery capability.

Weakness:

Limitation of Product Line. Large capital oriented. Reliability of data, plan predictability Cash flow.

Opportunities:

Market Development. Technology Development and Innovation. New market. Business Product Development. Partnership Agencies and Distribution.

Threats :

Political Effect. Environmental Effect. IT Development. Market Demand. New Technologies, Service and Ideas.

DHPL is a small-sized firm manufacturing hand tools. Manufacturing plant is situated in Faridabad. The company’s sale Rs.100 crores , net profit 7.6

crores . To extend the further profitability there are two

investment proposals. 1st , is to expand manufacturing capacity & the estimated cost of new equipment is Rs. 25 crores. It’s having an expected economic life of 10 years.2nd is to replace an old machine to reduce the cost of operation . The new machine involve a net cash outlay of Rs.5 crores. The expected life of the machine is 10 years without any salvage value.

SUMMARY OF THE CASE STUDY

If the company accepts both projects , then it has to raise external fund of Rs.20 crores . Internal funds are available of Rs.10crores.

Two options of borrowing fund:- 1st : company can borrow funds from State

Bank of India , at 14% p.a. rate of interest for 10 years . For which it has to pay equal annual instalments of interest & repayment of principal .

2nd : A large Financial Institution has offered to lend money at low rate if interest(13.5%p.a) .

The financial institution has made another offer i.e. it can lease the equipment for the capacity expansion and for replacing old equipment to the company at annual rental of Rs. 5.2 crores payable at the beginning of the year.

Company wants to increase its profitability.To extend the profit company has two options one is to buy new equipment , other is to replace the old equipment . To fulfill both options company has to take loan from outside.Now the problem is that , from where company should take loan for witch company has to pay less rate of interest.

PROBLEM

Q :- What is the minimum amount of saving from the replacement that would justify the expenditure ?

Ans :- S=50000000 ,N=10 ,I =0.14,R=?S=R[(1+i)n-1]

=50000000=R[(1+0.14)10-1] I 0.14 Let X=(1.14)10 ,then

logX=10log1.14=0.569X=antilog0.569 =3.707 50000000= R(3.707-1) 0.14R =12585888.43

Qg :- What is the annual installment of the SBI loan AnS :- S=200000000,n=10,i=0.14,R=?

S= R[(1+i)n-1] ,200000000=R[(1+0.14)10-1]

I 0.14Let X=(1.14)10, logX=10log1.14=0.569X=antilog0.569=3.707200000000=R[3.707-1] 0.14R=10343554

Q :- Calculate the quarterly installment of the financial institution loan ?

Ans :-S=200000000, n=40,i=0.0337,R=? S=R[(1+i)n-1], , S=R[(1+o.o337)40-1]

I 0.0337LetX=(1+0.0337)40,logX=40log0.0337=

2.1104X=antilog2.1104=1.289200000000= R[1.289-1], R=

200000000(.337) 0.o337 0.289R=23321799

Q :- Should the company borrow from the SBI or the financial institution ?

Ans :-The company should borrow from Financial institution because in the financial institution, company has to pay quarterly interest and due to the payment it has to pay less interest and the interest rate is also low from SBI.

Q :- Would you recommend borrowing from the financial institution or get the equipment on lease ?

Ans :-As per the case ,we will recommend borrowing from financial institution; because the annual lease rent is 52million which is very high value it’ll be better to borrow from financial institution. In the case if company borrow then it has to pay less interest & less amount as compare to take it on lease.

The conclusion is that if the company wants to extend its profit it has to take loan from outside to buy new equipment or to replace the equipment. If the company decide to buy new equipment then it should take loan from the financial institution. It will be beneficial for the company.

CONCLUSION

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