IMaCS Capabilities - Automotive Sector 2013IMP

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Capability StatementAutomotive Sector

2013

ICRA Management Consulting Services Limited


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Automotive Sector - Capability Statement

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IMaCS - An introduction

ICRA Management Consulting Services Limited (IMaCS) is a multi-line management consulting firm

headquartered in India. It has an established track record of 17 years in management and development

consulting across various sectors and countries. IMaCS has completed more than 1200 consulting

assignments with about 600 clients and has worked in over 40 countries across the globe. IMaCS is awholly-owned subsidiary of ICRA Limited (ICRA), one of Indias leading credit rating agencies. IMaCS

operated as an independent division of ICRA till March 20051, when it was de-merged from ICRA and

became a standalone company in its present form.

About Group ICRA

Launched in 1991, ICRA has been set up by a number of prominent Indian financial institutions, banks,

and insurance companies. In September 2001, Moodys Investment Company India (Private) Limited, a

100% subsidiary of Moodys Investors Service, USA, became the single largest shareholder in ICRA. Post a

successful IPO in 2007, ICRA is a publicly listed company. ICRA has subsidiaries in Indonesia and Sri Lanka.

Group ICRA comprises four businesses,

namely, Credit Rating, Management

Consulting, Information Technology,

and Outsourcing, offered by four

different companies comprising ICRA

and its three subsidiaries, namely,

IMaCS, ICRA Techno Analytics Ltd.

(ICTEAS) and ICRA Online Limited. ICRA

is listed on the National Stock Exchangeand the Bombay Stock Exchange in

Mumbai, India.

The main driver for IMaCS growth has been a growing need for unbiased professional views on adopting

best business practices arising from

economic deregulation, deepening of

international trade and integration,

increasing uncertainty in business due to

advancement of technology and rising

volatility in the market place, and the

compelling need to be globally

competitive. IMaCS began as a firm

operating in India and has since worked

in several parts of the world on its own

1Under the name ICRA Advisory Services

IMaCS Virtus

Global Partners, Inc.

GROUP ICRA

Credit

Rating

ICRA Management

Consul t ing Services

Limited

Management

ConsultingIT

(Software)

BPO

ICRA Limited ICRA Techno

Analyt ics Ltd.ICRA Online Ltd .

ICRA Techno

Analyt ics Inc.


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and through strategic partners. Our clientele includes banks & financial service companies, private

corporates (manufacturing and service organizations), governments, government-owned organizations,

financial investors and fund managers, regulators, and multilateral agencies. Our New York based

subsidiary, IMaCS Virtus Global Partners, Inc. (www.ivgpartners.com) offers Strategy and Transactional

Advisory services to companies in North America and in India seeking to operate in the Indo-American

corridor.

Through the process of carrying out several assignments over the past 17 years, IMaCS has accumulated

considerable analytical and consulting expertise, backed by the following organisational capabilities:

An extensive and organised database on several sectors.

Knowledge of key factors of success in different projects and program.

An ability to research emerging global trends, both in specific countries as well as in different sectors,

based on primary and secondary data.

Performance benchmarking

Quantitative and financial modeling

Ability to identify the various types of risks and suggest appropriate strategies to mitigate the same

Ability to work in different geographies on its own and through affiliate partners

IMaCS Business Groups and Practice Areas

IMaCS has six practice areas grouped

under Strategy, Risk Management,

Process Consulting, TransactionAdvisory, Policy Advisory, and

Capacity Building. The different

business groups and practice areas

within IMaCS form our matrix of

service offerings. Multi-disciplinary

teams are used on most assignments.

The diversity of experience in IMaCS

teams helps it to adopt a creative and

cross-functional approach to problem solving, which has not only been very successful in practice, but

has also been well appreciated by all our clients.

Most consultants at IMaCS have advanced academic degrees and also have experience in reputed firms

before joining IMaCS. Both freshers and experienced consultants undergo formal and informal training in

IMaCS to deliver high quality solutions to clients. IMaCS clients also have the benefit of the considerable

organisational expertise that IMaCS has built up over the past 15 years.

Strategy

Risk

Management

Enhancing Competitiveness / Market Assessment / Product development/

Market Intelligence / Profit improvement

Credit Risk / Market Risk/ Operational Risk / Enterprise wide Risk management/

Risk Analytics/ Risk Software

Transaction

AdvisoryM&A / Due diligence / Project Advisory / Bid advisory / Financial restructuring

Policy&

RegulationPolicy Advisory / Regulatory Economics / PPP Models/ Governance

Process

Consulting

Cost reduction / Process re-engineering / Organisation design /

/ Supply Chain Management / Outsourcing

Capacity

Building

Investment Institutional Programme Sustainable Monitoring

Climate Strengthening Management Development & Evaluation

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Services offered by IMaCS

IMaCS has executed assignments in several sectors of the Indian economy and its consulting

activities are organised along five major functional groups:

1. The Banking and Finance Group focuses on assisting banks and financial service companies in the

areas of Strategy, Risk management, Process improvement and Transaction advisory. Our services

span the areas of M&A, purchase/sale of portfolios, setting up risk management systems across

credit/ market/ operations, strategic and business planning, organisation design and restructuring,

developing credit and portfolio risk models, derivatives strategy, corporate debt restructuring,

developing risk control processes and profit improvement studies. Besides providing consulting

services to banks, IMaCS also develops and installs software programmes in the areas of risk

management and workflow automation related to credit management. IMaCS also designs and

conducts a variety of training programmes in risk management for banks and other financial service

organisations.

2. The Corporate Advisory Group focuses on enhancing the competitiveness of clients across the

different constituents of its value chain. Its work has spanned multiple sectors and industries, with

strong expertise and experience in certain sectors such as, metals, automotive and engineering,

healthcare, hospitality and tourism, textile, retail, consumer goods and food processing. Specific

areas of consulting include competitiveness studies at firm/industry/region/country levels,

shareholder value maximisation, business process design and improvement, entry strategies and

product positioning, enterprise-wide risk management, evaluation of acquisition or divestiture plans,

and transaction assistance (e.g. partner search, valuation, due diligence, structuring deals and

business and financial restructuring).

3. The Infrastructure Group focuses on policy and transactional projects in the areas of sector reform

and restructuring, creating public private partnerships, and building capacity in government and

public sector institutions. At the policy level, IMaCS seeks to serve regulators, governments and

multilateral agencies in formulating or refining sector-wide policy issues such as licensing, regulation,

business rules, competition, tariffs, service level obligations, and subsidies. At a transaction level, the

Group has accumulated substantial experience and skills in handling engagements related to

regulatory representations, financial modeling, structuring payment and security mechanisms,

designing project contracts and concession agreements, and providing assistance in financial closurefor various infrastructure projects.

4. The Energy Group focuses on strategy, policy and transactional issues related to the Electricity,

Renewable energy, and the Oil and Gas sectors. The Group has garnered significant expertise in the

restructuring and reform process in the electricity sector by having been associated with multiple

entities such as the government, regulators, state owned and private power companies since the


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beginning of the reforms process in the sector. Our services in the energy domain encompass

regulatory assistance to utilities and regulatory commissions, restructuring and privatization,

formulating strategies and business plans for utilities, conducting market assessment studies for

investors/utilities, providing assistance to developers/project appraisal/project risk assessment, and

investment and transaction assistance. IMaCS has also assisted Indian and international business

groups in formulating strategies to enter the energy business. IMaCS has completed several projects

in the renewable sector covering diverse technologies such as wind, hydro, co-generation, and

biomass, and has also worked on policy level assignments.

5. IMaCS Development Consulting Group has emerged out of IMaCS experience in working with

profit-seeking organisations and investors that the principles and practices that commercial

enterprises follow are just as applicable for organizations working in the not-for-profit, government

and social development. The significant difference between for-profit and not-for-profit

organizations is essentially in how they are funded and/or in the expectations of returns of their

respective sponsors. As far as operations or efficiency is concerned, there should not be too muchdifference between the ways they work, if they are to be successful. The quest for strategic clarity,

operating efficiency, and financial sustainability remain the top priorities for senior management of

all kinds of organizations, spanning from profit-seeking enterprises to not-for-profit organizations in

the development sector. IMaCS works with governments at various levels national, state or local

government - in a bid to help them become more effective in achieving their objectives. Our clients

include Government institutions at central, state and local levels, bilateral and multilateral aid

agencies in India and overseas.


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Select Automotive Sector clients

Mahindra & Mahindra

TATA Motors Limited

Volvo India Private Limited

Hyundai Motor India Limited

Honda Siel Cars India Limited

Eicher Motors Limited

Escorts Limited

Apollo Tyres Limited

Cummins India Limited

IDIADA, Spain

Sumitomo Corporation India PrivateLimted

Roots Industries Limited

Toyota Kirloskar Motor Private Limited

Society of Indian Automotive

Manufacturers (SIAM) Automotive Components

Manufacturers Association (ACMA)

IMaCS Consulting Services in the Corporate Advisory Group

Our Corporate Advisory practice focuses on enhancing client competitiveness in all areas of operation.

We focus on how to improve a firm's competitiveness across its value chain for different industry sectors

such as manufacturing and services, as well as capacity building initiatives for the government and

government-owned organisations. Our service offerings are grouped across the functions of Strategy,Operations Improvement, and Corporate Finance.

Our clients include large and medium-size corporates, family-

run businesses, SME units, Central and State Government,

Government-owned undertakings, and national/state-level

industry associations. With in-house consultants and

partnerships with some leading industry associations like

Society of Indian Automotive Manufacturers (SIAM),

Automotive Component Manufacturers Association (ACMA),

Confederation of Indian Industry (CII) and India Brand Equity

Foundation (IBEF), the Corporate Advisory Group of IMaCS

enjoys the trust of a wide repertoire of clients.

While our work has spanned multiple sectors of the economy,

we have built up expertise and are more active in certain

sectors such as Retail and Consumer Markets, Automotive &Engineering, Metals & Mining, Education & Skill Development,

Tourism & Hospitality, Healthcare & Life Sciences, and Media &

Entertainment.

IMaCS has built a wealth of experience in the Automotive sectors over the last 10 years having

researched the sector and the trends, having assessed many of the leading entities therein, and by virtue

Strategy

BusinessStrategy/PlanFormulation

CompetitivenessStudies

Market/ DemandAnalysis

Location selection

studies Entry Strategies &Product Positioning

Enterprise-wide RiskManagement (ERM)

Opportunities in thenew free trade regime

Metals & Mining

Retail & Consumer Goods

Automotive & Engineering

Telecom & Technology

Media & Entertainment

Tourism & Hospitality

Corporate

Finance

Financial Restructuring Enhancing Shareholder

Value Assessing Investment

Risks Evaluating Acquisition/

Divestiture Plans M&A -Valuation, Due

Diligence & DealStructuring

Conducting PartnerSearch & Evaluation ofJV Partners

Brand Valuation

Healthcare & Life- Sciences

Operat ions

Improvement

Business ProcessDesign & Improvement

Cost reductionOrganization Design &

RestructuringSupply Chain

ManagementOperations &

Performanceassessment

Information & SystemsDesign

Evaluation of distributionnetwork

Customer relationshipmanagement

Service Offerings erticals

Education & Skills


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Growth

strategy

Marketing

strategy

Sales/channel

management

Operations

improvement

Riskassessment

and

management

of having interacted with industry associations on policy issues. We have worked with prominent entities

amongst vehicle manufacturers, auto ancillaries and vehicle finance companies. Our client list reads as

Whos who of the Indian automotive sector.

IMaCS offerings in the Automotive Sector

Our offerings for the automotive sector are in the following broad functional areas:

We help clients set the direction for growth through consolidation of existing

businesses as well as tapping new business opportunities (new products, new market

segments, new geographies, alliances, mergers & acquisitions).

We help clients put in place effective marketing organisations and processes that

aim at targeting attractive customer segments. Areas of work include competitivepositioning of brands, brand valuation as well as improving marketing mix

effectiveness. Our allied offerings include:

Customer Segmentation: We help clients identify and target profitable

customers as well explore new user groups

Product Innovation: We focus on optimizing product innovation processes in

order to increase new product success rate and improve customer satisfaction

by delivering value at acceptable price points

Pricing: We help clients identify and tap pricing opportunities, also implement

effective pricing processes.

We help clients design channel structure and management to enhance sales and

profit. Our areas of work include establishing and optimizing sales processes,

distribution footprint analysis and sales force effectiveness.

We help clients develop and execute their operations strategy with specific programs

to improve individual areas like procurement (vendor management, vendor

evaluation), manufacturing (outsourcing) and supply chain (inventory management,

rationalizing logistic costs, optimizing time-to-market)

We help clients manage the risk from counterparties like vendors,

dealers/distributors etc., by developing counter-party risk assessment models

through which they can evaluate and monitor the counterparty risk and make

appropriate changes to their business strategy. We also provide services to clients to


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Transaction

Advisory

put in place an enterprise-wide risk management system. Further we assist clients

manage their investment risks by evaluating these and suggesting appropriate

mitigation measures.

We help clients on strategy prior to an acquisition (this will typically includefinalisation of an acquisition strategy, funding strategies, and other issues such as

organisational implications, regulatory constraints, and legal requirements),

implementing an acquisition (short-listing candidates for acquisition, due diligence,

valuation, assistance in negotiation, deal closure, and post acquisition integration),

advising potential buyers on bidding strategies (e.g. during privatisation or M&A),

implementing sale of businesses / divisions (assistance in negotiations with buyers,

facilitate due diligence and valuation, and deal closure) and joint venture structuring

(partner search, risk assessment, facilitating due diligence, and finalisation of

agreement).

In the following section, we highlight some of the assignments that IMaCS has undertaken in the

automotive sector:

Impact of the FTA between India and Thailand on the competitive strategies of the client

Client: A large Indian automobile manufacturer

Description:

The client wished to assess the impact of the Free Trade Agreement (FTA) signed between India and

Thailand on its sourcing policies and marketing strategies. We were commissioned to evaluate the impact

of FTA on the operations of the company, suggest suitable sourcing strategies and identify import threats

and export possibilities.

Approach:

A study of this kind called for an understanding of the structure and characteristics of the automobile and

auto component industry in the countries under evaluation, the factors affecting competitiveness of the

automotive industry in these countries, the product characteristics, product range and pricing policies

and the current sourcing strategies of the OEM. We accordingly evaluated the following:

Structure, composition and characteristics of the Thai auto component and automotive industries

Competitiveness of manufacturing of components in Thailand vis--vis India

Budgetary quotations of about 50 components to be manufactured in conformance with the OEMs

specifications from Thai vendors and their price competitiveness vis--vis Indian manufacturers under

an FTA scenario

Prices of different vehicle categories in Thailand and their possible landed prices in India under an

FTA scenario


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Results:

We recommended possible sourcing strategies, identified import threats for the OEMs products and also

highlighted the companys export opportunities in certain vehicle categories.

Pricing exercise for a proposed new product

Client: Leading commercial vehicles manufacturer

Description:

IMaCS carried out an independent review to validate past findings resulting from the market research

conducted by the manufacturer on the price sensitivity, expected market shares and estimated demand

for the new product to be launched by the company.

Approach:

IMaCS conducted a conjoint analysis on the past market research undertaken and also did a primary

market survey in various cities to validate the past survey. Various transporters were interviewed for the

purpose. In order to estimate future demand, IMaCS created a demand modelfor commercial vehicles

using relevant variables. The results of the primary survey and the demand modelling was used to

determine the price sensitivity of the product as well as the market size and market share expected at a

certain price point.

Results:

Enabled the client to zero in on the price of the product as well as the product specifications.

Study to setup an Inspection and Maintenance model for vehicles in India

Client: International Centre for Automotive Technology (ICAT)

Description:

IMaCS was appointed to conduct a study and suggest a suitable Inspection and Maintenance (I&M)

model for vehicles in India. ICAT is preparing the blueprint for implementing I&M systems in India under

the aegis of the Union Ministry of Road Transport and Highways (MoRTH) and IMaCS study was aimed

at providing inputs for the same.

Approach:

IMaCS carried out the study in following three phases:-

Phase IAssessment of I & M requirements in IndiaIMaCS studied the existing in-use vehicle regulatory framework and certification process to identify issues

with the existing systems. Based on the data available, IMaCS evaluated the physical infrastructure

available to carry out vehicle inspection and certification. We then analysed the profile of in-use vehicles

in terms of age of vehicles plying, the technology levels of vehicles with respect to emission standard and

safety standards and the geographical distribution of vehicles. Based on this, the I & M requirements in

India were assessed and capabilities required to run the I & M centres were identified.


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Phase IIBenchmarking of I & M models prevalent in other countries

In this phase, IMaCS studied I & M models prevalent in the US, UK, Japan, China, Singapore, Spain,

Mexico and Dubai. Specifically, IMaCS reviewed the models that have been used to ensure road

worthiness of in-use vehicles, the governance and regulatory mechanism, the policy and legal framework,

and the strategies to control emission and meet safety standards. The key outcome of this phase was to

understand the best practices in various countries and draw upon them to implement an appropriate I &

M model for India.

Phase III Recommending an appropriate I & M model for India

The focus of this phase was to recommend an appropriate I & M system factoring the following:

Prevailing vehicle maintenance and fitness certification practices and profile of vehicles

Best practices in other countries that can be adopted to suit Indian requirements

Existing vehicle ownership practices (purchase, sale, used vehicles) and registration practices

Regulatory framework for the I&M system in India

Extent of decentralisation w.r.t. fitness certification, registration and related practices

Audit mechanism to ensure implementation of a robust I & M system

Layout of typical I & M facility

Sizing of investments and funding strategies that can be adopted

Pricing policy to be adopted for different vehicles

Viability of establishing and running the I & M center

Assessment of Market potential of Indian vehicles in ASEAN countries

Client: Industry Association

Description:

IMaCS was mandated to conduct an assessment of ASEAN (Thailand, Malaysia, Indonesia, Vietnam,

Philippines, and Burma) automobile market. IMaCS carried out an in-depth assessment of the market in

these countries, the key players and consumer preferences. The recommendations focused on the

opportunities available to Indian vehicle manufacturers in accessing the ASEAN market, investment

opportunities in ASEAN and strategy to be adopted by Indian companies.

Approach:

The project was conducted in two phases. In the first phase, IMaCS team visited the individual markets

and met industry participants including industry associations, auto companies, dealers and retailers in

order to gain an understanding on the current market size, structure, trends, competition, product

offerings and price points of automobiles in ASEAN market. In addition, the team met key government

officials to discuss regulations relating to investments and auto industry.

Results:

Projection of the growth in vehicle demand in each of the markets by developing appropriate

econometric models. IMaCS also identified the likely potential barriers to the Indian players and

recommended appropriate strategies for Indian automobile players to tap the ASEAN market.


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Preparation of comprehensive sector reports for the Automobile and Auto Component

Sectors of India

Client: A leading industry association initiative

Description:

The client wanted to prepare detailed sector reports on various sectors in India for showcasing Indias

capability to foreign investors. In this assignment, IMaCS with mandated to prepare 4 sector reports

including Automobile and Auto Component Sectors and several State reports. We prepared

comprehensive sector reports using primary and secondary research covering evolution of the industry,

analysis of the market, key players, products offered and latest trends in them, geographical spread of

the industry, changes in technology, drivers of growth, competitiveness of the sectors vis-a-vis other

competing countries, government support, and several other dynamics of the industry.

Assist in identifying target companies for investment, primarily in Pune, carrying out

engineering services for the auto sector

Client: A leading Spanish Auto Engineering Services group

Description:

IMaCS had been appointed to assist the client in identifying potential target companies that the client

could invest in India. The primary aim of the assignment was to identify the potential target Auto

Engineering Service provider companies in India which could be acquired by the client for establishing its

presence in Indian market as well as leverage on the cost advantage offered by India.

Approach:

IMaCS adopted a 2-stage process to assist the client:

Stage 1 Preparation of a database of potential target companies: The focus during this stage of theassignment was to identify companies that met the clients investment criteria and to profile them

based on information available in secondary sources and the public domain. IMaCS also provided its

recommendation on companies that could be shortlisted for further investigations and discussions.

Stage 2 Establishing initial contacts with shortlisted companies: Based on the inputs received from

the client, IMaCS established initial contacts with the shortlisted companies to gauge the interest in

the opportunity and sounded them out on the possibility of investment by the Spanish company.

Results:

The client used the study and IMaCS recommendation to hold advanced talks with the target companies

and develop their entry strategy for the Indian market.

Demand forecasting for CNG buses and understanding customer requirements

Client A leading auto component manufacture, India

Description:

The client wanted to estimate the size of various segments of passenger bus market, the changing

dynamics therein and demand drivers of CNG buses. The client later wanted to understand the

configurations of CNG components required by the customer


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Approach:

IMaCS approached the assignment in following modules

Module 1 Present state estimation of sixe of market of buses across various user segments. Conducted

an adequacy check of existing product offerings vis-a-vis customer requirements

Module 2 Identify the key demand drivers for CNG buses

Module 3 Demand estimation of buses across various segments over the span of 5 years i.e. 2010-15

Module 4 Analysed customer requirements so as to arrive at the desired configuration of auto-

component/product of the client

Detailed Project Implementation Report for setting up National Automotive Testing and R &D Project

Client NATIS, (Under the Ministry of Heavy Industry, Govt. of India)

Description:

Govt. of India proposed to establish state of the art automotive testing and research facilities to support

the growth prospects of the auto industry in India. NATIS mandated the consortium of consultants

(IDIADA of Spain, IMaCS and AVL of Austria) to prepare a detailed project implementation report for

establishing the test centres. The principal test centres are being established in Manesar (N.India), Pune

and Ahmednagar (W. India), Chennai (S. India). In addition a state of the art proving ground is being

proposed in Indore (Central India) and a hill driver training institute in Silchar (N.E. India) and a off road

vehicles and tractor testing facility in Rae Bareilly (N. India)

IMaCS primary role as a part of the consortium was to evaluate the market for testing services in India,

propose typical pricing for the key tests, size up the facilities in the various centres proposed, carry out a

detailed financial feasibility for the project and recommend an ideal management structures for the test

centres.

Approach:

Phase I (Market assessment phase) -

IMaCS team got responses from OEMs and auto component manufacturers in India through one-on-one

meetings and questionnaires on their present and testing requirements, details of testing facilities

available, test carries in-house and tests carried outside India. Based on the regulatory roadmap and

future product plans (new products and freshening plans) in India, the export potential of Indian

manufacturers, IMaCS estimated the market for testing services in India. The market for testing services

was developed lab wise and demarcated into developmental testing and regulatory testing as applicable.

Phase II

IMaCS sized up the various facilities in India in terms of what labs would be located in each location and

the capabilities / equipments of the various labs. To achieve this, IMaCS factored in the present testing

centres available in India and their capabilities, the footprint of OEMs in India and their testing centres,

the concentration of OEMs and the auto component manufacturers in India and the criteria that all the

major test centres should be similarly sized and have equal revenue generating potential.


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Phase III

IMaCS developed a model for evaluating the financial feasibility of the project (complete project and

centre wise). The consortium also made recommendation on improving the financial viability of specific

centres by recommending additional services that could be offered. The recommendations also focused

on defining a suitable organisation and management structure for the project that would ensure that the

centres function independently and free from governmental control, that they are professionally

managed and are able to attract talent on an ongoing basis.

Assessment of markets for filters and evolving entry strategy, India

Client: A Leading auto component group

Description:

The project includes assessing the Original Equipment Manufacturer (OEM) and after-market for filters

(oil filters, air filters and fuel filters) for use in automotive application and non-automotive applications in

India and evolution of an appropriate market strategy for entry into this market. The market was

analysed for automotive (cars, MUV, LCV, M/HCV) and non-automotive (earthmoving and stationery

diesel engine) applications. The study covers the assessment of key competitors, their market shares,

areas of strength and their performance in replacement market and finally recommending an entry

strategy for the client.

Approach:

Phase I:

The focus was to estimate the automotive market (OEM demand) for filters by considering a factor of

segment wise forecast based on econometric modeling and consumption norms for vehicle categories.

Similarly the replacement demand for filters was determined based on estimated replacement frequency

and total vehicle pool. IMaCS carried out a large scale primary survey consisting of more than 250 data

points, across 25 cities in India, targeted at various types of participants in the replacement market chain

including retailers, service centers, distributors and wholesalers, manufacturers and customers.

Phase II:

In the second phase, IMaCS estimated the size of the non-spurious replacement market in India based on

the inputs of Phase I and the primary survey conducted. IMaCS has also highlighted key trends in the

replacement market that would impact the performance of players in the future. Finally IMaCS has

recommended appropriate entry strategy for the client including approaches to enter the market, pricing

and product strategy, distribution network, strategies targeted at purchase influencers and commercial

terms.

Market Assessment of Commercial Vehicles Gearbox in India

Client: A leading Japanese auto-component manufacturer

Description:

The client was keen on capitalizing on the growth opportunity in the Automotive Industry in India by

introducing new products and entering new product segments. The clients asked IMaCS to evaluate the


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option of entering the market for Commercial Vehicle Gearbox market in India. Thus the client warranted

an industry analysis and demand estimation.

Approach:

IMaCS selected a top down approach for carrying out the study. At first, the Commercial Vehicles market

was analysed based on secondary data sources to size the market, understand the market structure, and

track trends, competition & product offerings in the market. Subsequently the future demand of

gearboxes was forecasted based on forecasted demand for vehicles. In the light of the forecasted data,

IMaCS studied the product plans of key OEMs, their broad gearbox specifications and their gearbox

sourcing patterns. At the end of the study, IMaCS presented estimated demand for gearboxes in different

segments.

Phase I: Industry Analysis

In this phase, IMaCS carried out an assessment of the gearboxes used by key CV manufacturers with an

aim to understand the broad product specifications, new products planned, capacity expansion plans and

sourcing strategies.

Phase II: Demand Estimation

IMaCS designed and conducted a primary survey at various dealerships in nine major cities, including the

four metros cities, wherein inputs were taken from dealership personnel on the mixes of various types of

gear boxes. The results of the survey were used as inputs to estimating model wise sales for various

gearboxes used by the CV manufacturers.

Market assessment of seatbelts

Client: A leading Japanese auto-component manufacturer

Description:

The client, a leading Japanese auto component manufacturer, recognised the potential of the automobile

market in India and desired to explore the possibility of entering the seatbelt market. The client

mandated IMaCS to identify the market potential for seatbelts for OEM sales in India.

Approach:

IMaCS approached the assignment in three phases.

Phase I Mapping the current and future market dynamics

In this Phase, IMaCS analysed the trends in the Indian automotive industry in terms of growth segments,

key players and feature content level of vehicles, regulations impacting seatbelt usage current and

likely future, profiled seatbelt manufacturers and identified their major customers, .

Phase II Forecasting the Indian auto market


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In this Phase, IMaCS developed an econometric model for future automobile demand based on factors

including disposable income levels, fuel prices, interest rates and duties and forecast the likely sales of

vehicles in the domestic market till 2010.

Phase III Assessing derived demand of seatbelts

In this phase, IMaCS assessed the timeframe of introduction of various seatbelt features in various

vehicle categories and estimated feature wise demand based on forecast of the auto sector and our

assessment of feature introduction.

Assessment of Replacement market for auto-batteries, India

Client: A leading auto-component manufacturer

Description

The client wanted to double its turnover in the span of 2-3 years by focusing on replacement market

thereby increasing its market share in the replacement market and also simultaneously developing the

market by changing its preference to branded products as against unbranded ones. Hence a thorough

assessment of the replacement market was warranted and accordingly IMaCS was to formulate a market

strategy for the same.

Approach

The study was conducted in four phases

Phase I Estimate the value of replacement market for auto batteries in India. Estimate replacement

frequencies for different categories of the vehicles and region wise market shares.

Phase II Map the purchase process of auto batteries, identify key purchase criteria and role of

influencers and various stakeholders in the process.

Phase III Assessment of client and its competitors on each purchase driver of the market.

Phase IV Formulation of market strategy based on strengths and weaknesses of client on the above

purchase drivers/criteria.

Assessment of Replacement market for other auto components, India

Client: Component Industry Association

Description:

Sales in the replacement market form a significant part of the total auto component industry turnover.

The industry association wanted to carry out an assessment of the size of the non-spurious replacement

market and identify the prevailing business practices, in addition to identifying key trends that would

impact the potential of this segment in the future.

Approach:


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IMaCS carried out the study in two phases i) evaluating the market for replacement parts and ii)

estimating the market for replacement parts. The first phase was aimed at gaining a thorough

understanding of the dynamics of the replacement market such as industry trends and characteristics,

customer behaviour, supply chain characteristics, prevalence of spurious parts and proportion of

imported parts. IMaCS carried out a large scale primary survey consisting of more than 1000 data points,

across 20 cities in India, targeted at various type of participants in the replacement market chain

including retailers, service centers, distributors and wholesalers, manufacturers and customers to identify

factors such as replacement frequency of parts, key purchase criteria, value addition and margins at

various parts of the value chain.

In the second phase, IMaCS estimated the size of the non spurious replacement market in India,

(presently and for 2010 and 2015) based on the inputs of Phase I and the primary survey conducted.

IMaCS carried out an in-depth analysis of the impact of key trends such as improvement in technology,

OEM component manufacturers relationship, FTAs etc on the market for replacement parts in the

future.

Competitiveness of the Indian Automobile Industry

Client: Two Auto-Industry Associations in India

Description:

The automobile industry worldwide is passing through a phase of consolidation and cost reduction. Auto

majors are looking at emerging markets like India and China in order to access new markets and create

low cost manufacturing bases. Keeping this in mind, two large automobile industry associations in India

engaged IMaCS to assess the competitiveness of the Indian automobile industry from the point of view of

manufacturing costs and to benchmark its performance with that of China.

Approach:

IMaCS conducted this study based on extensive primary research in India and China as well as secondary

research. IMaCS analysed the structure of the Indian and Chinese Auto Industry. The performance of the

Indian automobile and auto component industries were compared vis--vis that of China. The key drivers

of competitiveness for Indian OEMs and auto component manufacturers from the input side of the value

chain were identified and evaluated. These drivers were then benchmarked with respect to China to

arrive at the competitive strengths and weaknesses of the Indian industry vis--vis China. Accordingly,

IMaCS recommended interventions for the auto and auto component industry by the government and by

the industry.


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Preparation of Detailed Project Report for setting up an Apex Skill Development body for

the Automotive Sector in India

Client: Two apex associations of the Automobile Industry

Description:

The clients recognised that the need for skill development in the Indian Automobile Sector was

mandatory for its sustainable growth and took up lead in garnering cooperation and focus of various

stakeholders in ensuring human resource development. To this end, the client decided to set up an apex

body to focus on skill development for the automotive industry as well as coordinate the efforts of

various agencies in the area of skill development. IMaCS was mandated to prepare a Detailed Project

Report for setting up an apex body that would conduct research in the field of skill development,

establish standards and evolve a qualifications framework, and build a system to improve the quality of

training and its delivery in the industry. IMaCS completed the assignment using primary as well as

secondary research and came out with a report detailing the roles and responsibilities of the apex body,

framework of its operations, course offerings, organisation structure, manpower and infrastructure

requirements, project cost, streams of revenue, operational cost estimates, complete financial

assessment and the implementation roadmap.

Assistance in search/induction of an investor for a car leasing company

Client: Fast emerging leasing and transport solutions provider

Description:

The scope of work for the engagement was to assist the client in finalizing the business plan, identifying

suitable investors to participate in the fund raising exercise and the eventual consummation of the

transaction.

Approach:

We approached the engagement under two distinct modules.

Module 1: Structuring the investment

The focus of the engagement under this module was to complete the various activities necessary to

approach investors for raising funds. The starting point was to understand the strategic imperatives for

the client and the future business model. Subsequently, we fine-tuned the business model and finalised

the capital structure based on the pre-money valuation of the client to arrive at the premium for the

proposed equity stake that could be offered to the strategic investor.

Module 2: Induction of Strategic/financial Investor

Under this module, the focus was to conduct the process of managing the induction of the investor.

Based on the outcome of Module 1, we approached strategic/financial investors with an appropriate

pitch to enable them evaluate the investment opportunity.


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Business planning and valuation roadmap of an Auto Engineering Design Services company in India

Client A US-based investor having investments in the Auto Engineering Design Services company in

India

Description:

The client company, who had investments in an early stage Auto Engineering Design Services company in

India, targeted increasing the valuation of the subject company from 2 to 8 times its then valuation. The

client approached us to analyse the business and it current resources and chart out a clear valuation

roadmap for meeting its target. IMaCS used a top-down approach for carrying out the assignment. The

first step was to work out the requirements of target valuation in terms of the topline and profitability

required for reaching the desired range of valuation. In the next step, we worked out the business

requirements by scanning the market and identifying the opportunities to grow the business profitability

with the given resources and business strengths. IMaCS made a detailed matrix of the services that the

firm could provide in identified markets and regions. Based on the business plan, we laid down a detailed

implementation roadmap to operationalise the plan in terms of the marketing and sales strategy to befollowing, operational processes and resources to be developed, hiring and recruitment strategy, funding

requirement and options for raising funds etc. IMaCS then prepared a detailed financial model and

information memorandum to facilitate operationalisation of the charted business plan.

Study on the Indian Passenger Car Industry

Client: An all India Financial Institution

Description:

An all India financial institution appointed IMaCS to conduct a study on the Indian passenger car industry.

IMaCS was required to study the potential for passenger cars in India in various segments, assess thefinancial viability of integrated car manufacturing units versus assembly units, study the process of

indigenisation, and forecast the demand for the cars by segment.

Approach:

IMaCS analysed the policy framework governing the car industry, identified the key factors affecting the

demand and the issues in manufacturing and conducted a financial viability of the integrated

manufacturing units and assemble units. Since most of the manufacturing facilities were new, the

analysis drew on the experiences of Indo-Japanese joint ventures in the two-wheeler industry and LCV

manufacturers

IMaCS studied the experience of Maruti Udyog Limited, the only joint venture car manufacturer with a

significant track record, to understand the likely indigenisation strategy. IMACS also analysed the export

prospects for the new manufacturers and their ability to meet targets. IMACS then forecasted that

distribution costs were likely to emerge as a significant component of cost and studied the experience in

other countries. IMaCS also forecasted the demand for passenger cars in India.


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Review of Automotive Plastic Fuel Tank Project

Client: Diversified Indian group

Description:

The project was to carry out an independent review of the proposed plastic fuel tank project envisaged

by the group. This included forecasting the demand for automotive plastic fuel tanks in India till 2010 and

estimating per unit revenue in order to establish the financial viability of the project. IMaCS also

identified the risk associated with the project that could have an impact on the financial attractiveness of

the project and determining the financial viability of the project.

Approach:

IMaCS identified key risks that the project faces based on an in-depth study of the market for plastic fuel

tanks in India and review of the status of the project in two phases which included understanding the

market scenario for Plastic fuel tanks, its alternatives, volume potential and pricing. The second phase

included review of the project status i.e., project timelines, plant readiness, engineering support,

marketing plans, manpower recruitment and training. IMaCS also identified the risk factors and

recommended appropriate risk mitigation strategies for the group. As a part of the exercise, the IMaCS

team has had extensive discussions with key executives of the group in order to understand the status of

the project and the issues faced in implementation. The team also visited the proposed manufacturing

site to review the status of the work at the site. Based on the market estimate for fuel tanks estimated by

IMaCS and an assessment of the revenue potential for fuel tanks, IMaCS evaluated the financial feasibility

of the project.

Assessing the Feasibility of a Turnaround Plan

Client: A Large Tyre Manufacturing Company

Description:

A leading tyre manufacturing company of India with a well-recognised brand had fallen into bad times. It

steadily lost market share over a number of years, and eventually plunged deeply in the red. Being

completely cash strapped, both its factories had to be closed down. The company was referred to the

Board for Industrial and Financial Reconstruction (BIFR), which declared it as a "sick industrial company".

As per the direction of BIFR the company prepared a turnaround plan, which hinged on the sale of

surplus assets. The company mandated IMaCS to give an independent view on the viability of this plan.

Approach:

IMaCS executed the assignment in three stages. Firstly, it estimated the net worth of the company on a

given date, and then projected the quarterly erosion in net worth if status quo was maintained. It was

necessary to carry out this estimation since reliable accounting data was not available, as both the

factories of the company were closed and the operations were highly irregular. Secondly, the prospect of

selling the surplus assets was evaluated. This was done by assessing critical contributory factors such as

property market dynamics, physical condition, legal status, extant court orders and directives, opinion of

the bankers, creditors, Government, financial institutions and employee unions. Finally, the above


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information was synthesised to arrive at a considered view on whether the companys net worth would

become positive as a consequence of this divestiture.

Results:

IMaCS concluded that even under ideal assumptions, the net worth of the company could not become

positive by sale of real estate alone. A significant gap would continue to remain uncovered.

Valuation of two auto ancillary majors and determination of fair swap ratio for merger

Client: A large auto ancillary company in India

Description:

The client, a company in the Indian auto component sector, proposed to acquire a Chennai based Auto

Components Company (the target company) by way of a merger. The Client already held about 75%

equity stake in the target company and commissioned IMaCS to estimate the value of both companies

and arrive at a fair share swap ratio for the merger.

Approach:

We segmented the engagement into two phases:

Diagnostic phase to formulate and test assumptions and

Synthesis phase, to discuss findings with the Client and finalise our report.

The two phases included the following tasks:

Industry analysis comprising of an evaluation of current and likely future demand-supply conditions,

regulation and other drivers impacting industry fortunes. The objective of the task was to arrive at the

revenue and cost projections for both the client and the target company

Financial modelling - projecting the financial performance of the companies over a five-year horizon.

Valuation IMaCS employed a combination of the Discounted Cash Flow method and the Earnings

Multiple Method (Price to Earnings Ratio and EBITA/EV) for valuation purposes. The swap ratio was

estimated on the basis of the valuation exercise.

Impact of FTA between India, Thailand and ASEAN on Indian auto industry

Client: Industry Associations

Description :

A Free Trade Agreement (FTA) has been signed between India and Thailand as well as ASEAN. IMaCS was

commissioned to formulate a framework for evaluating the FTAs and applying the framework to Thailand

and ASEAN in order to assess the impact on the Indian automotive and auto component industries.


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Approach:

A study of this kind calls for an in-depth understanding of the structure and characteristics of the

automobile and auto component industry in the countries under evaluation and of factors affecting

competitiveness of the automotive industry. We accordingly studied the following factors for formulating

an appropriate RTA/FTA evaluation framework and applying it to Thailand and ASEAN:

a. Macroeconomic indicators

b. Other FTAs and RTAs that the countries are party to

c. Likely business potential including an in-depth review of the auto industry in these countries

d. Cost advantages/ disadvantages as a result of Govt policies/ external environment/internal issues

e. Possible tariff adjustments depending on Rules of Origin and their mode of implementation

Results:

IMaCS conducted primary research in India and ASEAN countries and secondary research on WTO,

NAFTA, AFTA and Indian Automotive industry while applying the framework and formulated a set of

recommendations on Tariff structure, rules of origin and export incentives that Indian industry should

seek from Government in order to improve competitiveness. IMaCS also assisted the Industry

Associations in making suitable representations to Government Bodies on the study.

Impact of Preferential Trade Agreement between India and MERCOSUR on Indian auto industry

Client: Industry Associations

Description:

India and MERCOSUR became joint signatories to a Preferential Trade Agreement (PTA) in January 2004.

The list of products on which India and the MERCOSUR countries would offer tariff concessions under the

PTA was under finalisation. IMaCS was commissioned to evaluate the impact of this PTA on the Indian

automotive and auto component industries and identify the auto components and vehicle categories on

which India could seek or offer tariff concessions.

Approach:

As for the ASEAN and Thailand study, we studied the following factors in order to evaluate the impact of

the MERCOSUR PTA on the Indian automotive and auto component sector:

Macroeconomic indicators

Other FTAs and RTAs that the countries are party to

Likely business potential including an in-depth review of the auto and auto component industry in

these countries

Cost advantages/ disadvantages that either country could have as a result of Government policies/

external environment/internal issues

Possible adjustments that may be made to tariffs depending on Rules of Origin and their mode of

implementation

IMaCS conducted primary research in India and MERCOSUR countries and extensive secondary research

while applying the framework and formulated a set of recommendations on Tariff structure, rules of


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origin and export incentives that Indian industry should seek from Government in order to improve

competitiveness. IMaCS also assisted the Industry Associations in making suitable representations on the

tariff list to the Government of India.

Vision for Indian Automobile Industry

Client: A leading Auto-Industry associations in India

Description:

The Govt. of India, in the process of developing a 10-year vision for the development of the Automotive

Sector, realised the need for industry-government partnership in developing the vision. Thus working

closely with SIAM, TMA and ACMA, Govt. has set up a Task Force for defining the vision, identifying issues

and suggesting suitable interventions. We assisted the Task Force in the development of the vision by

providing inputs on policy initiatives and industry efforts that need to be undertaken to realise the vision.

Approach:

Module I - includes a brief on the as is status of the Indian automotive industry focusing on the evolution

of Indian automobile industry and auto component industry, size of the industry, leading players and

their market shares, key global automotive trends impacting Indian automotive industry etc.,

Module II - focuses on the growth potential of the Indian automotive industry vehicle category wise,

export opportunities for Indian automobile industry, incremental investment requirement, future

challenges for Indian automobile industry.

Module III - highlights the issues that need to be addressed to achieve the targets set out in the vision

and suggest preliminary interventions

Impact of dismantling of Administered Price Mechanism on the Indian automotive industry

Client: A leading auto industry association in India

Description:

The client was a leading auto industry association in India. The Administered Price Mechanism (APM)

governed the Indian downstream oil industry until March 1998. The mechanism ensured uniform pricing

and addressed certain socio-economic needs of the country. However, the regulated regime led to

inefficiency and uncompetitiveness in the downstream oil industry. Therefore, a road map was laid down

to dismantle APM completely by April 1, 2002. The automobile industry is the single largest consumer of

petroleum products. The client being an apex association representing the automobile industry in India

was concerned about the possible changes in the prices of retail petroleum products (post APM

dismantling), mainly Motor Spirit (MS) and High Speed Diesel (HSD) and their relative prices. IMaCS was

appointed to conduct a study to analyse the possible implications on the auto industry following the

dismantling and forecasting demand for automobiles.

Approach:

The study was divided in two phases.


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Phase 1: The focus in this phase was to forecast the prices of automotive fuels, consequent to the

dismantling of APM, under different possible scenarios (phased transition/soft landing). The analysis took

into consideration the understanding of current stage of the APM dismantling process. It also took into

consideration various socio-economic issues linked to removal/reduction of subsidies on LPG and

kerosene, political compulsions, expected movement of international crude oil prices and possible

depreciation/appreciation of the Rupee vis--vis relevant currencies. An assessment was done of the

various change drivers post-APM dismantling and their likely impact on the Indian automobile industry.

Phase 2: The focus of this phase was to analyse the possible factors that explain present and future

automotive (two-wheelers, three-wheelers, passenger cars, commercial vehicles, tractors, MUVs)

demand, in addition to automotive fuel prices. It involved the identification of key demand drivers for

various categories of automobiles and formulating econometric models both on time series and causal

factors model to determine automobile demand for the categories until April 2007.

Results:

The conclusion of the study was the suggestion of the possible scenarios post dismantling and their

probability of occurrence. The study also forecasted likely auto fuel prices (MS & HSD) post APM

dismantling and its impact across automobile categories. The econometric models were developed for

each of the categories and their demand forecasted till 2007.

Assessment of Transportation & Logistics Infrastructure for Auto and Auto Components export, India

Client: An Industry association

Description:

The project included assessing the current status of infrastructure availability in terms of port facilities

and hinterland logistics, reviewing the plans for up-gradation, assessing the existing logistics and

transportation related issues faced by the industry that impact supply chain efficiency and export

performance of auto and auto component industry. IMaCS also reviewed the export targets for

automobiles and auto components over a ten-year period and assessed the cluster wise export growth

potential and arrived at targets for clusters and cluster-port linkages and identified gaps/bottlenecks in

infrastructure and recommend interventions for addressing the same.

Approach:

Phase I: This is done primarily through secondary research and primary surveys which include meeting

around 30-35 contacts in association, Ministry of Roads, Shipping, Transport and Highways, ports and

infrastructure agencies, automobile industry players, and logistics service providers. IMaCS used export

targets of the auto / auto components industry as the base for arriving at the cluster wise export

potential.

Phase II: In this the output from phase I regarding to available infrastructure and projected automotive

trade was combined to map out the desired levels of transportation infrastructure. The gaps in

transportation infrastructure were identified along the following lines:

Hinterland logistics covering rail-road connectivity between clusters and gateway ports

Intermediate storage - covering availability of CFS/ICDs across clusters


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At port facilities - covering capacities for storage and berthing

Results:

The gap analysis with regards to desired levels of infrastructure availability and service standards in

conjunction with the various developmental interventions by the state and central governments to

improve roads, ports and other transport infrastructure. Having identified the requirement for such

infrastructure, we suggested various models for implementing such projects such as pure public, public

private partnerships (PPPs), industry initiatives etc.

Process improvement and benchmarking study of vehicle financing business

Client: A large Indian automobile manufacturer

Description:

A large Indian Original Equipment Manufacturer (OEM) wished to benchmark the functioning of its

vehicle financing division and assess opportunities for improvements in its existing business processes.

IMaCS was commissioned to identify opportunities for process improvement, benchmark the processes

of the OEM along operational and financial indicators and suggest improvements in the existing MIS.

Approach:

IMaCS executed the assignment in three modules:

Module 1: Review the business processes at branches & dealerships and suggest process improvements

The main objectives of this Module was to review the business processes of the vehicle financing

division of the OEM at branches and dealer locations and identify the processes where the OEM needs

to improve its efficiency and the processes that offer scope of rationalization

Module 2: An industry study to identify key competitor attributes and benchmarking.

In our approach to the benchmarking exercise, we identified indicators critical for monitoring

operational and financial performance of the company. These indicators were identified after an

extensive discussion with top management, dealer, customer, channel partners, competitor review,

review of industry best practices and understanding possible future business requirements

Module 3: Review existing management information reports and suggest improvements

The objective of this module was to review the current Management Information System (MIS) and

identify possible improvement opportunities at operational and senior management level.

Financial Evaluation of Vendors

Client: A Japanese Automobile Company setting up a Manufacturing facility in India

Description :

The client was a Japanese automobile company, which was in the process of setting up a joint venture in

India. As a part of its understanding with the Government of India, the joint venture was expected to

attain pre-determined levels of indigenisation as per a phased manufacturing programme. The client

wished to conduct a survey of the automobile component vendors to assess several parameters, such as,


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their financial capabilities to augment capacity, their abilities to withstand a downturn in the industry,

their organisation structures and expected financial performance for the following two years.

Approach:

IMaCS classified the automobile component vendors on the basis of their scale of operations. The

financial statements of each company were analysed to understand the trends in historical performance

and financial strength. IMaCS visited the manufacturing facilities of each vendor and met the

management of the company. This was done to gain firsthand experience of the scale of operations,

assess their physical limitations to undertake capacity expansion, evaluate their working capital

requirements, understand the management structure including succession plans, and collect data for

projecting their financial performance over the next two years.

Results:

IMaCS made its recommendations on the risks factors affecting each company, the possible risk

mitigants, and steps being planned by the management to address the risk factors.


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ICRA Management Consulting Services imitedwww.imacs.in

I M a C S

Corporate Office:

Logix Park, First Floor,

Tower A4 & A5, Sector - 16,

Noida - 201 301

Tel: +91-120-4515 800

Fax: +91-120-4515 850

Registered Office:

1105, Kailash Building, 11th Floor26 Kasturba Gandhi Marg

New Delhi 110001

Tel: +91-11-2335 7940-50

Fax: +91-11-2335 7014

Contact:

Mr. V Sriram

Chief Operating Officer

IMaCS

5th Floor, Karumuttu Centre

634 Anna Salai, Nandanam

Chennai - 600035

Tel: +91-44-24333293/3294/0724

24340043/8080/9659

Mobile: +91 9840088273

Fax: +91-44-24343663

Email: [email protected]

Mr. B V Rajesh

Head Automotive and Industrial Goods

M-01, Mezzanine Floor

Prestige Infantry Court

130, Infantry Road

Bengaluru 560 001

Tel: 91 80 4093 4100 / 4123

Fax: 91 80 4093 4111

Email:[email protected]

Mr. Vageesh NigamConsultant

4th Floor, Electric Mansion

Appasaheb Marathe Marg

Prabhadevi

Mumbai 400 025

Tel : 91 22 3047 8659

Fax: 91 22 3047 0081


Mr. Abhishek Nandi Roy

Consultant

Logix Park, First FloorTower A4 & A5, Sector - 16

Noida - 201 301

Ph: +91 120 4515800

Fax: +91 120 4515850

http://www.imacs.in/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.imacs.in/

Documents

IMaCS Capabilities - Automotive Sector 2013IMP