Indus Motor Co. Final Project-2

Final Project

“Read the name of Lord, Who created man

from a clot of blood. Read! The Lord is most

Bounteous who taught by pen.”(96:1-4)

Final ProjectOn

INDUS MOTOR COMPANY LIMITED

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Indus Motor Company Limited Page 1

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Submitted By

M. HASEEB 1662-111001

M.Com(FINANCE)

-------------------------------

Submitted To:

Registrar

PIMSAT Institute of Higher Education

INDUS MOTOR COMPANYTHIS PROJECT IS SUBMITTED TO


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PIMSAT Institute of Higher Education

FOR

THE PARTIAL FULFILMENT OF THE REQUIREMENTS FOR AWARDING THE DEGREE

OF M.Com (Finance)

Assigned by: _____________________________

Faculty Member’s Signature

Internal Examiner

Sign: ____________________

Name: ___________________

External Examiner

Sign: _____________________ Name: ____________________

Table of Contents


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Serial No.

ParticularPage No.

Dedication 6

1. Acknowledgment 7

2. Disclaimer 8

3. Reason for Choosing the Organization 9

3.1 Aims and Objectives of the Project 9

4. Executive Summary 10

5. Vision 11

5.1 Mission 11

5.2 Core Values 12

6. Corporate Information 13

7. Automobile Industry in Pakistan 18

7.1 Current Situation of Car Industry 19

8. History 20

9. Product Line 21

10. Strategic Objectives 23


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10.1 Manufacturing Facilities 24

11. Dealership of the Company 25

11.1 Major Departments 25

12. Awards Achievement 26

13. SWOT Analysis 27

14. PEST Analysis 30

15. Boston Consulting Group Matrix 32

15.1 Toyota Corolla BCG Matrix 34

16. Financial Analysis of Indus Motor Company 35

16.1 Balance Sheet 36

16.2 Profit &Loss Account 38

17.1 Vertical Analysis of Balance Sheet 39

17.2 Vertical Analysis of Profit and Loss Account 41

18.1 Horizontal Analysis of Balance Sheet 42

18.2 Horizontal Analysis of Profit &Loss Account 44

19. Ratio Analysis 45


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Dedicated To

er idea of life.

.May God Bless Them (Aamin).


Dedicated To

Our Dearest and most

respected Parents.

Whose efforts and prayers

are great source of strength

to us in every noble venture.

Their love inspired us to the

higher idea of life.

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1.Acknowledgement

I find no words at my command to express my deepest sense of

gratitude to the Almighty ALLAH, the most Gracious, the most

Merciful and the most Beneficent, who gives me the talent to complete

this task successful, He is the one who gave me courage to do this.

I am much obliged to my loving Parents whose prayers have enabled

me to reach this stage. At this occasion, I can’t forget my parents for

their guidance at the crucial moments of my life.

Next, I owe my bottomless thanks to our esteemed resource

person Mr. Syed Asad who directed me well and was always available

to clear my doubts and misunderstandings throughout this project.

It is also a matter of immense pleasure for me to express my gratitude

to the Faculty of Preston Institute of Management Science and

Technology for giving us their precious time and tried their best as

helpful as possible.

I wish to thanks all my Friends and Classmates who really helped me

by giving suggestions and critical review of the manuscript. Obviously

this achievement was not possible without all of you.

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2..Disclaimer

The purpose of the project is to introduce the subject matters and provide a general idea and

financial information about the Indus Motors Company Limited. All the material included in this

document is based on data/information gathered from various sources and is based on certain

assumptions. Although, due care, diligence and reasonable efforts has been taken to compile this

project, the contained information may vary due to any change in any of concerned factors and

the actual results may differ substantially from the presented information.

Project does not assume any liability for any financial or other loss resulting from this document

in consequence of undertaking this activity. Therefore the content of this document should not be

relied upon for making any decision, investment or otherwise. The content of the information

does not bind “PROJECT MAKER” in any legal or other form.

Project does not also assume any rectifications, errors, omission and misprinting between the

electronic and printed version of document. Financial Analysis of IMC does not accept any

responsibility for the validity and correctness of the information published on its project.


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3..Reason for Choosing the Organization

When I was informed that I would have to do the financial analysis of last three years of any

listed company than the primary challenge for me was to choose the organization on which I can

start my working. It was bit difficult and confusing for me to select the organization. I started

brainstorming and came up with many well-known organizations having large operations, both

in Pakistan and worldwide. After gathering data and relevant information, I ended with three

business sectors, Automobile industry, Textile industry and Tobacco industry. I choose best

companies in their respective class, but after applying hindsight, I decided to go with Automobile

industry and the organization I selected was “Indus Motor Company Limited”

3.1 Aims and Objectives of the Project

The main objectives and aims of this project are to analyze and evaluate the overall performance

of the company by applying different conceptual models and discuss the liquidity, cash flow

situation and produce informative report usable by the users of the statements assessing the

financial position, performance and adaptability of the organization. The performance evaluation

is based on historic and current available data about the operations of the company. Under the

constantly increasing competition in the business market, these analyses portray a very clear and

informative picture to the investors, shareholders, regulators and other players in the stock

market. Finally, the project draws conclusions based on my analysis about the current situation

and the prospects of the Indus Motor Company Limited.


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4..Executive Summary

Indus Motor Company is one of the Automobile Companies, which formed with the help of

house of Habib, Toyota Motor Corporation, Toyota Tsusho Corporation. It manufactures and

imports cars and enjoys a healthy share in the market. It is competing with the Honda, Nissan,

Suzuki and Mitsubishi. To sustain its lead IMC must maintain strategic competitive advantage,

which is its production strength, ability to produce quality cars with respect to low cost and

research and development in hybrid and bio fuel cars. But recently company is in stabilization

mode trying to improve its functional area, consolidation of resources and maintaining SCA. In

my opinion, it is the best move made by IMC to survive the financial holocaust. Indus Motors is

the country's second largest auto manufacturer, after the Pak Suzuki Motors, located near Bin

Qasim Karachi, having an assembling capacity of 55,000 units per annum. Its core business is to

manufacture and market cars. In addition, the company also sells auto parts and accessories. Its

product line includes 9 variants of Toyota Corolla, 8 variants of Daihatsu Cuore and 2 variants of

Toyota Hilux. The company also offers six different imported vehicles namely Toyota Camry,

Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is Corolla, having

a contribution of 66.5% in company's sales.

Company Profile:

Name of the Company: Indus Motor Company Limited.

Industry Type: Automobile Industry (Cyclical)

Major Investors:

1. House of Habib.

2. Toyota Motor Corporation Japan (TMC).

3. Toyota Tsusho Corporation Japan.


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5..Vision

"IMC’s Vision is to be the most respected and successful enterprise, delighting customers with a

wide range of products and solutions in the automobile industry with the best people and the best

technology".

The most respected.

The most successful.

Delighting customers.

Wide range of products.

The best people.

The best technology.

5.1 Miss ion

Mission of Toyota is to provide safe & sound journey. Toyota is developing various new

technologies from the perspective of energy saving and diversifying energy sources.

Environment has been first and most important issue in priorities of Toyota and working toward

creating a prosperous society and clean world.

“Action Commitment Teamwork for becoming # 1 in Pakistan”

Means a committed team to make Indus # 1 in:

Respect and Corporate Image

Customer Satisfaction

Quantity in Production & Sales

Quality

Profitability

Best Employer


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5.2 Core Values

Customer Satisfaction

Team Work.

Ethics and Practices.

Achieving market Leadership by Delivering Value to Customers by:

1. Following our “Customer first” philosophy in manufacturing and

providing high quality vehicles and services that meet the needs of

Pakistani customers.

2. Enhancing the quality and reach of our 3S Dealership Network

3. Employing customer insight and feedback for continuous

corporate renewal, including producer development, improving

service and customer care.

Bringing Toyota quality to Pakistan

1. Maximizing QRD (Quality, Reliability and Durability) by built-in-

engineering,

2. Transferring Technology and promoting Indigenization at IMC and

Vendor.

3. Raising the bar I all corporate functions to meet Toyota Global

Standards.

Optimizing Cost by Kaizen

1. Fostering a Kaizen culture and mindset at IMC, its Dealers and

Vendors.

2. Implementing Toyota Production System.


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3. Removing waste in all areas and operating in the lowest cost

quartile of the industry.

6..Corporate Information

Board of Directors

Mr. Ali S. Habib Chairman

Mr. Yutaka Arae Vice Chairman

Mr. Farhad Zulficar Chief Executive Officer

Mr. Mohamed Ali R. Habib Director

Mr. Tokuichi Uranishi Director

Mr. Masaru Kato Director

Mr. Kersi Kapadia Director

Company Secretary

Mr. Shahid Mahmood Khan

Bankers ABN Amro Bank

American Express

ANZ Grindlays Bank plc

Askari Commercial Bank

Bank of Tokyo-Mitsubishi,Ltd.

Credit Agricole Indosuez

Emirates Bank International Ltd.

Faysal Bank Ltd.


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Habib Bank AG Zurich

Habib Bank Limited

Hong Kong & Shanghai Banking Corporation

Metropolitan Bank Limited

Muslim Commercial Bank Ltd.

National Bank of Pakistan

Societe Generale

Standard Chartered Bank

Union Bank Ltd.

Auditors

M/s. Ford, Rhodes, Robson, Morrow

Chartered Accountants

1st Floor, Finlay House,

I. I. Chundrigar Road, Karachi

Legal Advisors

M/s. A. K. Brohi& Co.

M/s. Mansoor Ahmed Khan & Co.

M/s. Mahmud & Co.

Registered Office

14, Bangalore Town Housing Society,

Main Shahrah-e-Faisal, Karachi.

Registrar

M/s. Noble Computer Services (Pvt) Ltd.

14, Bangalore Town Housing Society,

Main Shahrah-e-Faisal, Karachi.


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Factory

Plot No. NWZ/1/P-1,

Port Qasim Industrial Estate,

Bin Qasim, Karachi.


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Company Registration Number

0020742

National Tax Number (NTN)

0676546-7

Status of the Company

Listed on

Karachi Stock Exchange (Guarantee) LtdLahore Stock Exchange (Guarantee) LtdIslamabad Stock Exchange (Guarantee) Ltd

SymbolINDU

Details of Permissible Business Activities

Manufacturers, assemblers, distributors and importers of Toyota and Daihatsu vehicles, spare

parts and accessories in Pakistan.

Bankers

Askari Bank Limited

Bank Alfalah Limited

Barclays Bank PLC Pakistan

Bank Al-Habib Limited

Citibank N.A.

Habib Bank Limited

Habib Metropolitan Bank Limited

HSBC Bank Middle East Limited

MCB Bank Limited

National Bank of Pakistan

NIB Bank Limited

Soneri Bank Limited

Standard Chartered Bank (Pakistan) Limited


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The Bank of Tokyo-Mitsubishi UFJ, Limited

United Bank Limited

Share Registration

Noble Computer Services (Pvt.) Ltd.

First Floor, House of Habib Building

(Siddiqsons Tower), 3 Jinnah Cooperative Housing Society

Main Shahrah-e-Faisal

Karachi-75350.

PABX: (92-21) 34325482-87, Fax (92-21) 34325442

Email: [email protected]

Address of Head Office / Registered Office / Factory

Plot No. N.W.Z/1/P-1, Port Qasim Authority,

Bin Qasim, Karachi.

Phone: (PABX) (92-21) 34720041-48

(UAN) (92-21) 111-TOYOTA (869-682)

Fax: (92-21) 34720056

Email: [email protected]

Memberships

Pakistan Automotive Manufacturers Association (PAMA)

The Overseas Investors Chamber of Commerce & Industry (OICCI)

Karachi Chamber of Commerce & Industry (KCCI)

Pakistan Business Council (PBC)

Associated Companies

Toyota Motor Corporation, Japan

Toyota Tsusho Corporation, Japan

Thal Limited

Habib Insurance Co. Limited


mailto:[email protected]

mailto:[email protected]

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Shabbir Tiles & Ceramics Ltd.

Makro-Habib Pakistan Ltd.

Habib Metropolitan Bank Limited

Collaboration

EQUITY

Toyota Motor Corporation

Toyota Tsusho Corporation

House of Habib

BUSINESS

TOYOTA GROUP

Technology & KD Parts

Materials, Parts & Logistics Support

Technology KD Parts

Hilux Frame & Deck


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7..Automobile Industry in Pakistan

Auto market is one of the largest segments in world trade. Changing models, improving fuel

efficiency, cutting costs and enhancing user comfort without compromising quality are the most

important challenges of the auto industry in a fast globalizing world.

The automotive assembling in Pakistan started in 1950 when National Motors Limited, a public

limited company and the pioneer in the industry, came into existence, established by General

Motors of USA. National Motors assembled passenger cars as well as commercial vehicles,

which carried “General Motors” brands such as Bedford, Vauxhall, and Chevrolet.

The indigenized parts in these vehicles did not exceed 20% with only exception of Bed Ford

trucks with a deletion level of 80%. By the end of 70s, practically all-automobile assembling in

Pakistan ceased.

A regular car industry started in the country in 1983, when Suzuki commenced production

eyeing the small and LCV car segment of 800cc-1000cc range, and introduced Suzuki car which

targeted the middle-income group (constituting the larger segment of the market) by providing

an affordable car.

Then there was a long gap until the early 90’s when Indus Motor Company was established to

manufacture Toyota vehicles in Pakistan. Soon after Honda Atlas came with the Civic and

Gandhara Nissan entered the market with Sunny.

In the late 90,s, Dewan Farooque Motors set up a plant to manufacture Hyundai and Kia vehicles

in Pakistan. Since then the market has changed all together. After struggling through nineties, a

decade full of uncertainties and frequent policy the Pakistani Auto Industry has been able to

achieve double-digit growth consistently since the last 4 years. The industry operates under

franchise and technical cooperation agreements with Japanese, European and Korean

manufacturers.

Lately Few new market players entered the market such as Gandhara Nissan again with now the

imported Nissan range of vehicles, Dewan Mushtaq Motors with imported Mitsubishi range of

vehicles, Nexus Automotive with Chevrolet imported vehicles and others imported Chinese


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vehicles such as Karakoram Motors, Roma Automobiles and Foton by Dewan Innovations

Limited along with Pak Cherry Automobiles. Sigma Motors made its mark with Rover recently.

Apart from these the big brands of the auto industry also entered the Pakistani market such as

BMW, Mini & Rolls Royce by Dewan Motors, Porsche, Mercedes and Audi have also launched

their brands in Pakistan catering to the very upper niche.

7.1 Current Situation of Car Industry

Locally produced cars have taken an unexpected drastic downturn to the extent of frustrating all

future growth prospects and projections. According to the current figures, in due comparison

with the figures of year 2007 for September to December period, the sales of cars has gone down

by 15 percent. As a result the production has also gone down culminating with its impact on

supply schedule both import and local. This downturn has come at a crucial time as most of the

manufacturing had just increased their investment in the expansion projects and vending industry

had made equally huge investment to complement the capacity expansion exercise. The local

vendors have now to face the curtailed orders, which may most hit the smaller ones with

closures. All this obviously has also adversely affected the government revenues in substantial

terms. The government has suffered a revenue loss of Rs. One billion (9%) when September to

December data is compared with last year.

IN the budget 2007-08, government announced a withholding @ 5 percent on purchase of cars,

which was reduced to 2.5 percent and imposed from 1st September 2007. The intension was

obviously to enhance government revenue. The current situation however, has proved a reversal

in collection of the revenue. Last year, the ECC approved the five years policy (AIDP) for auto

sector prior to announcement of budget. Levy of such tax is a deviation from the spirit of pre

announced policy thus causing anxiety to the auto manufactures.

The uplift in the car market is also suffering due to stringent regulations announced by State

Bank of Pakistan recently for car financing. Moreover, the cost of financing has also increased

interest rate.


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8..History

Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor

Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling,

progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01,

1990.IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd.

Vehicles in Pakistan through its dealership network. It manufactures and Imports Cars and

enjoys a healthy share in the market.

The company was incorporated in Pakistan as a public limited company in December 1989and

started commercial production in May 1993. The shares of company are quoted on the stock

exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25%

stake in the company equity. The majority shareholder is the House of Habib.

IMC is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must

maintain Strategic Competitive Advantage, which is its Production Strength, ability to produce

quality cars with respect to low cost, Research, and Development in Hybrid and Bio Fuel Cars.

But recently company is in stabilization mode trying to improve its functional area, consolidation

of resources and maintaining SCA.

Indus Motor is the country's second largest auto manufacturer, after the Pak Suzuki Motors.

IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area

measuring over 105 acres, having an assembling capacity of 55,000 units per annum.

Indus Motor Company’s plant is the only manufacturing site in the world where both Toyota and

Daihatsu brands are being manufactured. Its core business is to manufacture and market cars. In

addition, the company also sells auto parts and accessories. Heavy investment was made to build

its production facilities based on state of art technologies. To ensure highest level of productivity

world-renowned Toyota Production Systems are implemented.

Its product line includes 6 variants of newly introduced Toyota Corolla, Toyota Hilux and 3

variants of Daihatsu Cuore. The company also offers six different imported vehicles namely

Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is

Corolla, having a contribution of 66.5% in company's sales.


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9..Product Line

COROLLA:

Corolla includes six variants of cars, which are

1) Xli

2) GLi

3) Corolla Altis M/T

4) Corolla Altis A/T

5)2.0D

6)2.0D Saloon


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CUORE

Cuore consist of 3 variants of cars that are as under:

1)CX

2)CX CNG

3)CX A/T

HILUX

Hilux consist of following car.

4x 2 S/Cab


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10. .Strategic Objectives

Achieving Market Leadership by Delivering Value to Customers:

a) Following our “Customer First” philosophy in manufacturing and providing high quality

vehicles and services that meet the needs of Pakistani customers.

b) Enhancing the quality and reach of our 3S Dealership Network.

c) Employing customer insight and feedback for continuous corporate renewal, including

product development, improving service and customer care.

Bringing Toyota Quality to Pakistan

a) Maximizing QRD (Quality, Reliability and Durability) by built-in engineering.

b) Transferring technology and promoting indigenization at IMC and Vendors.

c) Raising the bar in all support functions to meet Toyota Global Standards.

Optimizing Cost by Kaizen)

a) Fostering a Kaizen culture and mindset at IMC, its Dealers and Vendors.

b) Implementing Toyota Production System.

c) Removing waste in all areas and operating in the lowest cost quartile of the industry.

Respecting our People

a) Treating employees as the most important sustainable competitive resource.

b) Providing a continuous learning environment that promotes individual creativity and

teamwork.

c) Supporting equal employment opportunities, diversity and inclusion without

discrimination.

d) Building competitive value through mutual trust and mutual responsibility between the

indus team and the company.


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Becoming a Good Corporate Citizen

a) Following ethical business practices and the laws of the land.

b) Engaging in philanthropic and social activities that contribute to the enrichment of

Pakistani society, especially in areas that are strategic to both societal and business needs

e.g. Road Safety, Technical Education, Environment Protection, etc.

c) Enhancing corporate value and respect while achieving a stable and long-term growth for

the benefit of our shareholders.

10.1 Manufacturing Facil it ies

Just in Time spirit implies two opposing forces of providing fast and flexible response to

customers, yet building efficient mechanisms and systems that are efficient and waste-free.

The concept is to provide the right product and information, at the right time, in the right amount,

in the right manner, while maintaining high standards of efficiency and cost control. We have to

practice this contradictory idea in our daily activities.


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11..Dealerships of the Company

1st dealership in Calicut – 1986

2nd in Kochi – 1991

3rd in Trivandrum – 1994

4th in Muvattupuzha – 2005

5th in Royapettah, Chennai – 2006

6th in Kattupakkam, Chennai – 2008

As on today, Indus has

6 Dealerships40 Workshops10 True Value Outlets2 Maruti Driving Schools18 E-Outlets75 sales outlets

11.1 Major Departments

Sales

Service

True value

Spares

Accessories

Insurance

Sales support

Institute

Maruti Driving School


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12..Awards Achievements

Indus Motors Team receiving the Best Dealer Award from

Maruti Suzuki Dealers Conference held at Thailand -

2012


Maruti Suzuki Dealers Conference held at Singapore –

2011


Maruti Suzuki Dealers Conference held at Hongkong -

2010


Maruti Suzuki Dealers Conference held at Thailand -

2009


Maruti Suzuki Dealers Conference held at Isthanbul –

2008


Maruti Suzuki Dealers Conference held at Greece -

2007Awards received by INDUS MOTORS in the MSDC held at Thailand – 2012

3 Most Prestigious Awards

All India Best Dealer (Overall Excellence) - Indus Group

All India Highest Car Sales - Indus Group

BSC- Platinum dealer- Indus Group


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13..SWOT Analysis

In formulating sound strategic plans, an organization must assess its internal strengths and

weaknesses in relation to the external opportunities and threats it faces. An effective strategy will

take advantage of an organizations strengths and opportunities at the same time it minimizes or

overcomes weaknesses and threats. Regular assessment and SWOT analysis is thus given

importance.

Strengths

Strengths are the core competencies of any organization & as far as Indus Motor Company

Limited is concerned, the core competencies of this organization are:

Toyota has become the generic name in the Pakistan market. Whenever the company launches

the new car in the market it has always the great support of the already market orientation so the

car introduced by it easily covers the introduction stage. People have a lot of trust for their name

and this is why Toyota is the leader in automobile industry.

Toyota has a great strength for its 2.OD car, Toyota is the hot selling diesel engine car in

Pakistan and is the only company offering the diesel engine in this category of cars.

The important edge over the company editors are the ample availability of the spare parts in the

markets. The price of spare parts is comparatively low and availability all over the country has

proved to be beneficial for the company.

Toyota is a financially strong company. This can be seen by analysis of the financial reports of

the previous years.

Toyota vehicles have got a much stronger resale value than other car in Pakistan. This is why

people prefer to buy a Toyota.

Toyota vehicles are made according to the Pakistani environment. No doubt the other cars are

available but Toyota has an edge because it has learnt various conditions of the Pakistan

environment and people. So new additions and changes are proving to be successful.


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Toyota is proud to have a successful team of competent managers and skilled workers. Extensive

training has enabled the employees to perform outstandingly.

Toyota is the only company having the most sophisticated network of dealerships where

professional dealers treat customers. There are twenty-five dealers in Pakistan where sales,

service and spare parts are offered, leading to convenience for the customers.

Weakness

Weaknesses are the lacking points, which every organization must avoid in order to make its

operational effectiveness.

There is some weakness in the case of ergonomic interior of Toyota corolla as well. The power

steering is not speed sensitive and the air conditioning system in severe heat is in effective.

Interior dimensions are less and heavy body and small engine sometimes create problems in hilly

areas.

There are some weaknesses in the dealership network. The dealers sometimes tend to deviate

from the recommended course of action and principles of Toyota. This results in customers

complaints sometimes.

The company is besieged with internal operating problems which are not very serious. Because

of dependency on Toyota’s principles delivery of cars is done after 4-6 months. This is because

CKD kits are ordered four months before and once they arrive from Japan, assembly and

delivery takes some more time.

A lot of effort is pulling into the sales forecasting because of the changing political and economic

scenarios. For this reasons inventory has to be kept low.

The company feels that one weakness is the changing policies of the government and the 30%

cash L/C margin. This has lead to an adverse environment.

Opportunit ies

In fact, when we study all our weaknesses critically & deeply than we come to know that we can

convert our weaknesses into strengths. Therefore, these are our opportunities. The opportunities

for IMC are:


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Export is a major opportunity for Toyota Indus Motors. Vehicles were exported to Bangladesh

just once in order to prove the plant capacity and efficiency of the company. This should be

started again.

The contract with the government departments e.g. Motorway Police, Shaheen Force and the

dignitaries where corolla has an opportunity to deal with the business markets along with dealing

in consumer markets.

Toyota can do better by focusing on segments much more than presently being done.

Toyota should also try to lower its price of Corolla in the segment where Honda city has

penetrated.

It can offer discounts to Government departments and large organizations on purchase of its

vehicles in more quantities.

Success of the manufacturing of Daihatsu cuore is a major opportunity for Toyota to excel

further careful planning and the right time to launch the new car can prove to be a success.

Threats

Though Indus Motor Company Limited has a strong footing and maintain a good number of

loyal customer, still company has threats in various sectors. When we see the possible threats for

IMC, the threats are prevailing such as

Even though Toyota enjoys the position of being the no.1 automobile company, still it faces

some threat from competitors especially Honda. Honda has adopted aggressive strategies for

capturing the market.

Even though Toyota keeps a careful eye on the changing trends, still the changing customer

needs and trends can prove to be a threat.

A major threat is the changing political and economic scenarios of Pakistan. Changing

government policies affect the company’s performance. Devaluation of rupee adverse shifts in

foreign exchange rates, trade policies of government’s is a threat. Moreover, the company is

threatened by the ongoing rate of 30% cash L/C margin.


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Import of re-conditioned cars is also considered as a threat for the company.

The planned car manufacturing plants of Hyundai and Daewoo can prove to be tough

competition for Toyota if they are successful.

14. .PEST Analysis

PEST analysis is the analysis, which we tend to perform in order to analyze the external as well

as the internal environment in which organization is currently working. PEST analysis revolves

around the four things.

Pol i t ical Factors

Government at all levels is an important component of the general environment. No organization

or industry is immune from the various decisions made by the government. The Pakistan

Government’s inconsistent policies, frequent change in duty tariff and smuggling are main

reasons of unstable market conduction. Like other motor companies, Toyota is also affected by

the current changing policies of the government. Previously the automobile industry had to cope

with more than 77000 yellow cabs that were imported during the yellow cabs scheme and was

later turned lose to the market after a change of government and the policy scrapped. IN 1995, all

the previous taxes and duties were rolled into one import duty of 30percent on CKD kits as well

as CBU vehicles. In 1996, the sales tax on CBU was increased cost to 18 percent. In 1997, the

ministry of industries and production recommended that duty on CKD be reduced from 40

percent to 35 percent while the car sales should be exempted from CVT and the deletion program

should be accelerated. Just a half-year back the general sales tax has been increased to 16 percent

promoting more prices like. Therefore, there is going to be a Rs. 80,000 to Rs. 1, 00,000increases

in vehicles.

Economical Factors

Government economic policies at the federal level clearly influence the ability of the industries

to survive and progress. Inflation is a major economic factor which has affected the Pakistan’s

automobile industry including Toyota. The current inflation rate is 21% to 23% annually prices

in the auto market were deregulated in 2000 and grew almost 20 percent to 30 percent per annum

to allow Toyota to bring their prices to profitable levels. After three years of “Still Market” the


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market picked up. The recent increase of 16 percent sale tax is however, going to result in a price

increase.

Social Factors

Society holds a global or summary belief that an organization is proper and worthy of support.

Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a

status symbol. It is the guiding principles of Toyota which has strongly developed trust in the

people. Toyota respects the culture and customs of every nation and community and contributes

to the economic and social development through corporate activities in the communities. Toyota

believes in honoring the language and spirit of the law of every nation and undertakes open and

fair corporate activities to be a good corporate citizen of the world. This is the reason that Toyota

is proud of the fact that Pakistani society considers Toyota vehicles to be a symbol of reliability,

comfort, luxury and a have to be trusted.

Technological Factors

Technology is of particular importance because it has been and continues to be the main source

of increases in productivity. Despite changes in the means used to motivate people and the

variety of incentives that have been offered to stimulated production, the resulting increase has

been negligible when compared to that of created by technology.

The locally produced Toyota Corolla introduced in May 1993 is now in its 17th year. Its

excellent quality, low maintenance cost and high resale value has won it the support and loyalty

of its customers. Product diversification and a wide range of colors have allowed customers to

exercise greater options and have sustained this threat. The total company’s product range

comprises of 8 variants of Corolla and5 variants of Hilux. As a result of the “Safety First”

commitment; for the first time in Pakistan SRS “Secondary Restrain System” Airbags have been

introduced in the GLI Automatic and GLI manual models, side impact bars which protect

vehicles for side collisions have however been routinely fitted in all Corolla variants since

inception. The process of making a car more durable includes “Pitospaate Primer” total

immersion in a catholic Electro-deposit primer, which assures long term anti corrosion and an

extra thick color coat that is better than all others, ensuring that “New Car” look “New” for years

to come.


Final Project

15. .Boston Consulting Group Matrix

The BCG matrix measures market attractiveness by market growth rate and it assesses the firm’s

ability to compete by its relative market share. The BCG matrix assumes the causal relationship

between market share and profitability. BCG matrix consists of four factors which are:

Stars

Question mark

Cash cows

Dogs

Stars

Toyota Corolla of IMC falls into the category of Stars. It generates large amount of cash because

of its strong relative market share, but also consume large amounts of cash because of its high

growth rate, therefore the cash in each direction approximately nets out. However, companies

usually invest in star units as they are feeling that the future of their company depends on the

success or failure of that particular unit or product.


Final Project

Cash Cows

If IMC’s Toyota Corolla could maintain its large market share, it will become a Cash Cow when

the market growth rate would decline. The portfolio of a diversified company always should

have stars that will become the next cash cows and ensure future cash generation. Typically

needs this cash to support its rapid and significant growth. It generates large amounts of cash for

the organization and usually segments in which management can make additional investments

and earn attractive returns. In case of Indus Motor Company Limited, the Hilux is a cash cow for

the company which earns a lot of cash for the company and company utilize this cash to run its

future units like Toyota Corolla.

Question Mark

According to Boston consulting group matrix, a question mark is such a business unit about

which you are not about the success or failure. The unit can be very successful in the market or it

can be simply being ruined of. In case of IMC, the question mark is actually the Cuore. It is due

to the large competition of in this category of cars. As the Suzuki Aulto, Mehran, Santro and

some imported vehicles like Vitz are already present in the market.

Dogs

This category of BCG matrix includes the product that has no market share as well as consuming

the large amount of cash instead of generating the cash. The company wants to dissolve that

product.


Final Project

15.1 Toyota Corolla BCG Matrix

If we analyze the position of Toyota Corolla by using the Boston consulting group matrix in a

market than it will show the following result


Final Project

16..Financial Analysis of Indus Motor Company


Final Project

Table 16.1

Balance Sheet

For the Financial Year 2009, 2010 and 2011

NOTE 2011(RUPEES IN

*000)

2010(RUPEES IN

*000)

2009(RUPEES IN

*000)ASSETS

NON-CURRENT ASSETS

FIXED ASSETS 3 4225710 3324333 3934473

LOGN TERM LOANS ANS ADVANCES 4 11949 15570 28509

LONG TERM DEPOSITS 5 9222 7122 7222

4246881 3347025 3970204

CURRENT ASSETS

STORES AND SPARES 6 189755 111567 128483

STOCK IN TRADE 7 5690052 5198367 4088358

TRADE DEBTS 8 1356068 1613171 1736631

LOANS AND ADVANCES 9 926174 839819 894459

SHORT TERM PREPAYMENTS 10 18900 18778 16876

ACCRUED RETURN ON BANK DEPOSITS 52586 57254 50944

OTHER RECEIVEABLES 11 149533 196317 67902

INVESTMENT 12 4993464 --- ---

TAXATION- PAYMENT LESS PROVISION 13 399006 --- ---

CASH AND BANK BALANCES 14 8812199 15755980 9731166

22587737 23791253 16715319

TOTAL ASSETS 26834618 27138278 20685523

EQUITY

SHARE CAPITALAUTHORISED CAPITAL100000000(2009:100000000)ORDINARY SHARES OF RS 10 EACH

1000000 1000000 1000000

ISSUED,SUBSCRIBED AND PAID-UP CAPITAL

15 786000 786000 786000

RESERVES 16 13333648 11801615 9510973


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14119648 12587615 10296973

LIABILITIES

NON-CURRENT LIABILITIES

DEFFERED TAXATION 17 454012 325797 503700

454012 325797 503700

CURRENT LIABILITIES

TRADE,OTHER PAYABLES AND PROVISIONS

18 5740869 5905062 3942988

ADVANCES FROM CUSTOMERS AND DEALERS

19 6519669 8076281 5926529

ACCRUED MARK-UP 420 944 673

SHORT-TERM RUNNING FINANCE 20 - - -

TAXATION-NET 21 - 242579 14660

12260958 14224866 9884850

CONTINGENCIES AND COMMITMENTS 22

TOTAL EQUITY AND LIABILITIES 26834618 27138278 20685523


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Table 16.2

Profit and Loss Account

For the Financial Year 2009, 2010 and 2011

NOTE 2011(RUPEES IN *000)

2010(RUPEES IN *000)

2009(RUPEES IN *000)

Net sales 21 61702677 60093139 37864604

Cost of sales 22 57613542 55382306 35540418

Gross profit 4089135 4710833 2324186

Distribution expenses 23 690130 468496 469985

Administrative expenses 24 462517 381575 352249

1152647 850071 822234

2936488 3860762 1501952

Other operating expenses 25 355796 416106 156479

2580692 3444656 1345473

Other operating income 26 1507878 1801459 727080

4088570 5246115 2072553

Finance costs 27 77115 3576 26540

Profit before taxation 4011455 5242539 2046013

Taxation 28 1268071 1799136 660911

Profit after taxation 2743384 3443403 1385102

Earning per share 29 34.90 43.81 17.62


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Financial Analysis

Table 17.1

Vertical Analysis of Assets and Liabilities as Follows

Description Figures in %

Years 2011 2010 2009

ASSETS

NON-CURRENT ASSETS

FIXED ASSETS 15.75 12.25 19.02LOGN TERM LOANS ANS ADVANCES 0.045 0.057 0.138LONG TERM DEPOSITS 0.034 0.026 0.035

15.83 12.33 19.19CURRENT ASSETS 0 0 0STORES AND SPARES 0.71 0.411 0.621STOCK IN TRADE 21.20 19.16 19.76TRADE DEBTS 5.053 5.94 8.395LOANS AND ADVANCES 3.451 3.095 4.324SHORT TERM PREPAYMENTS 0.07 0.069 0.082ACCRUED RETURN ON BANK DEPOSITS 0.196 0.211 0.246OTHER RECEIVEABLES 0.557 0.723 0.328INVESTMENT 18.61 0 0TAXATION- PAYMENT LESS PROVISION 1.487 0 0CASH AND BANK BALANCES 32.84 58.05 47.04

84.17 87.67 80.81TOTAL ASSETS 100 100 100EQUITY


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3.727 3.685 4.834

ISSUED,SUBSCRIBED AND PAID-UP CAPITAL 2.929 2.896 3.799RESERVES 49.688 43.487 45.98

52.617 46.38 49.78LIABILITIES


DEFFERED TAXATION 1.692 1.2005 2.435

CURRENT LIABILITIES

TRADE,OTHER PAYABLES AND PROVISIONS 21.394 21.76 19.062ADVANCES FROM CUSTOMERS AND DEALERS 24.296 29.76 28.65ACCRUED MARK-UP 0.00157 0.0035 0.0032SHORT-TERM RUNNING FINANCE 0 0 0TAXATION-NET 0 0.894 0.071

45.691 52.416 47.786CONTINGENCIES AND COMMITMENTS 0 0 0TOTAL EQUITY AND LIABILITIES 100 100 100


Final Project

Table 17.2

Vertical Analysis of Profit and Loss Accounts are as Follows

Description Figures in %

2011 2010 2009

Net sales 100 100 100Cost of sales 93.37 92.16 93.86Gross profit 6.627 7.839 6.138Distribution expenses 1.118 0.779 1.241Administrative expenses 0.749 0.635 0.930

1.868 1.415 2.172

4.759 6.425 3.967Other operating expenses 0.577 0.692 0.413

4.182 5.732 3.553Other operating income 2.444 2.997 1.920

6.626 8.729 5.474Finance costs 0.125 0.0059 0.070Profit before taxation 6.501 8.724 5.403Taxation 2.055 2.994 1.745Profit after taxation 4.446 5.730 3.658

0 0 0Earning per share 5.66 7.29 4.65


Final Project

Table 18.1

Horizontal Analysis of Balance Sheet is as Follows

Description Figures in (%)

Years 2011 2010 2009

ASSETS

NON-CURRENT ASSETS

FIXED ASSETS 107.40 84.49 100

LOGN TERM LOANS ANS ADVANCES 41.91 54.61 100

LONG TERM DEPOSITS 127.69 98.61 100

CURRENT ASSETS

STORES AND SPARES 147.69 86.83 100

STOCK IN TRADE 139.18 127.15 100

TRADE DEBTS 78.086 92.89 100

LOANS AND ADVANCES 103.55 93.89 100

SHORT TERM PREPAYMENTS 111.99 111.27 100

ACCRUED RETURN ON BANK DEPOSITS 103.22 112.38 100

OTHER RECEIVEABLES 220.22 289.12 100

INVESTMENT

TAXATION- PAYMENT LESS PROVISION

CASH AND BANK BALANCES 90.56 161.91 100

135.13 142.33 100

TOTAL ASSETS 129.73 131.19 100

EQUITY


100 100 100


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ISSUED,SUBSCRIBED AND PAID-UP CAPITAL 100 100 100

RESERVES 140.19 124.08 100

137.12 122.25 100

LIABILITIES


DEFFERED TAXATION 90.14 64.68 100

CURRENT LIABILITIES

TRADE,OTHER PAYABLES AND PROVISIONS 145.59 149.76 100

ADVANCES FROM CUSTOMERS AND DEALERS 110.008 136.27 100

ACCRUED MARK-UP 62.41 140.27 100

SHORT-TERM RUNNING FINANCE 0 0 0

TAXATION-NET 0 1654.7 100

124.04 143.91 100

CONTINGENCIES AND COMMITMENTS

TOTAL EQUITY AND LIABILITIES 129.73 131.19 100


Final Project

Table 18.2

Horizontal Analysis of Profit and Loss Account is as Follows

Description Figures in (%)

2011 2010 2009

Net sales 162.96 158.71 100

Cost of sales 162.11 155.83 100Gross profit 175.94 202.69 100

Distribution expenses 146.84 99.68 100Administrative expenses 131.30 108.33 100

140.18 103.39 100

195.51 257.05 100

Other operating expenses 227.38 265.92 100

191.80 256.02 100Other operating income 207.39 247.77 100

197.27 253.12 100Finance costs 290.56 13.47 100Profit before taxation 196.062 256.23 100

Taxation 191.87 272.22 100Profit after taxation 198.064 248.60 100

Earning per share 198.07 248.64 100


Final Project

19..Ratio Analysis

Current Ratio

Ratios Formulas Results Current ratio Current Asset/Current liabilities2009 16715319/9884850 1.692010 23791253/14224866 1.672011 22587737/12260958 1.84

Comments.

In Indus Motor Company, limited 2011s current ratio is stronger than other years. It shows that this year’s liabilities could be recovered with its assets. There is a significant decrease of current ratio from 2009 to 2010 but in 2011, company has maintained good current ratio which is very useful for the analyst aspect of creditors.


2009 2010 20111.55

1.6

1.65

1.7

1.75

1.8

1.85

1.9

Current Ratio

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Quick Ratio

Ratios Formulas Results Quick ratio Quick assets/Current liabilities2009 12626461/9884850 1.272010 18592886/14224866 1.302011 16897685/12260958 1.38

Comments.

Prepaid expenses are considered as current assets so they are included in current ratio calculation. Prepaid expenses are less liquid. Normally it is not easily converted into cash on short notice. This ratio tells us to how much liquids assets in the company to meet an unconditional situation here in 2011quick ratio is better than other years it show that company can easily recover its liabilities on short notice.

Gross Profit Ratio

Ratios Formulas Results


2009 2010 20111.2

1.22

1.24

1.26

1.28

1.3

1.32

1.34

1.36

1.38

1.4

Quick Ratio

Final Project

Gross profit ratio Gross profit/sales*1002009 2324186/37864604*100 6.14%2010 4710833/60093139*100 7.83%

2011 4089135/61702677*100 6.63%

Comments.

The gross profit in 2009 is 6.14% while we see in 2010 it has been increased. it means company has shown good performance in 2010 but the company has loosed his position in 2011 which is not in favor of company. Reason is that because cost of goods sold has increased and the selling rate of the goods sold has decreased.

Net Profit Ratio After Tax

Ratios Formulas Results Net profit ratio Net profit after tax/sales*1002009 1385102/37864604*100 3.65%2010 3443403/60093139*100 5.73%2011 2743384/61702677*100 4.45%


2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

Gross Profit Ratio

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2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

Net Profit Ratio

Comments.

Net profit is 3.65% in 2009 but it is increase in 2010 is 5.73% it is increase by in one year it’s better for the company to increase in net profit but in 2011 net profit of the company has decreased it is not in favor of company. Reason is that that total expenses are increases.

Net Profit Ratio Before Tax

Ratios Formulas Results Net profit ratio Net profit before tax/sales*1002009 2046013/37864604*100 5.40%2010 5242539/60093139*100 8.72%2011 4011455/61702677*100 6.50%


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2009 2010 20110.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Net Profit Ratio

Comments

The ratio shows more profit in 2010 as compared to 2009 and 2011. According to average overall performance of the company has increased but in 2011 company is bearing more expenses than the previous year.

Inventory Turnover Ratio

Ratios Formulas Results Inventory turnover ratio Cost of goods sold/ average inventory

2009 35540418/4088358 8.692010 55382306/5198367 10.652011 57613542/5690052 10.13


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2009 2010 20110

2

4

6

8

10

12

Inventory Turn Over Ratio

Comments.

Show the time, in which it will convert the current inventory in to sales, so 2010 is more beneficial for the company and favorable for the company.

Fixed Asset Turnover

Ratios Formulas Results Fixed asset turnover Sales/fixed assets

2009 37864604/3934473 9.622010 60093139/3324333 18.072011 61702677/4225710 14.60


Final Project

Comments.

In 2009 the fixed assets turnover is 9.62, in 2010-it is18.07 and in 2011 14.60 .In 2009 and 2011 fixed asset turnover ratio is decrease as compare to 2010 that shows Indus motors used his assets in 2010 effectively. Company used his fixed assets intensely that is why his production level increases in every year.

Asset Turnover

Ratios Formulas Results Total Asset turnover Sales/Total Assets

2009 37864604/20685523 1.832010 60093139/27138278 2.212011 61702677/26834618 2.29


2009 2010 20110

2

4

6

8

10

12

14

16

18

20

Fixed Asset Turnover Ratio

Final Project

Comments.

Ratio tells us how much time is requires to asset sale. In 2009 company asset turnover is 1.83, which is lower than other two years. From 2010 to 2011 it has been increasing in so it is not in favor of company.

Debt Ratio

Ratios Formulas Results Debt ratio Total debts/total assets

2009 10388550/20685523 0.502010 14550663/27138278 0.532011 12714970/26834618 0.47


2009 2010 20110

0.5

1

1.5

2

2.5

Asset Turn Over

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Comments.

In 2010 debt ratio is higher than other two years it means company is capable to meet outside obligation in full out of its own assets but in 2011 its worth is very low which is not favorable for the company.

Earning Per Shares

Ratios Formulas Results Earning per shares PAT-performance dividend/No. of ordinary

share2009 1385102-000/78600 17.622010 3443403-000/78600 43.812011 2743384-000/78600 34.90


2009 2010 20110.42

0.44

0.46

0.48

0.5

0.52

0.54

Debt Ratio

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Comments.

Earning per share is increased in 2010 is due to increased in net profit of company it’s for better performance of company

Return on Capital Employed

Ratios Formulas Results Return on capital employed Profit before interest tax/Capital

employed*1002009 2046013/10800673*100 18.94%2010 5242539/12913412*100 40.59%2011 4011455/14573660*100 27.52%


2009 2010 20110

5

10

15

20

25

30

35

40

45

50

Earning Per Share

Final Project

Comments.

A measure of the returns that a company is realizing from its capital. This ratio tell us the investment of company in 2009 ROCE is 18.94% in 2010 it is 40.59% and in 2011 is 27.52.Comparatively 2010 and 2011 shows an increasing trend as compare to 2009 this means it is favorable for company because the high rate if ROCE is beneficial for company. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.

Time Interest Earned

Ratios Formulas Results Time interest earned

PBIT/interest

2009 2046013/26540 77.092010 5242539/143873 36.442011 4011455/77115 52.02


2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Return on Capital Employed

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2009 2010 20110

10

20

30

40

50

60

70

80

90

Time Interest Earned

Comments.

A measure of the creditworthiness of a company, equal to EBIT divided by interest Time interest earned in 2010 is 36.44and in 2009 it is 77.09. This ratio is increase in 2011 as compare to 2010 that show company’s EBIT is increased. It indicates that company is able to meet his interest cost for long period of time. Time interest ratio is very good for company satiability. However, according to average the ratio has decreased as compare to the previous years.

Return on Total Assets

Ratios Formulas Results Return on Total Assets

Net Income / Total Assets*100

2009 1385102/20685523*100 6.69%2010 3443403/27138278*100 12.68%2011 2743384/26834618*100 10.22%


Final Project

Comments.

Return on asset in 2010 is 12.68%, which is higher than other two years but 2011shows a decreasing trend. . It means the assets of the business are not fully utilized in more and efficient way and shows an unfavorable trend of the business. It means that Indus motors basic earning power has decreased in 2011.

Return on Equity (ROE)

Ratios Formulas Results Return on Equity (ROE)

Net Income / capital employed*100

2009 1385102/10800673*100 12.8%2010 3443403/129134128*100 26.6%2011 2743384/14573660*100 18.82%


2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Return on Total Assets

Final Project

Comments.

Return on equity in 2010 is 26.6%which is highest than other two years. The graph shows a increasing trend as compare to 2009.It means this is a good sign for Indus motors if its return on equity remain positive than many shareholder will invest money in the Indus motors.

Net Working Capital Ratio

Ratios Formulas Results Net Working Capital Current Assets - Current Liabilities2009 16715319-9884850 6830469 2010 23791253-14224866 9566387 2011 22587737 -12260958 10326779


2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Return on Equity

Final Project

Comments.

Working capital is better in 2011, which are 10326779. It means that are assets utilized more economically in 2011 as compared to previous years.

Working Capital Turnover

Ratios Formulas Results Sales/working capital

2009 37864604/6830469 5.542010 60093139/9566387 6.282011 61702677/10326779 5.97


2009 2010 20110

2000000

4000000

6000000

8000000

10000000

12000000

Working Capital Ratio

Final Project

Comments.

What this ratio tries to highlight is how effectively working capital is being used in terms of the turnover in 2010 is high from 2009 to 2010 we see that in 2010 it is effective as compare to 2009 and 2011.

Return on Investment

Ratios Formulas Results Return on investment Net profit after tax/ capital employed*100

2009 1385102/10800673*100 12.82%2010 3443403/12913412*100 26.66%2011 2743384/14573660*100 18.82%


2009 2010 20115

5.2

5.4

5.6

5.8

6

6.2

6.4

Working Capital Turn Over

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Comments

Return on investment ratio is used by financial analysts to ascertain the best investment plans. It is also an important tool used by investors and shareholders, while making investment decisions in which we see in 2011 is 18.82% is less favorable for the company than 2011.

Debt to Equity Ratio

Ratios Formulas Results Debt to asset ratio Total debts/ Total equity

2009 10388550/10296973 1.002010 14550663/12587615 1.152011 12714970/14119648 0.90


2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

Return On Investment

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Comments

Debt to equity ratio shows how the firm’s stockholder bears the risk of the firm. Higher debts means higher financial risk involve. Therefore, Indus motor company is less risky as compared to 2009 and 2010 so it is favorable for the company.

Financial Leverage

Ratios Formulas Results Total assets/total equity

2009 20685523/10296973 22010 27138278/12587615 2.152011 26834618/14119648 1.90


2009 2010 20110

0.2

0.4

0.6

0.8

1

1.2

1.4

Debt to Equity Ratio

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Comments

The financial leverage ratio is a measure of how much assets a company holds relative to its equity. A high financial leverage ratio 2010 means that the company is using debt and other liabilities to finance its assets and, everything else being equal is more risky than a company with lower leverage.

Conclusion

KARACHI: Indus Motor, the maker of Toyota Corolla, recorded a 34 per cent decline in net profit to Rs908 million in the first half of fiscal 2010-11 primarily due to higher cost pressures and lower other income.

Manufacturing operations were affected by rising input cost due to depreciation of the rupee against Japanese yen and other inflationary pressures, said the company in a press release.

The result was accompanied by a dividend announcement of Rs5 for every Rs10 ordinary share, according to a communique sent to the Karachi Stock Exchange on Tuesday.

The company’s gross margins declined by 250 basis points to 5.2 per cent in the period under review compared with 7.7 per cent in the first half of 2009-10,

The impact of political uncertainty compounded with a general slowdown in the economic environment resulting from rising interest rates, limited credit availability for auto financing,


2009 2010 20111.75

1.8

1.85

1.9

1.95

2

2.05

2.1

2.15

2.2

Financial Leverage

Final Project

depreciation of the Pak Rupee against major currencies, unprecedented rise in prices of oil, steel and other inputs, inflation, etc impacted the demand negatively.

Indus Motor has requested the government to take note of the recommendations made by the Pakistan Automobile Manufacturers Association to accelerate growth of the local industry and withdraw the 5% Federal Excise Duty and increase of 1% Sales Tax, amongst other measures.

The combined sale of Toyota and Daihatsu brands in the first half ended December 2010 grew by eight per cent to 22,903 units compared with 21,300 units sold in the same period last year.

With the country’s macroeconomic indices showing some signs of modest recovery, the company expects the second half of fiscal 2011 to be better for the auto industry. However, the earnings will remain under pressure owing to continuous depreciation of the rupee and relaxation allowed by the government in used car imports. The government recently allowed imports of used cars up to five-year-old compared to the previous three- year benchmark, which may drive up competition.

Financial ratios are a useful by product of financial statement and provide standardized measures of business financial position, profitability and riskiness. It is an important and powerful tool in the hands of financial analyst. By calculating one or other ratio or group of ratios he can analyze the performance of a business from the different point of view.

The ratio analysis can help in understanding the liquidity and short-term solvency of the business, particularly for the trade creditors and banks. Long-term solvency position as measured by different debt ratios can help a debt investor or financial institutions to evaluate the degree of financial risk. The operational efficiency of the business in utilizing its assets to generate profits can be accessed on the basis of different turnover ratios. The profitability of the firm can be analyzed with the help of profitability ratios.

However, the ratio analyses suffer from different limitations also. The ratios need not be taken for granted and accepted at face values. These ratios are numerous and there are wide spread variations in the same measure. Ratios generally do the work of diagnosing a problem only and failed to provide the solution to the problem.


Final Project

REFRENCES

Annual Report http://www.toyota-indus.com/ http://en.wikipedia.org/wiki/Indus_Motors_Company Library: Magazines, Newspapers and Others


http://en.wikipedia.org/wiki/Indus_Motors_Company

http://www.toyota-indus.com/

Documents

Indus Motor Co. Final Project-2