project

A STUDY ON FINANCIAL PERFORMANCE

AT

MITSUBISHI HEAVY INDUSTRIES INDIA PRECISION TOOLS LIMITED, Ranipet.

A Project Report

Submitted in partial fulfillment of the requirements for

The award of the degree of Masters of Business Administration

By

R. VIJAYAVARMAN

14MBA0146

Under the Guidance of

Dr. Sumathy

Professor.

JULY 2015

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CERTIFICATE

This is to certify the Project report submitted by Mr. R. VIJAYAVARMAN Reg. No. 14MBA0146 to VIT Business School, VIT University, Vellore in partial fulfillment of the requirement for the degree of Master of Business Administration is a bonafide record of work carried out by him under my supervision. The contents of this report, in full or in parts have not been submitted in any form to any other institute or university for the award of any degree or diploma.

Faculty Guide Program Chair

Internal Examiner External Examiner

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DECLARATION

I, R. VIJAYAVARMAN (14MBA0146) is a Bonafide student of the VIT Business School, VIT University, Vellore, hereby declare that the project report submitted in partial fulfillment of the requirements of the degree of Master of Business Administration of the VIT University, is my original work.

Date:

Place: Vellore Name of the student

R. VIJAYAVARMAN

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CONTENTS

PARTICULARS PG.NO

CHAPTER I

1.1 INTRODUCTION 6

1.2 NEED FOR THE STUDY 8

1.3 SCOPE OF THE STUDY 8

1.4 OBJECTIVES OF THE STUDY 9

1.5 LIMITATIONS OF THE STUDY 10

CHAPTER II

2.1 REVIEW OF LITERATURE 11

CHAPTER III

3.1 INDUSTRY PROFILE 21

3.2 COMPANY PROFILE 23

3.3 PRODUCT DETAILS 25

CHAPTER IV

4.1 ANALYSIS AND INTERPRETATION 32

4.2 COMPARISON OF BALANCE SHEET 44

CHAPTER V

5.1 FINDINGS 51

5.2 SUGGESTIONS 52

5.3 CONCLUSION 53

BIBLIOGRAPHY 54

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ACKNOWLEDGEMENT

I am very much obliged and indebted to Mr . V .S .JANARDHANAN, Vice President ( HRD ) of

Mitsubishi Heavy Industries India Precision Tools Limited for his Approval and valuable

suggestions to take up the project.

I also offer my gratitude to Mr. S. Srinivasan., Director – Operations, approval and valuable

suggestions to take up the project in Mitsubishi Heavy Industries India Precision Tools Limited.

I express my deep sense of recognition to Mr M.A Dhanasekran, General Manager (EDD) for his

valuable guidelines, continuous help and personal interest during my project work.

I am also thankful to Mr. Manju Nathan, Mitsubishi Heavy Industries India Precision Tools

Limited. for his support and suggestions during the project.

I am very pleased to express my deep sense of gratitude to Mrs. Sumathi., Associate professor

for her consistent assistance. I shall forever cherish my acquaintanceship with her for exuberant,

limitless approachability, veritable freedom of thought and actions I have appreciated for the

duration of the project.

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CHAPTER 1

1. Introduction and design of study

Financial management is very important for every company which is concerned in

growing and stabilizing their position. Financial management involves several key steps such

financial performance analysis, finding out financial distress signals and finding out solutions for

the problems.

The term ‘financial performance analysis also known as analysis and interpretation of

financial statements’, refers to the process of determining financial strength and weaknesses of

the firm by establishing strategic relationship between the items of the profit and loss account,

balance sheet and other operative data.

Financial performance analysis is the method of determining the relationship between

components parts of financial statement to obtain a better understanding of a firm’s position and

performance.

The objective of financial analysis is to identify the facts contained in financial

statements so as to judge the profitability and financial stability of the firm. Just like a physician

examines his patient by tracking his body temperature, blood flow pressure etc. Before making

his conclusion regarding the illness and before giving his approach. A financial analyst analyses

the financial statements with a variety of tools of analysis prior to commenting upon the financial

strength or weaknesses of an enterprise.

The analysis and understanding of financial statements is vital to bring in the enigma

behind the figures in financial statements. Financial statements analysis is an effort to find out

the importance and meaning of the financial statement data so that prediction can may be made

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of the future earnings, their ability to shell out interest and debt (both ongoing and long term) and

profitableness of a strong dividend policy.

Financial performance relates to the act of carrying out activity that is financial. In wider

sense, financial performance relates to the extent to which financial objectives being or has been

accomplished. It is the approach of measuring the results of a firm's policies and operations in

monetary terms. It is used to evaluate firm's overall health that is financial over a given period of

time and can also be used to analyze similar firms across the industry that is same to compare

businesses or sectors in aggregation.

The term ‘financial statements’ refers to two basic statements: They are balance sheet and the

income statement.

Balance Sheet

The balance sheet shows the financial state (condition) of the firm at any given point of

time. It provides a snapshot and may be regarded as a static picture.

“Balance sheet is an overview of a firm's financial position on a given date that Shows total

assets = total liabilities + owner's equity.”

Income Statement

The Income statement (mentioned in India as the profit and loss statement) reflects the

efficiency of the firm over a period of time.

“Income statement is an overview of a firm's revenues and expenses over a particular period,

ending with net income or loss for the period.”

Although, financial statements do not reveal all the information related to the financial

operations of a firm, but they furnish some extremely useful significant information, which

highlights two significant factors profitability and financial soundness. Thus analysis of financial

statements is a significant aid to financial performance analysis. Financial performance Analysis

includes analysis and interpretation of financial statements in such a real way that it undertakes

diagnosis that is full of profitability and financial soundness of the business.

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According to Metcalf and Titard

“The analysis of financial statements is a process of evaluating the relationship between

component parts of financial statements to obtain a better understanding of the firm's position

and performance. “

1.1 NEED FOR STUDY:

Need of financial management study is to diagnose the information contained in

financial statement so as to judge the profitability and financial position of the firm.

It is highly beneficial to management of the business by providing crystal clear

picture regarding vital aspects like liquidity, leverage, activity and profitability.

The study is beneficial to employees and provides motivation by displaying how

actually they are contributing for organization's growth.

The study has great importance which provides benefits to various parties whom

directly or indirectly interact with the company.

1.2 SCOPE OF STUDY:

This study helps the firm to find out the dull areas for making improvement in its

financial performance.

The business must be able to learn about its position for future time.

The employers should know their corresponding contribution to the performance of

the company.

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1.3 OBJECTIVES OF THE STUDY:

The main objective of the study is to evaluate the financial strength and weakness

of “MITSUBISHI HEAVY INDUSTRIES INDIA PRECISION TOOLS LIMITED”.

The main objective of study aimed as:

To evaluate the performance of the business by using balance sheet, income statement, ratios,

etc., as a standard to measure the efficiency of the company. To understand the profitability,

liquidity and efficiency positions of the company during the study period. The main idea is to

measure and analyze various facts of the financial performance of the business.

OBJECTIVE:

To find out the liquidity position of the Company.

To understand the financial statements of Mitsubishi heavy industries India

precision limited.

To understand the financial health of the firm using ratio analysis.

To identify the profitability position of the Company.

To find out the debt maintaining capacity of the company.

To offer recommendations and ideas to the company.

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1.4 LIMITATIONS OF STUDY

The below mentioned are some constraints under which the project study is carried out.

TEMPORARY REPORTS:

Only temporary statements, they don't give a complete picture of the issue. The data given in

these statements is only an estimated value. The exact situation can only be found out when the

company is sold or liquidated.

DON’T GIVE OUT EXACT POSITION:

The financial statements are declared in money values, they are designed to provide absolute and

accurate position. The worth of fixed assets within the balance sheet neither describe the value

for which fixed assets will probably be sold nor the money that will be needed to replace these

properties.

HISTORIC DATA:

The financial statements are developed on the grounds of historical costs or original costs. The

economic value of assets reduces with the time but current price changes are not taken into

consideration. The statements are not developed keeping in mind about the current economic

conditions. The balance sheet seems to lose the importance of being an list of current economic

realities.

NON MONETORY FACTORS ARE ABSENT:

There are several elements which have a impact on the financial position and operating outcomes

of the business but they don't become a part of these statements simply because they can't be

measured in monetary terms. One example of such a factor is reputation of the company.

Time was also a pressing constraint. The entire study was performed in a period of 45

days, which is not adequate to carry out proper interpretation and research.

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CHAPTER 2

REVIEW OF LITERATURE:

2.1 FINANCIAL PERFORMANCE ANALYSIS:

INTRODUCTION:

The term ‘ financial performance analysis also known as analysis and interpretation of

financial statements , refers to the process of determining financial strength and weaknesses of

the firm by establishing strategic relationship between the items of the profit and loss account,

balance sheet and other operative data.

“Analyzing financial statements” by Metcalf and Titard

“Financial analysis is a process of evaluating the relationship between component parts of a

financial statement and to obtain a better understanding of a firm’s position and performance “by

Myers.

Financial performance:

Financial performance denotes the act of carrying out a financial activity. In more diverse

sense, financial performance denotes to the extent to which financial objectives being or has

been achieved. It is the process of measuring the results of a firm's guidelines and operations in

financial terms. It is used to assess firm's overall financial fitness over a given period of time and

can also be used to compare similar businesses across the same industry or to compare industries

or sectors in collection.

The analysis and understanding of financial statements is vital to bring in theenigma behind the

figures in financial statements. Financial statements analysis is an effort to find out the

importance and meaning of the financial statement data so thatprediction can may be made of the

future earnings, their ability to shell out interest and debt (bothongoing and long term) and

profitableness of a strong dividend policy.

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TYPES OF FINANCIAL ANALYSIS:

Financial analysis are grouped into two different categories depending upon

1) The material used and

2) The modus operandi of analysis (i.e.) the method of operation of operation followed

in the analysis.

1. On the basis of materials used: According to materials used, financial analysis can be of

two kinds

External analysis

Internal analysis

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FINANCIAL ANALYSIS

On basis of materials used On basis of modus operandi

External analysis

Internal analysisHorizontal

analysisVertical analysis

External analysis:

This analysis is done by 3rd party who do not have access to the detailed internal data.

Outsiders include investors, Creditors, Potential investors, Potential Creditors, Credit Agencies,

Government Agencies and General Public. For financial analysis, these outside parties to the

firm depend entirely on the published financial statements.

Internal analysis:

This analysis is done by the persons namely directors, Managers, Executives and

employees of the organization or by the officers assigned by government or court who have

access to the books of account (internal accountancy records) and other information relevant to

the business.

2. On the modus operandi basis:

According to the financial analysis by modus operandi there are two types

Horizontal analysis

Vertical analysis

Horizontal analysis:

Horizontal analysis denotes the comparisons made on the financial data of a company for

a number of years. The data for this type of analysis are displayed horizontally over a number of

columns. The data of the various years are compared in contrast with a standard or base year, a

base year is year selected as beginning point. This kind of analysis is also known as ‘dynamic

analysis ' as it is based on the information from year to year rather than on information of any

one year. The horizontal analysis makes it likely to focus attention on factors that have

transformed significantly during the period.

Vertical analysis:

Vertical analysis relates to the study of association of the various items in the financial

statements for one accounting period. In this form of analysis the data from financial statement

of a year are compared with a base picked out from the exact same year's statement.

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Methods of financial analysis:

1. Common-size statements

2. Comparative statements

3. Trend analysis

4. Fund flow analysis

5. Ratio analysis

6. Cash flow analysis

Comparative statements:

The comparative financial statements are reports of the financial position at different

intervals of time. Comparative Statement gives an idea of financial state at two or more periods.

Generally two financial statements (income statement and balance sheet) are prepared in

comparative form for financial analysis.

The comparative statement shows the following:-

1. Absolute data in terms of percentages.

2. Increase or decrease in terms of percentages.

3. Absolute figures (rupee amounts)

4. Changes in absolute figures (i.e.) increase or decrease in absolute figures.

The Two Comparative Statements Are:

Comparative balance sheet

Income statement

I. Comparative balance sheet:

The comparative balance sheet analysis is the study of the trend of the same items, collection of

items and computed items in two or more balance sheets of the same business enterprise on

different dates. The change in periodic balance sheet items reflect the conduct of a business the

change can be observed by comparison of the balance sheet at the beginning and at the closing

period, these modifications can help in creating an opinion about the progress of an enterprise.

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Guide Lines for Interpreting Comparative Balance Sheet:-

While interpretation of comparative balance sheet the interpreter is expected to examine

the following aspects:-

1. Current financial position and liquidity position.

2. Profitability of the concern.

3. Long term financial position.

Common Size Statement:-

The common-size statements, income statement and balance sheet are shown in analytical

percentages. The data's are shown as percentages of total assets, total liabilities and total sales.

The entire assets are taken as 100 % and various assets are attributed as a proportion of the total

similarly, various other liabilities are taken as a integral part of total liabilities.

Common Size Balance Sheet:-

A statement which balance sheet items are expressed as the ratio of every asset to overall assets

and the ratio of every single liability is expressed as a ratio of total liabilities is called common

size balance. The common size balance sheet can be used to compare companies of varying size.

The comparison of figures in different periods is not useful because total figures may be affected

by a number of elements. It is not feasible to establish standard norms for different assets. The

trends of figures from year to year may not be studied and even they may not give proper results.

Trend Analysis of Balance sheet:

Trend analysis is Very important tool of horizontal financial analysis. This analysis enables to known the

change in the financial function and operating efficiency in between the time period chosen. By studding

the trend analysis of each item we can know the direction of changes and based upon the direction of

changes, the options can be changed.

Trend =Absolute Value of item in the statement understudy *100Absolute Value of same item in the base

statement.

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Ratio Analysis:

Ratio analysis is used as a technique of analyzing the financial information, contained in the

balance sheet and profit and loss accounts, for a more meaningful understanding of the financial

position and performance of a firm.

The relationship between two accounting figures, expressed mathematically, is known as a

financial ratio. A ratio helps the analyst to make qualitative judgment about the firm’s financial

position and performance.

Several ratios can be calculated from the accounting data contained in the financial statements.

The parties which generally undertake financial analysis is short–term creditors, long-term

creditors, owner and management. In view of the requirements of the various ratios, ratios are

classified into the following four important categories.

Types:

Liquidity ratios Leverage ratios Activity ratios Profitability ratios

Liquidity Ratios:

It is extremely essential for a firm to be able to meet its obligations as they become due. Liquidity ratios measure the ability of the firm to meet its current obligations. A firm should ensure that it does not suffer from lack of liquidity, and also that it does not have excess liquidity. The failure of a company to meet its obligations due to lack of sufficient liquidity, will result in a poor creditworthiness, loss of creditors’ confidence, or even in legal tangles resulting in the closure of the company. A very high degree of liquidity is also bad idle assets earn nothing. The firm’s funds will be unnecessarily tied up in current assets.

Therefore it is necessary to strike a proper balance high liquidity and lack of liquidity. The most common ratios which indicate the extent of liquidity or lack of it are

Current ratio Quick ratio

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Other ratios include Cash ratio, Interval Measure and Net working capital ratio.

Current Ratio:

The current ratio is calculated by dividing current assets by current liabilities.

Current assets

Current ratio = --------------------------

Current liabilities

Current ratio is a measure of the firm’s short term solvency. It indicates the availability of current assets in rupees for every one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims against the, Current ratio of2 to 1 or more is considered satisfactory. Current ratio represents a margin of safety for creditors.

Quick Ratio:

Quick ratio also known as acid-test ratio establishes a relationship between quick assets and the current liabilities. Cash is the most liquid asset. It is calculated by dividing quick assets by current liabilities.

Quick ratio = Quick Assets / Current Liabilities

Quick Assets = Current assets – Inventory

One defect of the current ratio is that it fails to convey any information on the composition of the current assets of the firm. A rupee of cash is considered equivalent to a rupee of inventory of receivables. But it is not so. A rupee of cash is more readily available to meet current liabilities than a rupee of say inventory. This implies the usefulness of the current ratio.

The Acid–test ratio measures the firm’s ability to convert its current assets quickly into cash in order to meet its current liabilities.

A quick ratio of 1 to 1 is considered to represent a satisfactory current financial condition. It is an important index of the firm’s liquidity.

Leverage Ratios:

Leverage ratios identify the source of a firm’s capital –owners or outside creditors. Financial leverage refers to the use of debt in financing non-current assets. If the return on assets exceeds the cost of debt, the leverage is successful – i.e., it improves return on equity.

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Debt–Equity Ratio:

The Debt – Equity is determined to analyze the soundness of the long term financial policies of the organization. It is also known as “Internal External Equity Ratio”.

It is calculated as follows:

Debt – Equity Ratio = Total long term debt / Shareholders funds.

Equity Ratio:

This ratio is also called as proprietary ratio establishes a relationship between shareholder’s funds to total assets of company. Equity Ratio is calculated by dividing shareholders fund by total assets.

Fixed Asset Ratio:

This ratio indicates the extent to which the assets of the companies can be lost without affecting the interest of the creditors of the company. Higher the ratios better the long-term position of the company.

Activity Ratios:

They are primarily used for studying a firm’s working capital situation. A well-managed firm should have good activity ratios.

Working Capital Turnover Ratio:

The working capital turnover ratio indicates whether or not working capital has been effectively used in making sales.

Working capital turnover = Sales / Net current assets

Inventory Turnover Ratio:

This ratio also known as Stock Turnover Ratio establishes the relationship between costs of goods sold or net sales during the given period and the average amount of stock held during the period. This ratio reveals the number of times finished stock in turnover during a given accounting period.

Higher the ratio the better is it because it shows the finished stock is rapidly turned in to sales. On the other hand, a low stock turnover ratio is not desirable, because it reveals the accumulation of stock.

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Debtors Turnover Ratio:

This ratio indicates the velocity of debt collection of a company. In other words it shows the number of times average turnover during a year.

A Higher Debtor Turnover Ratio indicates a more efficient is the management towards debtors and low ratio implies inefficient management of debtors.

Total Assets Turnover Ratio:

The asset turnover ratio indicates how efficiently management is employing Assets.

Total Assets Turnover Ratio = Sales / Total Assets

Profitability Ratios:

Profitability ratios are the ratios which measure a firm’s overall effectiveness as revealed bythe returns generated on sales and investment.

General Profitability Ratios:

1. Gross Profit Ratio

2. Net profit Ratio

3. Operating or Expenses Ratio.

Gross Profit Ratio:

Gross profit Ratio measures the relationships to net sales and is usually represented as a percentage. It is a good measure of profitability. The gross profit ratio indicates the extent to which selling price of goods per unit may decline without resulting in losses on operation. Higher the gross profit betters the result.

Net Profit Ratio:

Net Profit Ratio indicates net margin on sales. It is given by the following equation.

Net Profit Ratio = (Net Profit / Sales) * 100

Operating or Expenses Ratio:

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This ratio is complimentary of Net Profit Ratio. The more the net profit is the lesser the operating ratio. Operating costs include the cost of direct materials, direct labors and other overheads, viz., are generally excluded from operating costs. A comparison of the Operating ratio will indicate whether the cost efficiency is high or low in the figure of sales. This less the ratio it depicts the efficiency of the management.

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CHAPTER III

3.1. INDUSTRY PROFILE

The automotive industry in India is one of the largest markets in the world and had previously the best one of fastest growing globally, but is now seeing flat or negative growth rates. India’s passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an annual production of more than 3.9 million units in 2011. According to recent reports, India overtook Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new automakers as Belgium, United Kingdome, Italy, Canada, Mexico, Russia, pain, France. Brazil grew 16 to 18 percent to sell around three million units in the course of 2011-12. In 2009, India emerges as Asia’s fourth largest exporter of passenger cars, behind Japan, South Korea and Thailand. In 2010, India beat Thailand to become Asia’s third largest exporter of passenger cars.

As of 2010, India is home to 40 million passenger vehicle. More than 3.7 million automotive vehicles were produced in India, in 2010 (an increase of 33.9%) making the country the second (after china) fastest growing automobile market in the world during the year. According to the society of Indian Automobile manufacturers annual vehicle sales was projected to increase by four million 2015, no longer than five million as previously projected.

The majority of India’s car manufacturing industry is based around three clusters in the south, West and north. The southern cluster consisting of Chennai is the biggest one with 3% of revenue share. The western hub near Mumbai and Pune contributes to 33% of the market and northern cluster around the National Capital region contributes 32%. Chennai with the Indian operation of Ford, Hyundai, Renault, Mitsubishi, Nissan, BMW, Hindustan motors, Caparo and PSA is about to begin their operation by 2014. Chennai accounts for 60% of the country’s automotive exports. Gurgaon and Mimesar in Haryana form the northern cluster where the country’s largest car manufacturer Maruti Suzuki is based.

The chukan corridor near pune, Maharashtra in the western cluster with companies like general motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata motors, Mercedes Benz, Land Rover, Jaguar cars, Flat and force Motors having assembly plants in the area. Nasik has a major base of Mahindra and Mahindra with a UV assembly unit and an engine assembly unit. Aurangabad with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is in the state of Gujarat motors in Halol and further planned for Tata Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot. Citron plants are also set to come up to Gujarat. Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of the other automotive manufacturing regions around the country.

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The first car ran on India’s road in 1897. Until the 1930’s car were imported directly, but in very small numbers. An embryonic automotive industry emerged in India during 1940s. Mahindra and Mahindra were established by two brothers as a trading company in 1943, and began assembly of jeep CJ-3A utility vehicles.

Following the Independence, in 1947, the government of India and the private sector launched efforts to create automotive component manufacturing industry to supply to the automotive industry. However the growth was relatively slow in the 1950s and 1960s due to nationalism and the license raj which hampered the Indian private sector. Total restriction for import of vehicles was set and after 1970 the automotive industry started to grow, but the growth was mainly driven by tractors, commercial vehicles and scooters.

Cars were still a major luxury. Eventually multinational automakers, such as, though not limited to, Suzuki and Toyota of Japan and Hyundai of South Korea, were allowed to invest in the Indian market ultimately leading to the establishment of an automotive industry in India. A number of foreign firms also initiated joint ventures with Indian companies.

The automotive industry in India is now working in terms of the dynamics of an open market. Many joint ventures have been set up in India with foreign collaboration. India ranks just behind China with the World’s second population at over 1 billion people. Less than 1% of the Southeast Asia region. India also has one of the fastest growing economics and many U.S. companies viewed India as a potentially lucrative market.

Indian Automotive Industry growth started in the 1970s. Between 1970 and 1984 cars were considered as luxurious product; manufacturing was licensed, expansion was restricted; there were quantitative restriction (QR) on imports and tariff structure designed to restrict the market but starting in 2000. Several landmarks policy changes like QR and 100% FDI through automotive route was introduced. In 2003, cove group of automotive R&D (C.A.R) was set up to identify priority areas for automotive R&D in India.

The evolution of the automotive component industry predictably followed the evolution of the auto industry itself. With the startup of local production of cars, trucks and two wheelers in 1950s, many of the associated component manufacturers (mainly from Europe) started operations in India, over a period of time, many of the major manufacturers has established the plants for manufacturing the assembly of plants.

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3.2 COMPANY PROFILE

INTRODUCTION:

Mitsubishi Heavy Industries Ltd (Japan) is one of the world’s leading manufacturers of gear cutting machine, large machine centres and Gear Cutting tools, and Broaches the pioneer in introducing the latest ‘Super Dry’ technology in gear cutting. Mitsubishi Heavy Industries Ltd (Japan) acquired S.R.P Tools Ltd, a 42 year old company and the leaders in manufacturer of gear cutting tools and broaches in the country, in May 2005 and thus Mitsubishi Heavy Industries India Precision Tools Limited (MHI-IPT) was formed. This unit is now functioning as a subsidiary of Mitsubishi Heavy Industries Limited, Japan.

ABOUT MITSUBISHI:

Mitsubishi Heavy Industries Ltd.(Japan) is one of the World's leading manufacturers of gear cutting machines, large machining centres and gear cutting tools, and the pioneer in introducing the latest 'Super Dry' technology in gear cutting.

Mitsubishi Heavy Industries Ltd.(Japan) acquired S.R.P Tools Ltd., a 42 year old company and the leader in manufacturer of gear cutting tools and broaches in the country, in May 2005 and thus Mitsubishi Heavy Industries India Precision Tools Limited(MHI-IPT) was formed. This Unit is now functioning as a subsidiary of Mitsubishi Heavy Industries Limited, Japan.

S.R.P Tools Limited was started in the year of 1965. It started first factory at Chennai, India for manufacturing conventional cutting tools. It signed an agreement with Mitsubishi Heavy Industries, Ltd-Japan for the technical collaboration to manufacture gear cutting tools and broaches in the year of 1972.

S.R.P Tools Limited's second factory was started at Ranipet in the year of 1974 for the production of Hobs, Shaper cutters and Broaches. Later, it started manufacturing of Gear Shaving Cutters, Rotary cutters for straight bevel gears and Master Gears.

SRP Tools Limited obtained ISO 9001-1987 certification in 1994 and India's first unit to obtain ISO 9000 certification for Gear Cutting Tools and Broaches. It added CNC machines for profile grinding of Hobs, Shaper cutters and Broaches.

In 2005, S.R.P Tools Limited was acquired by Mitsubishi Heavy Industries, Ltd-Japan.

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After acquiring SRP Tools Limited, MHI-IPT expanded its plant capacity in 2007-08 by adding many CNC machines and conventional machines, to make more than double its production capacity to cater to the needs of its customers.

MHI-IPT is now India's largest manufacturer of Gear Cutting Tools and Broaches, featuring the most advanced precision technologies and commanding the largest market share. Its product range includes Gear Hobs, Gear Shaping Cutters, Gear Shaving Cutters, Master Gears, Rotary Cutters, Spine Broach and various other types of Broaches, used in manufacturing of various automotive and engineering components.

MHI-IPT draws upon MHI Japan's strengths in the use of advanced materials technology and its knowledge base as MHI Japan is the only manufacturer of gear cutting tools, who also manufactures machines to produce these gear cutting tools, as well as the gear cutting machines on which they are consumed, to produce gears for the automotive industry.

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3.3 COMPANY PRODUCTS

Gear Hobs

Module, DP and CP series Hobs are supplied by MHI-IPT.

Various forms of Hobs such as non-topping, semi-topping, topping, finishing, roughing, pre-

shaving or pre-grinding, with or without protuberance, tip relief , full fillet radius etc., are

manufactured.

Multi start Hobs, Multi gash Hobs and Dry cut Hobs are also supplied.

Designing & Production of Gear Hobs-both involute and parallel sided, Sprocket Hobs,

Worm Wheel Hobs, Serration Hobs, Timing Belt Pulley Hobs and Ratchet Hobs are done at

MHI-IPT. They are either custom-made or to suit international Standards.

Both bore type and shank type Hobs are made.

Hob material is generally AISI M35 (6-5-2+5%Co). On special request, Hobs made in

powder material (ASP 2030, ASP 2052) and TiN, TiAlN, TiCN and AlcronaPro coated

Hobs.

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Normally, accuracy classes are as per DIN 3968 Standard AA, A & B. However, Hobs are

made to suit other accuracy Standards also.

Gear Shaping Cutters

Module, DP and CP series Shaper Cutters are supplied by MHI-IPT

Various forms of Shaper cutters such as non-topping, semi-topping, topping, finishing,

roughing, pre-shaving or pre-grinding, with or without protuberance, etc., are manufactured

Both spur type and helical type Gear Shaping cutters are made

Designing and Production of relief ground Shaping cutters for involute splines, worms (cutter

to be used in hobbing machine by kinematics inversion process) and relief machined cutters

for sprocket, parallel sided splines etc., are done at MHI-IPT

The range of Shaping cutters available at MHI-IPT includes different varieties of disc type,

hub type and shank type. Tandem Shaping cutters are also supplied

Shaper cutter material is generally AISI M35 (6-5-2+5%Co). On special request, Shapers

made in powder material (ASP 2030, ASP 2052) and TiN, Ti AIN, Alcrona Pro coated

Shapers are supplied

Normally, accuracy classes are as per DIN 1829 Standard AA,A. However Shaper cutters are

made to suit other accuracy Standards also.

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Gear Shaving Cutters

Manufacturing of various types of Shaving cutters such as conventional, diagonal, under-pass

and plunge-cut are undertaken

Special profiles are incorporated on the Cutter to generate tip relief, profile crowning, lead

crowning, etc., on component

The Shaving machine at MHI-IPT tries out the Shaving cutter manufactured here, to confirm

the profile accuracy. This is done at extra cost with necessary mandrels, component blanks,

etc., supplied by the customer

Pre-shaved tools like Hobs/Shaping cutters along with Shaving cutters can be supplied from

a single source - MHI-IPT. Hence, design parameters can be worked out to achieve optimum

results on the components

Gear Shaving cutters made out of superior HSS Grades can be supplied.

Re-sharpening of MHI-IPT make cutters as well as imported cutters are carried out.

Customers have to furnish the re-sharpening chart along with other make and imported

cutters.

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Master Gears

It is used on double flank roll-testing machine to confirm the Gear accuracy

To improve the life of Master Gears, we manufacture the same out of HSS material and

hardness is maintained above 63 HRC

We can manufacture Master Gears in Quality Class 4 & 5 of DIN 3962.

We can also manufacture Taper Bore and OBD Master Gears.

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BROACH

Broaches are made to suit component specifications, customer's machine and holder

details.

Different internal profiles are undertaken for manufacture of -

Splines-Involute, parallel and trapezoidal

Serrations

Round

Rectangular

Ratchet, etc.

Different types of broaches are supplied -

Burnishing for round holes

Only spline

Plain combination round and spline

Interspaced round and spline.

Full form Gear Broaches.

Pull end /Rear end details

Sleeve type as per DIN 1415 or DIN 1417 Standard

Cotter type

Any other type to suit the customers' holder details

Equipped to manufacture and supply Surface Broaches for plain and curved profiles

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Other Products

Rotary Cutter For Straight Bevel Gears

Cutters are supplied in pairs

At present, we supply cutters made out of High Speed Steels of Grade M2 (conventional) or ASP

2023 (powder material)

These cutters have 9" diameter, 4.5" bore and 0.5" thickness

Rack Milling Cutters (Ground Form)

This cutter is used to produce racks.

We can supply either with straight gash or helical gash.

We can supply cutters upto diameters 280mm & Overall length 300mm

Cutters are offered in various High Speed Steel of Grades like AISI M35(conventional),ASP

2030 & ASP 2052(Powder materials)

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Swaging Cutters

These cutters are used to produce taper flanks in external splines or internal splines.

Most of the synchromesh gear boxes require taper splines which are formed by this process.

External splines are produced by hobbing or shaping process. Then, these swaging cutters are

used on special purpose machines to obtain taper flanks.

Internal splines are produced by broaching or shaping process. Then these swaging cutters are

used on a special purpose machines to get taper splines.

Chamfering Cutters

These cutters are used to produce chamfers along involute profile of gears at end faces.

Normally, it is used after gear cutting by hobbing or shaping process.

Cutters are supplied in pairs and to suit gear profile.

Deburring Cutters

These cutters are used on gear chamfering machines to deburr while chamfering operation is

carried out.

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CHAPTER IV

ANALYSIS AND INTERPRETATION

TREND ANALYSIS: Share Capital

Year Amount(in Crores)

Trend % Increase Decrease

Base year Previous year

2011 6970000 100 0 0

2012 6970000 100 0 0

2013 6970000 100 0 0

Fig 4.1

2011 2012 20130

20

40

60

80

100

120

Amount Trend %

Trend Percentages in Share Capital:

Share capital shown a constant trend in the period 2011 and 2013.

Share capital is 6.97 crores all the years from 2011-2013.

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Reserves & surplus:




2011 83,79,72,425 100 0 0

2012 94,68,10,382 112.99 12.99 12.99

2013 100,65,72,820 120.12 20.12 7.13

Fig 4.2

83,79,72,425 94,68,10,382 100,65,72,8202011 2012 2013

0

20

40

60

80

100

120

140

Trend %

Trend Percentages in Reserves & Surplus:

Reserves & surplus shown an increasing trend in the period between 2011 and 2013.

The average trend was 112.99 % till 2012.

The Reserves & surplus was showing increasing trend in the period 2011-2013 (i.e. from

100 % in 2011 to 120.12 % in 2013).

The increasing trend in Reserves & surplus indicates the increase in profits of thefirm.

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Net current Assets:

Net Current Assets




2011 55,59,05,612 100 0 0

2012 60,16,66,366 108.2317 8.23 8.23

2013 65,57,46,729 117.9601 17.96 9.73

Fig 4.3

55,59,05,612 60,16,66,366 65,57,46,7292011 2012 2013

90

95

100

105

110

115

120

Trend %

Trends in Net Current Assets:-

The NCA shown positive (increasing) trend.

The NCA are increased to 117.96 % (the year 2013) compared with base year and

The NCA shown increased trend from year and crossed 100 %.

The overall trend was good.

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Quick Assets:

Quick Assets




2011 468495011 100 0 0

2012 495996571 105.87 5.87 5.87

2013 537872567 114.81 14.81 8.94

46,84,95,011 49,59,96,571 53,78,72,5672011 2012 2013

90

95

100

105

110

115

Trend %

Trend %

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Ratio Analysis:

i. Current Ratio

Current ratio = (Current assets / current liabilities)

Year Current Assets Current Liabilities Current Ratio

2010-11 55,59,05,612 6,22,56,311 8.932011-12 60,16,66,366 6,29,10,555 9.562012-13 65,57,46,729 7,92,00,488 8.28

Fig: 4.4

6,22,56,311 6,29,10,555 7,92,00,48855,59,05,612 60,16,66,366 65,57,46,729

2010-11 2011-12 2012-13

7.5

8

8.5

9

9.5

10

Current Ratio

Current Ratio

Interpretation of current ratio:

As per the standard rule of current ratio i.e., 2:1 where current assets double the current liabilities

is considered satisfactory. In the present analysis the current ratio of the Mitsubishi is not

satisfactory from the above table. It was assessed that the current ratio for all the five year is

lower (less) than the standard rule i.e., 2:1. And it is 8.28 in the year 2012-2013. This is highly

unsatisfactory because it has gone down.

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ii. Quick Ratio:

Quick ratio also known as acid-test ratio establishes a relationship between quick assets and the

current liabilities. Cash is the most liquid asset. It is calculated by dividing quick assets by

current liabilities.

Quick ratio = Quick Assets / Current Liabilities

Quick Assets = Current assets – Inventory

Quick Assets




2011 468495011 100 0 0

2012 495996571 105.87 5.87 5.87

2013 537872567 114.81 14.81 8.94

Fig 4.5

Interpretation for Quick ratio:

Usually a high Quick ratio is an indication that the company is liquid and has the ability to meet

its current or liquid liabilities in time on the other hand a high Quick Ratio represents that the

company’s liquidity position is good. The above table showing the quick ratios of Mitsubishi is

considered satisfactory.

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46,84,95,011 49,59,96,571 53,78,72,5672011 2012 2013

90

95

100

105

110

115

Trend %

Leverage Ratios:-

iii. Debt Equity Ratio

Debt – Equity Ratio = Total long term debt / Shareholders funds.

Total Long term Debt= Debenture Capital + Long term loans from banks and financialInstitutions + Public deposits.

Equity Share Holders fund = Equity + Reserves and Surplus.

Debt equity

Year Total Debt Shareholders Fund Debt Equity Ratio

2011 65122346 90,76,72,425 0.072012 67301525 101,65,10,382 0.072013 84342351 107,62,72,820 0.08

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Interpretation of Debt Equity ratio:

The Debt-Equity Ratio accepted standard is 0.5. This ratio reflects the relative contribution of

creditors and owners of business in its financing. From the above it is clear that the long term

debt is more than that of the share holders’ fund. So we can interpret that the firm’s assets are

financed more by the external funds rather than by the internal funds.

2010-11 2011-12 2012-130.06

0.07

0.08

Debt Equity ratio

Debt Equity ratio

iv. Fixed Asset turnover ratio

Fixed asset ratio = Net sales / Net Assets

Fixed asset turnover ratio

Year Net sales Net assets Fixed assets ratio

2011 585457655 972794771 0.602012 679062426 1083811907 0.632013 694757044 1160615171 0.60

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Interpretation of Fixed Asset turnover ratio:

This ratio indicates the extent to which the assets of the company’s can be lost without affecting

the interest of the creditors of the company. Higher the ratios better the long-term position of the

company. The table shows a decline in the ratio, is this good for the company?

2010-11 2011-12 2012-130.58

0.59

0.60

0.61

0.62

0.63

Fixed turnover ratio

Fixed turnover ratio

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Overall Profitability Ratios:-

v. Net profit ratio:

It establishes a relationship between net profits after tax and net sales, and indicates the

efficiency of the management in manufacturing, selling, administrative and other activities of the

company. Net Profit Ratio indicates net margin on sales. It is given by the following equation.

Net Profit Ratio = (Net Profit / Sales) * 100

Net profit

Year Net profit Net sales Net profit ratio

2011 100179116 585457655 17.112012 130141698 679062426 19.162013 80833641 694757044 11.63

Interpretation of Net profit ratio:

The higher the ratio the better is the profitability or performance of the business.

The above table depicts the net profit Ratio of Mitsubishi has increased between year from 2011-

2012 but declined in 2012-2013. This shows a decrease in the profits of the company.

2010-11 2011-12 2012-130.00

5.00

10.00

15.00

20.00

25.00

Net profit ratio

Net profit ratio

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vi. Return on investment:

Return on investment = (Net profit / shareholders fund ) * 100

Return on inv

Year Net profit Shareholders fund Return on inv

2011 100179116 90,76,72,425 11.042012 130141698 101,65,10,382 12.802013 80833641 107,62,72,820 7.51

Interpretation on Return on Investment:

The above table reveals how well the resources of the firm are being used. Higher the ratios

better the result. The above ratio implies how well the firm is growing in terms of profitability

and efficiency. From the above table we can concern that the return on investment is in

decreasing trend. ROI is highest in the year 2012 as 12.80 %. But there after it’s decreased every

year.

2010-11 2011-12 2012-130.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Return on investment

Return on investment

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vii. Return on capital:

Return on capital

Year PBIT Capital employed Return on capital employed ratio

2011 100613083 972794771 10.342012 130264673 1083811907 12.022013 80833641 1160615171 6.96

Interpretation on Return on capital:

The above table depicts return on Equity Capital Employed Ratio of Mitsubishi has increased

from 2012-2013. It further decreased to 6.96 in the year 2012-2013 which shows constant

fluctuation in the returns of the company.

2010-11 2011-12 2012-13

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Return on Capital employed

Return on Capital employed

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Common Size Balance sheet of Mitsubishi for the year 2011, 2012 and 2013

Common size

Particulars 2011 Change Percentage

2012 Change Percentage

2013 Change Percentage

LiabilitiesShare Capital 69700000 7.16 69700000 6.43 69700000 6.01Reserves and surplus

837972425 86.14 946810382 87.36 1006572820 86.73

LoansDeferred Tax Liabilities

2866935 0.29 4390970 0.41 5141863 0.44

Current Liabilities 62256311 6.40 62910555 5.80 79200488 6.82Total liabilities 972794771 100 1083811907 100 1160615171 100

AssetsNet Block 409038113 42.05 419091610 38.67 461447059 39.76Capital WIP 0 0 44416507 4.10 19880279 1.71Investments 11351046 1.17 18637424 1.72 23541104 2.03Current AssetsInventories 87410601 8.99 105669795 9.75 117874162 10.16Sundry Debtors 130642083 13.43 123954880 11.44 130721961 11.26Cash and Bank Balances

311937427 32.07 336347386 31.03 343690789 29.61

Loans and Advances

20124108 2.07 21293570 1.96 24279523 2.09

Other Current assets

5791396 0.60 14400735 1.33 39180294 3.38

Total assets 972794771 100 1083811907 100 1160615171 100

Interpretation of Common Size Balance Sheet of 2011-2012:

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Share capital was recorded 7.16 percent in the total liabilities in the year 2011 it is

decreased to 6.43 % in the year 2012.

Reserves & surplus contributed to 86.14 % in the total liabilities in the year 2011 it is

increased to 87.36% in the year 2012.

Current Liabilities shown to 6.40 % in the total liabilities in the year 2011 it is

Also 5.80 % in the year 2012.

Fixed Assets were 42.05 in the total liabilities in the year 2011 i.e., decreased to 38.67 %

in the year 2012.

Investments were 1.17 in the total liabilities in the year 2011 it increased to 1.72 % in

the year 2012.

Sundry debtors were 13.43 in the total liabilities in the year 2011 it decreased to 11.44 %

in the year 2012.

Interpretation of Common Size Balance Sheet of 2012-2013:

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Share capital was recorded 6.43 percent in the total liabilities in the year 2012 it is

decreased to 6.01 % in the year 2013.

Reserves & surplus contributed to 87.36 % in the total liabilities in the year 2012 it is

decreased to 86.73% in the year 2013.

Current Liabilities shown to 5.80 % in the total liabilities in the year 2012 it is

also 6.82 % in the year 2013.

Fixed Assets were 38.67 in the total liabilities in the year 2012 i.e., increased to 39.76 %

in the year 2013.

Investments were 1.72 in the total liabilities in the year 2012 it increased to 2.03 % in

the year 2013.

Sundry debtors were 11.44 in the total liabilities in the year 2011 it decreased to 11.26 %

in the year 2012.

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Comparative balance sheet 2011-2012

Particulars 2011 2012 Change(in rupees)

Change( in Percentage )

LiabilitiesShare Capital 69700000 69700000 0 0

Reserves and surplus 837972425 946810382 108837957 12.98Loans

Deferred Tax Liabilities 2866935 4390970 1524035 53.15Current Liabilities 62256311 62910555 654244 1.05

Total liabilities 972794771 1083811907 111017136 11.41

AssetsNet Block 409038113 419091610 10053497 2.45

Capital WIP 0 44416507 44416507 -Investments 11351046 18637424 7286378 64.19

Current AssetsInventories 87410601 105669795 18259194 20.88

Sundry Debtors 130642083 123954880 -6687203 -5.11Cash and Bank Balances 311937427 336347386 24409959 7.82

Loans and Advances 20124108 21293570 1169462 5.81Other Current assets 5791396 14400735 8609339 148.65

Total assets 972794771 1083811907 111017136 11.41

Interpretation of comparative balance sheet of 2011-2012:

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Reserves & surplus increased to 12.98 % i.e., in Rupees 1.088 Crores.

Current Liabilities were increased to 1.05 % i.e., in Rupees 6.54 lakhs, and

Fixed Assets were increased to 2.45 % i.e., in Rupees 1.05 Crores.

Investments were increased to 64.19 % i.e., in Rupees 0.72 Crores.

Sundry debtors were decreased to 5.11 % i.e., in Rupees 0.66 Crores.

Total assets increased to 11.41 % i.e., in Rupees 11.10 Crores. And loans and

Advances increased 53.15 % i.e., in Rupees 15.24 Lakhs.

The overall financial position was satisfactory.

48 | P a g e


Particulars 2012 2013 Changes (in rupees)

Changes( in Percentage )

LiabilitiesShare Capital 69700000 69700000 0 0.00Reserves and surplus 946810382 1006572820 59762438 6.31LoansDeferred Tax Liabilities 4390970 5141863 750893 17.10Current Liabilities 62910555 79200488 16289933 25.89Total liabilities 1083811907 1160615171 76803264 7.09

AssetsNet Block 419091610 461447059 42355449 10.11Capital WIP 44416507 19880279 -2.5E+07 -55.24Investments 18637424 23541104 4903680 26.31Current AssetsInventories 105669795 117874162 12204367 11.55Sundry Debtors 123954880 130721961 6767081 5.46Cash and Bank Balances 336347386 343690789 7343403 2.18Loans and Advances 21293570 24279523 2985953 14.02Other Current assets 14400735 39180294 24779559 172.07

Total assets 1083811907 1160615171 76803264 7.09


49 | P a g e

Reserves & surplus increased to 6.31 % i.e., in Rupees 5.97 Crores.

Current Liabilities were increased to 25.89 % i.e., in Rupees 1.62 Crores, and

Fixed Assets were increased to 10.11 % i.e., in Rupees 4.23 Crores.

Investments were increased to 26.31 % i.e., in Rupees 0.49 Crores.

Sundry debtors were increased to 5.46 % i.e., in Rupees 0.67 Crores.

Total assets increased to 7.09 % i.e., in Rupees 7.68 Crores. And loans and

Advances increased 17.10 % i.e., in Rupees 7.5 Lakhs.

The overall financial position for 2012-2013 shows growth better than period of 2011-

2012.

50 | P a g e

CHAPTER V

FINDINGS AND SUGGESTIONS

5.1 FINDINGS:

The Share capital remains constant. Share capital is unchanged all the years from 2011-

2013.

Reserves & surplus were recorded an increasing trend in the period between 2011 and

2013. The Reserves & surplus was showing increasing trend in the period 2011-2013 (i.e.

from 100 % in 2011 to 120.12 % in 2013).

Current Liabilities were increased compared to base year i.e. 2011.

The current ratio for all the three years is lower (less) than the standard rule i.e., 2:1.

And it is 8.28 in the year 2012-2013.

The Debt-Equity Ratio was shown under the standard ratio. It is clear that the long term

debt is more than that of the share holders’ fund. It indicates that the firm heavily relying

on external funds rather than the internal funds.

The operating and net profit ratio of Mitsubishi, ranipet is in decreasing trend due to

heavy increase of manufacturing & administrative expenses.

ROI is highest in the year 2011-20012 as 12.80 %. The ROI is less in the years

2012-2013 and 2010-2011 as 7.05 & 11.05 respectively.

Return on Equity Capital Employed Ratio of Mitsubishi, ranipet has increased during the

year 2011-2012. It further decreased in the year 2012-13 to 6.96.

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5.2 SUGGESTIONS:

The organization should adopt an appropriate capital structure.

The company’s debt-equity ratio is recorded more or less as 0.7 in the year 2012 and it is

increased to 0.8 in the year 2013. The company should adopt a better debt equity mix in

the future to decrease the fluctuations in returns.

The company should control fluctuations in cash and bank balances as it impacts the

current ratio of the company.

The company should control heavy increase of manufacturing & administration expenses

as it is impacting the operating and net profit of company.

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5.3 CONCLUSION

The project entitled “A Study on financial Performance of Mitsubishi Heavy Industries India

Precision Tools Limited” was undertaken with the objective of financial performance and to

examine profitability performance of the company. From the study, Gross Profit and Net profit

position was good. The liquidity position should be increased in the company. Long term

solvency position of company was satisfactory. The Overall Financial performance of Mitsubishi

Heavy Industries India Precision Tools Limited was good.

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BIBLIOGRAPHY

Sl.

no Books: Author:

1 Financial Management Khan & Jain

2 Financial Management I.M.Pandey

3 Management Accounting R.P.Trivedi

Journals:

1. Annual Report of Mitsubishi Heavy Industries India Precision Tools Limited year 2010-

2011.


2012.


2013.

Websites:

http://www.mhi-ipt.in

http://www.moneycontrol.com

http://www.tofler.in

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Documents

project