Project q Wl

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Quality of work life

PART- A

1. INDUSTRY PROFILE:

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CONSTRUCTION AND MINING EQUIPMENT INDUSTRY

Construction and mining equipments industry covers a variety of machinery such ashydraulic excavators, wheel loaders, backhoe loaders, bull dozers, dump trucks, tippers, graders,

pavers, asphalt drum / wet mix plants, breakers, vibratory compactors, cranes, fork lifts, dozers,

off-highway dumpers, drills, scrapers, motor graders, rope shovels etc. They perform a variety of

functions like preparation of ground excavation, haulage of material, dumping/laying in specified

manner, material handling, road construction etc. These equipments are required for both

construction and mining activity.

Exporters of construction machineries are riding the boom wave with many bigger orders from

west Asian African countries. Most of them have managed to get huge profits with many

registering as high as a threefold increase.

Domestic production began in INDIA in 1964 with the setting up of Bharat Earth Movers Ltd

(BEML), a public sector unit of the Ministry of Defence, at Kolar in South India to manufacture

bull dozers, dumpers, graders, scrapers, etc. for defence requirements. In the private sector, the

Hindustan Motors’ Earthmoving Equipment Division was established in 1969 at Tiruvallur, near

Chennai with technical collaboration from Terex, UK for manufacture of wheel loaders, dozers

& dumpers...

In 1974, L&T started manufacturing hydraulic excavators under license from Poclain, France. In

1980 and 1981, two more units, Telcon and Escorts JCB commenced manufacturing of hydraulic

excavators (under license from Hitachi, Japan) and backhoe loaders (under license from JCB,

UK) respectively.

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The construction and mining equipment industry is dominated by a few large manufacturers in

each product segment. BEML supplies to nearly half the total market. BEML and Caterpillar

lead in dumpers and dozers while L&T Komatsu and Telcon lead in excavators, JCB India in

backhoe loaders and Escorts Construction Equipment Ltd. in Mobile Cranes.

India’s construction equipment sector has a market size of 1.49billion, a fraction of the global

market of over 56.17billion. The global industry is growing at a 5% rate, while Indian

construction equipments sector is growing at the rate of 30% annually.

The Indian capital equipment industry has:• The advantage of high technical talent base.

• Established component vendor base.

• Low labor rates, all ingredients for a competitive product.

The appreciable increase in real estate construction activities has resulted in a surge of demand

for transit concrete mixers, bar bending and cutting machines, excavator and backhoes and

earth rammers. For the construction equipment sector, which has adapted rapidly to the changed

scenario, this is indeed good news, as it paves the way for an exciting future.

The opening of the Indian economy and the booming infrastruction and real estate sectors

attracted international giants including Telco, JCB, VOLVO, TEREX, CATERPILLAR and

HITACHL.

State Government development authorities and even companies have begun investing in

infrastructure development projects.

Present market condition is very competitive and there are five to six global players (Telco, JCB,

VOLVO, TEREX, CATERPILLAR and HITACHL.) for excavators in India, only those

companies, which can supply quality machines at lowest price, can be successful. This requires

substantial improvement in productivity levels by more effective utilization of fixed assets of the

company.

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The success depends upon the company’s ability to meet the challenges of price, increasing

value to customers & investors and retaining the powerful brand image. And L&T Komatsu is

one such company which steps forward for success of the company.

L&T Komatsu is a firm under construction and mining equipment industry which has established

itself to the fullest and competitive as well. L&T Komatsu is a premium manufactures of various

types of earth moving equipments like hydraulic excavators, wheel loaders, backhoe loaders, bull

dozers, dump trucks, tippers, graders, pavers, asphalt drum / wet mix plants etc.., L&TK is

known as NO.1 Company in maintaining quality of its products and has 66 acres of wide campus

for manufacturing their products.

L&T K has upgraded itself with advanced technology; they have advanced equipments for the

movement of spare parts, paint spray machines for the purpose of painting and 2 world class

robots for welding purpose. L&TK has an advantage of strong technical base workers and

recognizes the best workers by rewarding them.

2. COMPANY PROFILE:

(a) BACKGROUND AND INCEPTION OF L&T-KOMATSU

ABOUT LARSEN & TURBO

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The evolution of Larsen & turbo Ltd (L&T) into the country’s largest engineering and

construction organization is among the remarkable success stories in old Indian Industry. L&T,

a partnership firm founded in 1938 by two Danish Engineers, Henning Hock-Larsen and Soren

Kristian Toubro- both of whom were strongly committed to developing India’s engineering

talent and enabling it to meet the demands of industry. Beginning with the import of machinery

from Europe, L&T rapidly took on Engineering and Construction assignments of increasing

sophistication.

In 1938, the two friends decided to forgo the comforts of working in Europe, and started their

own operation in India. All they had was a dream. Their first office in Mumbai (Bombay) was so

small that only one of the partners could use the office at a time.

In the early years, they represented Danish manufacturers of dairy equipment for a modest

retainer. But with the start of the Second World War in 1939, imports were restricted, compelling

them to start a small work-shop to undertake jobs and provide service facilities.

Germany's invasion of Denmark in 1940 stopped supplies of Danish products, this crisis forced

the partners to stand on their own feet and innovate. They started manufacturing dairy equipment

indigenously. These products proved to be a success, and L&T came to be recognized as a

reliable fabricator with high standards.

The war-time need to repair and refit ships offered L&T an opportunity, and led to the formation

of a new company, Hilda Ltd., to handle these operations. L&T also started two repair and

fabrication shops - the Company had begun to expand.

Larsen & Toubro group started in 1975 to manufacture Hydraulic Excavators. L&T is a

technology driven engineering and construction organization, and one of the largest companies

in India’s private sector.

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A strong customer-focused approach and the constant quest for quality enabled the company to

attain & sustain leadership in its major lines of business across seven decades in infrastructure

segment with factories and office located across seven the country, further supplemented by a

wide marketing and distribution network, L&T’s image and equity extends to virtually every

district of India. L&T believes that progress must necessarily be achieved in harmony with the

environment. A commitment to community welfare and environmental protection constitute an

integral part of the corporate vision. L&T embraces corporate sustainability reporting as per GRI

2006 (G3) guidelines. L&T’s registered office and the first manufacturing unit is located inMumbai, because of constraints of place, power, transport etc and to create employment

opportunities to all sections of the society at different locations, company started one of its

manufacturing units at Bangalore in 1974.

L&T KOMATSU LTD

L&T Komatsu Limited was establishes in Feb. 1998 as an equal participation (50:50) joint

venture between Larsen & Tourbo limited and Komatsu Asia Pacific Pte limited, Singapore, a

wholly owned subsidiary of Komatsu Limited, Japan. LTK –BW (Larsen and toubro komatsu – Bangalore works) is the largest manufacturer of Hydraulic Excavators and high-pressure

Hydraulic systems and components.

The JV was formed to bring together the manufacturing expertise, marketing and service reach

of Larsen & Tourbo ltd with superior product design and engineering capability of Komatsu

Limited for the manufacture of hydraulic excavators in India. L&T markets & Provides service

support for hydraulic excavators manufactured by L&T-K.

L&T (Bangalore works) pioneered in manufacture of Hydraulic Excavators in the country in

1975 in collaboration with Poclain, SA of France with the opening up of the Indian economy; it

has become imperative that the company become globally competitive so that it can efficiently

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tackle International competition and provide best quality products at competitive prices and

establish the leadership in the Indian market and export its products to other countries.

Hence M/s KOMATSU Asia Pacific Private Limited, the World’s NO.1 Excavator manufacturer

with the widest range and reach and L&T formed a joint venture company and its Bangalore

Works is now known and called as L&T-KOMATSU LIMITED, BANGALORE WORKS.

HIGHLIGHTS OF L&T KOMATSU:

•

The Plant is located on national highway NH7 connecting Bangalore and Hyderabad.

• It is spread on an area of 65.7 acres.

• The estate is lush green with well laid lawns and about 3750 trees.

• The Plant has captive power generation of 2760 KVA capacity.

• Currently L & T Komatsu, Bangalore works Ltd is in the first place in manufacturing

excavator and Caterpillar holds the second place.

(b) NATURE OF BUSINESS CARRIED:

L&T-Komatsu's manufacturing facility - Bangalore works - comprises two manufacturing

divisions they are the Machinery Works and the Hydraulics Works. The Machinery Works

manufactures various Hydraulic Equipments required for the manufacture of Hydraulic

Excavators by the Hydraulic Works. They also supply customized Hydraulic Systems to

Komatsu Ltd. Japan.

The various products of Hydraulic works are Hydraulic Motors, Pumps, Turning Joints,

Hydraulic Cylinders, Hoses, Valve bank, Power packs of different varieties. These are the

various activities undertaken by L&T Komatsu.

• Engineering and construction projects:

1. Petrochemical projects.

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2. Oil and gas for projects.

3. Nuclear power and allied business.

• Construction

1. Building-factories, parks, hotels, public buildings.

2. Transportation- roads and expressways, bridges, stations, underpass.

3. Civil- infrastructure, ports, harbors.

•Minerals & Metals

1. Electrical, Instrumentation and Communication.

2. Electrification works in power, steel, metallurgical, glass, fertilizer.

3. Transmission Lines and Electrification.

• Heavy Engineering

1. Heat Transfer Equipment.

2. Refinery & Cracker Plant equipment.

3. Equipment & Systems for power plant.

• Electrical & Electronics

1. Control Power Grade Projects.

2. Motor Starters.

3. Energy Meters.

(c) VISION:

•

We shall be a world-class company with high standards of governance, dedicated toexcellence in Products, Processes and People.

• We shall be a company delighting customers by delivering on time, highly reliable

producers, which enable them to succeed.

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• We shall be a company with very high safety standards, caring for safety of people,

committed to social responsibility and environment protection.

• Our people shall have the passion to continual learning and engage themselves to

the highest level of involvements.

• We shall embrace an inclusive culture that incorporates a strong and well-

articulated set of values and behavioral expectation.

• Our supply chain shall be of world class standard with highest level of seamless

integration bringing in quality, cost and volume flexibility.

• Our business model shall drive entrepreneurial zeal, growth with scale and speed.

Our financial performance shall reward our stakeholders.

MISSION:

• We shall manufacture a premium range of globally competitive hydraulic excavators

and hydraulic system for the domestic market.

• Our focus is to attain market leadership through sustained growth, quality through

products, reliability and on- time delivery of our products to our customers.

• We shall be committed to provide a safe working environment, promote team

working and improve employee engagement.

• We shall embrace the lean manufacturing philosophy in our operations and improve

our operating profit margins.

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QUALITY POLICY:

QUALITY IS OUR MOST VALUABLE ASSEST AT L&T KOMATSU

ISO certified quality management system backed by inspection facilities that include:

• Non- destruction testing laboratory approved by Bhabha Atomic Research Center,

Mumbai.

• Equipment and qualified inspectors to carry X-Ray, gamma ray, and ultrasonic tests

to ensure internal soundness of welded structures and castings.

• Modern metrology laboratory for inspection of precision components and calibration

of equipment and whether conditions.

• Provide resources to maintain & continually improve the quality management system

with a view to deliver quality products and services.

• Operate under the framework of quality, cost and delivery objectives.

• Train and build our entire employee to enhance, customer satisfaction on a

continuous basis.

QUALITY CERTIFICATION:

•In 2009-2010 the company is certified by BUREAU VERITAS for its quality

management system at machinery works (MW) in line with ISO 9001 which is valid up to

July 2012.

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• In respect of the ISO 9001 certification of hydraulics works (HW) awarded in Jan

2003, recertification was done in May 2008 and surveillance audit was carried out at HW

during 2009.

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ORGANISATION STRUCTURE:

(d) PRODUCT PROFILE:- 12 -




LIST OF PRODUCTS:

PRODUCT 1: PC 71

Price: 23 lakhs

Type: Crawler mounted

Weight: 7.05T

Bucket Size: 0.09-0.03 cu.m

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Attachments: Backhoe, Rock Breaker, Dozer Blade

PRODUCT 2: PC 130-7

Price: 34 lakhs


Horse power: 88

Weight: 12.6T

Bucket Size: 0.64 cu.m

Attachments: Backhoe

PRODUCT 3: PC 72CK

Price: 30 lakhs


Horse power: 97

Weight: 13.6T

Bucket Size: 0.6-0.7 cu.m

Attachments: Backhoe, Rock Breaker,

Wood grab, Elevated Cabin, Short Boom

For tunnel excavation, Auger.

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PRODUCT 2: 90CK-3

Price: 39 lakhs


Horse power: 120

Weight: 20T

Bucket Size: 0.64 cu.m

Attachments: Backhoe, Rock Breaker,

Elevated Cabin, Auger, clamshell, Multiline

Grapple, Trenching Long Mount, Ditch Cleaning.

(e) AREA OF OPERATION

L&T has a global presence. A thrust on International Business over the years has seen overseas

revenues growing steadily. The company has manufacturing facilities in India, China, Oman and

Saudi Arabia. It has a global supply network with offices in 10 locations worldwide, including

Houston, London, Milan, Shanghai, and Seoul. Customers include global majors in over 30

countries.

GLOBAL OPERATIONS:

Komatsu designates those production bases with development capabilities around the world as

Mother Plants and position them as the core of global production. The Mother plants play an

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important part in achieving a target cutback on the production cost when a new model is

developed or an existing machine model is changed.

They are also assigned with a task of strengthening the production competitive edge of their

daughter plants that manufacture the same models as well as that of their own. Currently,

Komatsu is running as many as 35 spare parts centers in strategic locations around the world,

aiming at seamless deliveries of any spare parts that its clients require. The Parts Management

System links all centers and is in operation 24 hours 7 days a week. Through this system, we can

forecast demand for spare parts, regional and worldwide, make a plan for parts placement andassure quick and secure deliveries of spare parts that are required for repairs and replacement.

REGIONAL/ NATIONAL OPERATIONS:

L&T KOMATSU is carrying on its operations in Bangalore at Bellary road Byatarayanapura

Bangalore, Karnataka – 560001. They are the importers of Bearings, Hydraulic Equipments, and

Capital Equipments Goods. Their major imports are to KOMATSU Japan, they sell around 52

equipments in 6 months.

(f) OWNERSHIP PATTERN:

Ownership Pattern of L&T-Komatsu Limited is 50-50 Joint Venture. In which

60 crores is invested by L&T and 60 crores by Komatsu Limited. L&TK is a

joint venture of L&T and KOMATSU to manufacture the construction and mining equipment

and L&TK supplies major portion of its equipments to komatsu ltd. L&TK issues only equity

shares.

TABLE NO. 1

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SHARE HOLDERS NO. OF SHARES NO. OF SHARES

LARSEN & TOUBRO 60000000 50%

KOMATSU ASIAPACIFIC PVT LTD

60000000 50%

TOTAL 120000000 100%

TABLE NO. 2

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Name of Shareholders

Number of Shares held

(thousand shares)

Equity

ratio (%)

Japan Trustee Services Bank,Ltd. (Trust Account) 48,073 4.9

JPMorgan Chase Bank 380055 41,614 4.2

The Master Trust Bank of

Japan, Ltd. (Trust Account) 40,978 4.2

Taiyo Life Insurance Company 38,000 3.9

State Street Bank and Trust

Company 33,290 3.4

Nippon Life InsuranceCompany 33,283 3.4

The Bank of New York Mellonas Depositary Bank for

Depositary Receipt Holders 21,937 2.2

SSBT OD05 OMNIBUS

ACCOUNT – TREATYCLIENTS 19,294 1.9

Sumitomo Mitsui Banking

Corporation 17,835 1.8

State Street Bank and Trust 17,582 1.8




(g) COMPETITORS INFORMATION:

L&T- Komatsu Limited has the following competitors:

1. TELCON

TELCON Construction Equipment Co. Ltd, the Leader in Construction Equipment in India,

enhances the operational performance of its customers, leading to improving their profitability

and competitiveness by offering constructive solutions. Telcon is a subsidiary company of

TATA motors, which holds 60% share, and Hitachi Construction Machinery Co. Ltd, Japan

holding the balance 40%. The company commenced manufacturing of construction equipment in

1961, as a division of TELCON. In 1984, it entered into a technical collaboration with HCM,

Japan for manufacturing state of the art hydraulic excavators. Telcon is the largest manufacturer

of construction equipment and has two manufacturing plants - at Jamshedpur in Jharkhand and at

Dharwad in Karnataka.

2. CATERPILLAR

Caterpillar Inc is a United States-based corporation headquartered in Peoria, Illinois. It is "one

of the world's largest manufacturers of construction and mining equipment, diesel and natural

gas engines, and industrial gas turbines." Famous for their products featuring caterpillar tracks

and a distinctive yellow paint scheme, Caterpillar produces a wide range of engineering

vehicles, including the range of Caterpillar bulldozers.

3. JCB

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JCB India is a part of the world renowned and legendary company J C Bamford Excavators

Limited (JCB), one of the prominent players in the construction equipment industry and

amongst the 3 largest players in the world, producing over 275 different models, which are sold

in over 150 countries. JCB India is growing at an enviable pace and surging ahead with

ambitious development and expansion plans through launching revolutionary products and

adherence to world class JCB corporate identity norms. Today in India, JCB has a park of over

65,000 machines and one out of every two Construction machines sold in India is a JCB.

5. BEML

Bharat Earth Movers Limited was established in May 1964 as a Public Sector Undertaking for

manufacture of Rail Coaches & Spare Parts and Mining Equipment at its Bangalore Complex.

The Company has partially disinvested and presently Government of India owns 54 percent of

total equity and rest 46 percent is held by Public, Financial institutions, Foreign Institutional

Investors, Banks and Employees. BEML operates on three major business verticals for

associated equipment manufacturing:

• Mining and construction

• Defense

• Rail and metro

INFRASTRUCTURAL FACILITIES:

•

Design facility supported by CAD-CAM (PRO-E)• Finite Element Analysis software (FEM) for Stress measurement and endurance

testing facility.

• Robotic Welding, CNC machines, State of art Metrology and Metallurgy Labs

• Modern facility for Polyurethane painting.

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• Computer center with Digital Alpha dual servers for perpetual uptime

FABRICATION TECHNOLOGY:

1. CNC high-speed gas cutting

process for consistent quality profiles

with good surface finish

Axis Welding Robots for reliable welding

and high strength point

3. CNC machines for precision machining

of huge structures of high quality

ASSEMBLY OPERATIONS:

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1. Assembly line operating on the concept of

single piece unidirectional flow with equal

tart-time

2. Modern assembling tools, jigs, fixtures at

each workstation enable foolproof assembly

processes

3. Painting in modern paint booth using

polyurethane painting process ensures

superior wear resistant surface with good

gloss luster and finish

(i) AWARDS AND ACHEIVEMENTS

• LTK has been certified under ISO 9001 since 1994 and ISO 14001 in 1999.

Domestically, LTK was awarded Golden Peacock National Quality award in 1997, Rajeev

Gandhi National Quality Award in 1999

• Commendation certificate for CII-Exim business excellence in 2000.

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• Bangalore works won Rajeev Gandhi National Quality Award 1997 instituted by BIS in

best of all categories.

• Machinery works has a modern manufacturing facility with ISO 9001 accreditation for

design, manufacture and servicing of earthmoving equipment. Hydraulic works with

precision machine shop manufactures the complete range of high-pressure hydraulic

components and systems.

• ISO 9001 certified for hydraulic pumps, motors, cylinders, turning joints. Hose

assemblies, value blocks, hydraulic systems and power drives as well as allied gear boxes

• ISO 14001 certification for environmental management system in the year 1999.

ACHIEVEMENTS:

TABLE NO. 3

Year Achievement

1975

Bangalore work established, L&T pioneered the concept of

Hydraulic excavator in India by manufacturing LC 80 / LY

80 models. (In Collaboration with Poclain, France)

1979Introduced 90 CK-E, 300CK-E. TT 900 Vibratory SoilCompactor introduced

1989 Recognized as R&D house by GOI

1992Indigenous design & development of 72CK Excavator

(first time in India by any manufacturer).

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1995 Transit mixer developed

1999ISO 14001 Certification for Environmental

Management System

2005ISO 14001:2004 Certification. Greentech Gold Category

Safety Award.

2007Certificate for integrated management system of ISO

14001:2004 & OHSAS 18001:1999 (EHS)

(j) WORK FLOW MODEL

(k) FUTURE GROWTH AND PROSPECTUS:

L&T-Komatsu, Bangalore Works plans for obtaining improved Reliability and Cost Reduction

for this year. Following would facilitate achieving this:

1. Resource management:

a) Implement TPM and number of equipment under TPM : >30

Cycle time (through put time) reduction : 25% from present

b) Inventory discrepancy : zero

Inventory adjustment : <1%

2. Control Direct Material Cost and Overhead expenses: 3% & 5% respectively less than

budgeted level.

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STEEL PLATES

CUTTING AND WELDING

SHOT BLASTING

PAINTING

ASSEMBLING

PRODUCT TESTING




3. Improve capacity utilization:

Try for excavator exports, excavator new applications.

Increase hydraulic component exports to Komatsu/PH and sales to OEMs/new applications.

4. Improve quality / reliability levels:

(a) First pass yield: 100% (start six sigma projects)(b) MTBF: >900 hrs (no machine less than 500 hrs)

(c) MTTR: < 2 days

5. Total employee involvement:

(a) Kaizen : one person per month.

(b) SGA : 10 numbers in each PU/departments.

(c) House keeping : at least at each level 4

(d) Develop new models

(e) The company plans to reduce the variable overhead cost, by offering VRS to excess

personnel and by adopting in house manufacturing.

MTBF: Mean Time between FailuresMTTR: Mean Time to Response

OEM: Original equipment manufacturer

3. MCKINSEY’S 7S MODEL:

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7-S MODEL: A SYSTEMATIC APPROACH FOR THE IMPROVEMENT OF

ORGANISATIONS The 7-S model is a tool for managerial analysis and action that provides a structure with which

we have to consider a company as a whole, so that the organization's problems may be

diagnosed and a strategy may be developed and implemented.

The 7-S diagram illustrates the multiplicity interconnection of elements that define an

organization's ability to change. The theory helped to change manager's thinking about how

companies could be improved. It says that it is not just a matter of devising a new strategy and

following it through, nor is it a matter of setting up new systems and letting them generate

improvements.

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Those seven elements are distinguished in so called hard S’s and soft S’s. The hard elements are

feasible and easy to identify. They can be found in strategy statements, corporate plans,

organizational charts and other documentations.

The four soft S’s however, are hardly feasible. They are difficult to describe since capabilities,

values and elements of corporate culture are continuously developing and changing. They are

highly determined by the people at work in the organization. Therefore it is much more difficult

to plan or to influence the characteristics of the soft elements. Although the soft factors are

below the surface, they can have a great impact of the hard Structures, Strategies and Systems of

the organization.

STRATEGY:

The company has a rolling plan called Strategic Plan which spans a period of 10 years. The

strategic plans are dove-tailed to the company’s Mission and Vision statements. The plans are

reviewed annually and changes / course-corrections carried out in regard to additions of new

products to its portfolio, in line with the changing business, economic environment – both

domestic and international. Strategic plan for 2007-2008 is as follows:

• SUPPLY CHAIN : To maintain good relation ship with the suppliers to enable them

deliver value in the supply chain based on total cost approach and to be cost competitive with

volume flexibility.

• NEW PRODUCTS: To introduce identified new products and using new promotional

activities, marketing to serve customers better with increased product range.

• PROFITABILITY: Together strive to consistently improve our profitability with

focus on reduction on material cost improving ROCE managing the working capital

effectively and improving company’s cash to cash cycle.

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• PEOPLE: To create an organizational culture that fully engages current and new

employees in a safe and enjoyable working environment, enable them to embrace team L&T

komatsu. Employees will work together without boundaries creating synergy to enable them

scale new heights.

• QUALITY: Employees will significantly accelerate the pace of quality

improvements for current and new products. Employees will strive to achieve this by driving

passion for quality and organization wide focus on improving new products introduction

process and product improvement process.

• SCALE AND SPEED: Company will focus on increasing production capacity to

enable to meet the customer needs by investing in core manufacturing processes and to

maintain close relationship with the major suppliers in their manufacturing and quality

processes to ensure timely supplies maintaining quality.

SYSTEMS:

Being a professionally-managed organization since 1938, there are separate Divisional Boards

to oversee/supervise the operations of each Operating Division. Further, there are sector wise

business meetings to take stock of the business parameters and take corrective action wherever

required. L&T has a very strong communication network for propagating company’s plans,

policies and procedures in order to keep everybody informed. In L&T Komatsu, a number of

software applications for different functions are provided by Oracle. They are as follows:

• Inventory, Bills of Material, Costing, Purchasing, Receiving.

• MPS/MRP Planning, Lead Times, Order Management, Invoicing.

• Attendance Recording system, physical attributes, service, group wise LAN.

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STRUCTURE:

Organization has clearly been segmented into different business sectors and the structure is

clearly demarcated for empowerment with regard to each product and/or sector of economy

which is managed by independent Strategic Business Unit as independent profit / growth

centers.

SKILLS:

L&T has a very strong people-oriented process. For assessing the performance of employees

they have assessment process. For assessing the availability of future leaders, they have

leadership programmes. There are a host of training programmes – (both internal and external)

covering performance-oriented development programmes, technical competence, personality

development etc. which cover the entire gamut of skills required for running the organization

effectively and profitably and also develop the individuals as well.

SKILL MATRIX – TABLE NO.4

DESCRIPTIO

-N

MANAGER

-IAL

SKILLS

ANALYTIC-

AL SKILLS

PEOPLE

ORIENT-

ED

COMMUNICATI-

ON SKILLS

TECHNICA

-L SKILLS

MOTIVATION-

AL SKILLS

TEAM

WORKIN

-G

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SKILLS SKILLSMANAGERS SUPERVISO-

RS

EXECUTIVE-

S

× × × ×

TECHNICIA-

NS

× × × ×

STYLE/CULTURE:

Organization culture:

It is a set of some shared values, norms and belief systems that controls organization operations

and interaction with the members both inside & outside of the company. L&T Komatsu follows a

very distinct and insular culture throughout the company. The company incorporates various

activities, which help in the betterment of four factors that account for cultural differences

among the organization: They are: Organizational ethics, Organization structure, the

property right system used by the organization, and the characteristics of people working

in the organization. In L&T Komatsu Ltd Company, every employee needs to potray “officer

like qualities” which make them different from their competitors. A unique characteristic of each

employee is that they contribute towards production and share the information to each other as

and when required. The top managers have right to use organization resources, the work force

may be given rights to participate in decision making through various forums so that they can

help in achieving the goals of an organization of higher productivity, good quality and cost

reduction. The shareholders of the company are given the strongest property rights as they own

the resources of the employee and shares from profit.

MANAGEMENT STYLE:

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It’s all about the fundamental responsibility of employees in interacting with each department:

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Customer Marketing

and sales

Resource

planning and

mgmt

Design

development

and planning

Qualityassurance

Information and

data mgmt

Training

Production

plan

Purchase

Equipment

planning

Production Customer

Product

service




SHARED VALUES:

STAFF:

TABLE NO. 5

TYPES OF STAFF CATEGORY AT L&T KOMATSUnt cate or

T – technical category B – superior category

A – administrative category E – executive category

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S – skilled category CA – chartered accountant, C – covenant category

No of employees in each cadre are represented:

TABLE NO.6

S, T, AND A CADRE 416

B CADRE- SUPERVISORY 082

E CADRE- EXECUTIVE 048

M CADRE- MANAGERIAL 100

SUPERVISORY TRAINEES 010

TOTAL 656

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4. SWOT ANALYSIS:

STRENGTHS:

• Professionally managed company, Maximum resource utilization.

• Importing certain prime components, Recognition of performance of workers and rewarding

them for the same.

• Network of dealership helping in better customer servicing.

• Construction equipment division measures customer satisfaction by the means of customer

satisfaction index and to measure performance.

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• Quality, technology upgrading in regular intervals, TQM, Effective supervision.

• ISO 9001, 14000, 18000 Certifications, High productivity.

• 90% of the components are made in house of key hydraulic components like Cylinders,

Motors, Pumps, Swivel joint, Tubes and Hoses which offers the following advantages:

1. Corrective and preventive action (CPA), Extensive testing facility.

2. High capability of product development which has been proved by the development of 12 ton

excavator and upgrading 20,30,60 ton class to improve reliability and productivity.

WEAKNESS:

• Time is consumed in introduction of new products/models.

• More formalities are involved in the process of introduction of new product.

• Growth or the promotion of the employees at L&T Komatsu is time bound.

• Under utilization of knowledge and less scope for sharing ideas of shop floor workers.

• Limited scope for growth and monotonous work that is repetitive.

OPPORTUNITIES:

• Government projects like river linking, road linking, laying of optical fibers, etc.

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• Mining, Market, Introduction of new model E.g.; PC200 is modified with the

introduction of new attachment like microprocessor control, which reduces vibration and

enhances operator comfort.

• There is an upward trend in the demand for construction and mining equipments.

The company can capture the untapped market.

THREATS:

• Market uncertainty because of sudden government policies.

• Increasing steel prices in the market, it is a major threat to the company because

the major raw material used in the equipments is steel.

• Limited scope for exporting as there is increased competition.

5. FINANCIAL STATEMENTS ANALYSIS:

BALANCE SHEET FOR THE PAST THREE YEARS:

DESCRIPTION As at 31-3-2009 As at 31-3-2010 As at 31-3-2011

Sources of funds

Share holder's funds

Share capital 1200000000 1200000000 1200000000

Reserves and surplus 1316866025 1636478497 1936658056

Loan funds

Secured loans 1939423105 131350000 65675000Deferred tax liability 66587644 69634876 68653595

TOTAL 4522876775 3037463373 3270986651

Application of funds

Fixed assets Gross block 2013311599 205457761 2135888222

(-) depreciation 101366831 1085784872 1151542987

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Net block 996944768 968792729 978345235

Capital W-I-P 64307464 61328931 9446934

1061252232 1030121660 987792169

Deferred tax asset 14810271 3122055 2267182

Current assets

Loans and advances

Inventories 2898541865 2450296814 2156595888S.Debtors 1273172989 1839987365 2523946226

Cash and bank balance 1512611 313110868 254098311

Loans and advances 621868352 680473016 817841559Other current assets 0 0 23671

4795095817 5283868063 5752505655

(-)Current liabilities & prov Liabilities 1099537196 2557902132 2791272425

Provisions 248744349 721746273 680305930

1348281545 3279648405 3471578355

Net current assets 3446814272 2004219658 2280927300

TOTAL 4522876775 3037463373 3270986651

PROFIT AND LOSS A/C FOR THE PAST THREE YEARS

DESCRIPTION

RUPEES

2011

RUPEES

2010

RUPEES

2009

Income

Sales 14907279126 11998165921 12110180588

(-) Excise duty and education cesson sales 1390897561 896752327 1370213132

Other income 52768754 139018347 47608741

Total income 13569150319 11240431941 10787576197

Exp: Manufacturing & op exps 10356292369 8307411285 7649341363

Staff expenses 431759739 367101217 378572646

Sale and administration and other expenses 1757148724 1378157368 2273257615

Interest 27280252 99363991 105542409

Depreciation and obsolescence 75651643 74142971 79577071

12648132727 10226176832 10486291104

Profit before tax 921017592 1014255109 301285093

Provision for current tax 308392421 339031131 99721169

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Provision for deferred tax -126408 14735448 3393752Provision for fringe tax 0 0 0

Taxes in respect of earlier years

Income tax 5744620 5194166 4905507

Fringe benefit tax 0 -151308 107167

Profit after tax 607006959 655445672 189879943

Balance brought forward from

previous year 1362430647 1108362742 1016758599

Profit available for appropriation 1969437606 1763808414 1206638542

(-) transferred to general reserve 60700696 65544567 0

Profit available for distribution 1908736910 1698263847 1206638542

Proposed dividend 264000000 288000000 84000000

Additional tax on dividend 42827400 47833200 14275800

Balance carried to balance sheet 1601909510 1362430647 1108362742

EPS- Basic (in Rs.) 5.06 5.46 1.58

Face value/ share 10 10 10

RATIO ANALYSIS:

• CURRENT RATIO : TOTAL CURRENT ASSETS / TOTAL CURRENT

LIABILITIES

2009 = 4795095817/ 1348281545 = 3.55

2010 = 5339509313 / 3335289655 = 1.6009

2011 = 5752505655 / 3471578355 = 1.657

INTERPRETATION:

From the above calculations, current ratio indicates the operating efficiency and the standard

is 2:1, in the year 2009 CR is above the standards and it proves that the company has enough

resources to pay its debts, where as in the year 2010 and 2011 CR is below the standards and

proves the company does not have enough resources to pay off its debts.

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• QUICK RATIO: TOTAL QUICK ASSETS / TOTAL QUICK LIABILITIES

QUICK ASSETS = CURRENT ASSETS – STOCK ( INVENTORY)

QUICK LIABILITIES = CURRENT LIABILITIES

2009 = 4795095817 – 2898541865 / 1348281545 = 1.4066

2010 = 5339509313 – 2450296814 / 3335289655 = 0.866

2011 = 5752505655 - 2156595888 / 3471578355 = 1.0358

INTERPRETATION:

From the above calculations, quick ratio standard is 1:1, so in the year 2009 and 2011 quick

ratio higher than 1:1 indicates that the company can meet its current financial obligations

with the available quick funds on hand where as in the year 2010 QR is less than the

standards so the company cannot meet its current obligations.

• DEBT EQUITY RATIO: TOTAL DEBT / EQUITY

2009 = 1939423106 / 1200000000 = 1.616

2010 = 131350000 / 1200000000 = 0.109

2011 = 65675000 / 1200000000 = 0.0547

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INTERPRETATION:

From the above calculations, a standard of debt equity ratio may be 1:1, in the year 2010 and

2011 DER is less than 1 and in the year 2009 it is higher than 1. If the ratio is greater than 1,

the majority of the company’s assets are financed through debt. If the ratio is less than 1, its

assets are primarily financed through equity. The ratio measures how much money a

company might safely borrow over long periods of time. But if the company borrows funds

through debt earnings will be more, at the same time company should pay interest to

debenture holders.

• INVENTORY TURNOVER RATIO: COST OF GOODS SOLD / AVERAGE

INVENTORY

COGS = SALES – GROSS PROFIT

AVG INVENTORY = OP. BAL OF STOCK+ CLO. BAL OF STOCK / 2

2009 = COGS = 12110180588-301285093 = 120800565495

2010 = COGS = 11998165921-1014255109 = 10983910812

2011 = COGS = 14907279126-921017592 = 13986261534

2009 AVG STOCK = 2691768268

2010 AVG STOCK = 2674419340

2011 AVG STOCK = 2303446351

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ITR 2009: 11808898495 / 2691768268 = 4.387

ITR 2010: 10983910812 / 2674419340 = 3.7391

ITR 2011: 13986261534 / 2303446351 = 6.0718

INTERPRETATION:

From the above calculations, Inventory Turnover Ratio measures company's efficiency in

turning its inventory into sales. Its purpose is to measure the liquidity of the inventory. A low

ITR is a signal of inefficiency, since inventory usually has a rate of return of zero; a high

ITR implies either strong sales or ineffective buying, in the year 2009 and 2010 ITR is low

than compared to 2011.

• EARNINGS PER SHARE: EARNINGS AVAILABLE TO EQUITY

SHAREHOLDERS / NUMBER OF EQUITY SHAREHOLDERS

2009 = 189879943 / 120000000 = 1.58

2010 = 655445672 / 120000000 = 5.46

2011 = 607006959 / 120000000 = 5.06

INTERPRETATION:

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From the above calculations, EPS allows us to compare different companies’ power to make

money. Here as the calculations shows the positive trend year after year, and also shows the

company’s ability to earn profits and in creating value to shareholders. Though in the year

2011 it has seen a bit downfall in the EPS, it can be said that the company is on the positive

pace.

6. LEARNING EXPERIENCE :

It was really a great experience and very informative doing my summer project at L&T

KOMATSU.

As soon as I entered the company I met Mr. Prakash sir (manager of finance and accounts

department ) He introduced me to Mr. Jeevan sir who was external guide.

As the time went on Jeevan sir guided me on the so many concepts that were relavent to my

topic, I was able to learn online booking of currencies, importance of forward cover rates under

his guidence.

I had an opportunity to work in several areas like Bill of entry, Procurement of invoice bill,

matching the shipment documents, which works under Oracle applications and also checking of

despatched materials from suppliers of TVS company, I was taken for the factory visit where

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was able to have sight on the construction and mining equipments like bull dozers, excavators,

PC-71, PC-200 etc…, getting assembled and painted. And got the knowledge about the machines

at factory that help in the movement of heavy spare parts for assembling purpose. There was

mock show conducted through which I even had an experience of what measures has to be taken

if there is a fire in the factory,

Finally it was a wonderful experience in handful of time to know what is corporate world, and I

thank my guide for supporting me and for having shared the knowledge.

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