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Profitability Analyasis of TVS Motors of 5 years
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AFINANCIAL RESEARCH REPORT
ONTVS MOTOR COMPANY LTD .
AREA OF STUDY: PROFITABLITY ANALYSIS
PREPARED BY : BHARAT N. DUDHAIYA
CLASS: T.Y. B.B.A.
ROLL NO: 58
COLLEGE: R.P. BHALODIA COLLEGE, RAJKOT
ACADEMIC YEAR: 2008-09
SEAT NO:
SUBMITTED TO: SAURASHTRA UNIVERSITY
GUIDED BY: MR. KULDEEP JOBANPUTRA
DECLARATION
I undersigned Mr. Bharat N. Dudhaiya the student of T.Y. B.B.A. hereby declare that the
project work presented in this report is my own work and has been carried out under the guidance of
prof. Kuldeep Jobanputra of Shree R. P. Bhalodia College.
This work has not been submitted to any other University for any other examination.
Year: - 2008-09 Signature
ACKNOWLEDGEMENT
I wish to express my sincere appreciation to all those, whose works, ideas have been useful in
writing this report.
First of all I would like to convey my gratitude to our prof. Kuldeep Jobanputra, I am also
thankful to the staff members of JIVRAJANI TVS for granting me the permission for my report and
providing me the sufficient information and guidance. And at last I am much thankful to my parents.
Date:
Place: RAJKOT
PREFACE
Financial activity plays and important role in overall economic development of the
developing country like India. Financial Research is a part of practical training contained in B.B.A.
course.
B.B.A. is a special course of management, where the management knowledge is given during
the year and which is more related practically with the managerial field.
So, I am very please to get a chance to make a financial research report on TVS Motors Ltd.
It was really a great experience for me to get practical experience in such a reputed Co.
INDEX
1. GENERAL INFORMATION
2. FINANCE DEPARTMENT
3. FINANCIAL RESEARCH
4. SUMMARY
5. CONCLUSION
6. LIMITATION OF THE STUDY
7. SUGGESTION
8. BIBLIOGRAPHY
GENERAL INFORMATION
INDEX
1. HISTORY
2. COMPANY PROFILE
3. COMPANY POLICE
4. ACHIVEMENTS OF THE COMPANY
5. ORGANISATION CHART
6. PRODUCTS
HISTORY
TVS MOTOR COMPNAY LTD. is the holding company for the TVS Group of companies
(TV Sundram Iyengar and Sons Limited) was founded by T. V. Sundram Iyengar in 1911. TVS
MOTOR COMPNAY LTD. is engaged in the manufacturing of almost all kinds of automotive
components, two wheelers. TVS MOTORS COMPANY LTD is mainly situated in Padi, Tamil
Nadu.
It is the only automotive manufacturer in India to get the prestigious Deming Prize. This
prize is "given to organizations or divisions of organizations that have achieved distinctive
performance improvement through the application of TQM in a designated year."
In 1980 TVS Motors rolled out TVS 50, India's first two-seater moped. Likewise the TVS
champ and super Champ gave a reliable and sturdy two wheeler to public. These two wheelers
together redefined the category of mopeds in India. TVS later left its collaboration with Suzuki
Motors Corporation, Japan and started to manufacture its own vehicles.
TVS is currently the third largest two wheeler company in India with sales of 107,117
units (as of June 2007). The company exported 9,133 units of two wheelers in June 2007.
COMPANY PROFILE
Company: TVS Motor Company Ltd.
Founded: 1911 by Shri.T V Sundaram Iyengar
Headquarters: Jaylaxmi Estate, Haddows Road, Chennai, Tamilnadu,
India
Key people: Mr.Venu Srinivasan Chairman
Products: Motorcycles, Mopeds, Ungeared scooters
Revenue: USD 2.2 billion (2006)
Auditors: Sundaram & Shrinivasan
Registrar: Sundaram-Clayton Ltd.
Employees: 4,000 (2006)
Website: http://www.tvsmotor.in/
COMPANY POLICY
TVS believes that the success of any enterprise is built on the solid foundation of customer
satisfaction. Continuous innovation and close customer interaction have enabled TVS to stay ahead
of competition.
TVS delivers total customer satisfaction by anticipating customer need and presenting quality
vehicles at the right time and at the right price. The customer and his ever changing need is our
continuous source of inspiration.
TVS is committed to being a highly profitable, socially responsible, and leading manufacturer
of high value for money, environmentally friendly, lifetime personal transportation products under
the TVS brand, for customers predominantly in Asian markets and to provide fulfillment and
prosperity for employees, dealers and suppliers
ACHIVEMENTS OF THE COMPANY
Star of Asia Award
Mr. Venu Srinivasan, CMD TVS Motor Company by Business Week International.
The Deming Prize
TVS Motor Company is the only two-wheeler company in the world to be awarded the
world’s most prestigious and coveted recognition in Total Quality Management.
Technology Award 2002
From Ministry of Science, Government of India for the successful commercialization of
indigenous technology for TVS Victor.
Asian Network for Quality Award 2004
TVS Scooty Pep won the prestigious 'Outstanding Design Excellence Award' from
Business World and National Institute of Design.
Best Managed Company award
From Business Today, one of India’s leading business magazines.
ORGANISATION CHART
CHAIRMAN & M.D
VENU SHRINIVASAN
DIRECTORS
GOPAL SHRINIVASAN
T.K. BALAJI
T.K. KANNAN
N. GANGA
C.R. DUA
H. LAXMANAN
T. R. PRASAD
K. S. BAJPAI
PRESIDENT
K. N. RADHAKRISHNAN
PRESIDENT FINANCE
S. G. MURALI
SECRETARY
T. S. RAJAGOPALAN
PRODUCTS
BIKES
TVS Star city
TVS Victor
TVS Flame
TVS Apache
TVS Apache RTR
SCOOTERETTES
TVS Scooty Teenz
TVS Scooty Pep
TVS Scooty Pep+
FINANCE DEPARTMENT
INDEX
1. INTRODUCTION
2. FINANCE DEPARTMENT CHART
3. WORKING CAPITAL STRUCTURE
4. ACCOUNTING & FINANCIAL METHOD & STANDARD
5. FINANCIAL POLICY
6. PRICE OF PRODUCTS
7. FINANCIAL DETAILS
INTRODUCTION
Finance is the life blood of a business. Without finance no business activity can be
undertaken. It is a lubricant for the business. Finance is the center of business world.
Financial management is that managerial activity which is concerned with the planning and
controlling of the firm’s financial resources.
Finance is required not only at the time of establishment but also at the time of expansion,
modernization, diversification and replacement of assets. Every company should be able to manage
its finance efficiency only a company can prosper.
Financial management includes the activities of raising funds, proper utilization of funds,
deciding up on the terms and conditions and period of borrowing.
FINANCIAL DEPRATMENT CHART
PRESIDENT
K. N. RADHAKRISHNAN
SR. VICE PRESIDENT
S. G. MURALI
FINANCE MANAGER
DEPUTY FINANCE MANAGER
HEAD ACCOUNTANTS
SUNDARAM & SHRINIVASAN
WORKING CAPITAL STRUCTURE
Working Capital is that proportion of a company’s capital which is employed in short term
operations.
There are two types of working capital:
Gross working capital
Net working capital
1. Gross working capital:Gross working capital is the sum total of all current assets.
2. Net working capitalNet working capital is the amount by which the value of current assets exceeds the value of
current liabilities.
Working Capital Structure Of
Year
Current assets
Inventories
2007
396.56
2006
357.90
2005
233.23
2004
216.66
2003
214.07Sundry Debtors 111.40 58.19 39.56 51.90 52.21Cash and Bank Balance 86.56 24.35 73.87 18.00 82.46Loans and Advances 266.07 233.68 180.61 159.95 105.92
Less: Current liabilities
Current Liabilities
860.59
774.22
674.12
691.97
527.27
616.32
446.51
554.54
454.66
497.34Provisions 49.73 62.44 55.61 43.11 33.07
Net Current Assets
823.95
36.64
754.41
-80.29
671.93
-144.66
597.62
-151.14
530.41
-75.75 TVS Motor Company Ltd. (Rs. in Cr)
ACCOUNTING & FINANCIAL METHODS & STANDARDS
Mainly there are two types of accounting methods
1. Single entry system
2. Double entry system
The law and the Stock Exchange rules are concerned with disclosure that the accounts
prepared should provide a “true and fair view” of the financial position and results.
Financial reports of “accounts” required for external users include two financial statements
and accompanying notes, a balance sheet and a profit and loss account, plus a third statement
required under SSAP No.10 (Statement of Standard Accounting Practices) namely, a statement of
sources and application of funds, or funds statement.
According to the Company Act, 1956 every company which is listed of the Stock Exchange
is required to prepare its accounts as per double entry system. TVS Motor Company Ltd. is listed of
both the Stock Exchanges: BSE and NSE
BSE NSE
TVS Motor Company Ltd.: 532343 TVS Motor Company Limited TVSMOTOR
Double Entry System:
Regarded as the most distinctive and fundamental concept of accounting the Dual aspect
concept provides the basis for accounting mechanics. Before explaining this concept, let us define
the term “assets” and “equity”.
Assets are resources owned by the firm. They are very broadly divided in to two broad
categories: Fixed assets and Current assets.
There are two types of equities: Owner equity and Liabilities. Owners equity represents the
claim of the owner, liabilities, on the other, reflects the claims of the creditors of the firm.
Now, according to the Dual aspect concept, each event has two aspects. These are such that
the accounting identity is always preserved.
FINANCIAL POLICY
This is one of the challenging and key issues of the financial management. The main long
term financial decisions relating to the financial policies are related to the structure of debt, equity
ratio, and dividend policy.
TVS Motor Company has been following yearly financial policies relating to the competitors’
move in the market.
The financial year 2007-08 was an eventful year for TVS Motor Company. During the year,
the company completed its product portfolio with the launch of TVS Flame in the executive segment.
With the various initiatives and a complete portfolio in two wheelers, the company is now in
a better position to reverse the declining trend in sales and to report improved results.
Till the launch of the TVS Flame towards the end of the year, the company was absent in the
executive segment, which accounts for over 50% of the motorcycle market. TVS Motor Company's
motorcycle portfolio was largely dependent on the entry level Star range of products and non-
availability of retail finance had a severe impact on sales. The Company continues its rigorous focus
on its costs through an effective deployment system. Value engineering and aggressive global
sourcing projects are being pursued to reduce material costs and also to neutralize input material cost
increases.
PRODUCT PRICE
BIKES
TVS Star city 33300
TVS Victor 42200
TVS Flame 46600
TVS Apache 58800
TVS Apache RTR 65500
SCOOTERETTES
TVS Scooty Teenz 29900
TVS Scooty Pep 33300
TVS Scooty Pep+ 34400
FINANCIAL DETAILSPROFIT & LOSS ACCOUNT (Rs. In Cr)
Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
Sales Turnover (net sales) 4,473.44 3,731.75 3,321.25 3,260.01 3,111.28
Other Income 85.34 80.72 88.22 45.30 29.28
Stock Adjustments -37.72 60.70 3.18 -7.77 39.82
Total Income 4,521.06 3,873.17 3,412.65 3,297.54 3,180.38
Raw Materials 2,865.65 2,381.79 1,984.60 1,847.40 1,898.50
Excise Duty 618.48 496.79 445.34 439.80 406.75
Power & Fuel Cost 43.10 36.47 27.41 29.34 20.85
Other Manufacturing Expenses 72.03 63.58 64.97 69.25 44.43
Employee Cost 171.39 155.20 139.73 132.68 101.67
Selling and Administration
Expenses502.51 446.94 390.35 392.66 332.19
Miscellaneous Expenses 27.10 9.05 61.84 81.69 83.70
Less: Preoperative Expenditure
Capitalized0.00 0.00 0.00 0.00 0.00
Profit before Interest, Depreciation
& Tax220.80 283.35 298.41 304.72 292.29
Interest & Financial Charges 42.35 20.99 8.33 10.30 11.24
Profit before Depreciation & Tax 178.45 262.36 290.08 294.42 281.05
Depreciation 87.60 93.91 89.63 79.89 79.91
Profit Before Tax 90.85 168.45 200.45 214.53 201.14
Tax 24.25 51.45 62.88 76.04 73.19
Profit After Tax 66.60 117.00 137.57 138.49 127.95
Adjustment below Net Profit -0.32 5.50 1.42 6.03 1.40
P & L Balance brought forward 35.50 38.21 34.43 32.63 23.17
Appropriations 72.69 125.21 135.21 142.72 119.89
P & L Bal. carried down 29.09 35.50 38.21 34.43 32.63
Equity Dividend 20.19 30.88 30.89 31.41 27.72
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Corporate Dividend Tax 2.94 4.33 4.22 4.25 2.07
Equity Dividend (%) 85.00 130.00 130.00 130.00 120.00
Earning Per Share (Rs.) 2.68 4.74 5.61 5.65 5.39
Book Value 34.07 32.26 28.58 24.21 183.10
BALANCE SHEET
(Rs. In Cr)Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
Share Capital 23.75 23.75 23.75 23.75 23.10
Reserves & Surplus 785.52 742.37 655.08 551.20 399.85
Total Shareholders Funds 809.27 766.12 678.83 574.95 422.95
Secured Loans 446.16 308.61 175.01 37.50 41.03
Unsecured Loans 187.40 76.43 11.83 81.51 80.86
Total Debt 633.56 385.04 186.84 119.01 121.89
Total Liabilities 1,442.83 1,151.16 865.67 693.96 544.84
Gross Block 1,483.01 1,378.41 1,287.22 1,132.57 806.51
Less: Accum. Depreciation 685.93 611.63 523.64 437.91 302.03
Net Block 797.08 766.78 763.58 694.66 504.48
Capital Work in Progress 205.83 54.68 6.90 9.52 28.19
Investments 344.74 344.19 175.39 128.02 87.92
Inventories 396.56 357.90 233.23 216.66 214.07
Sundry Debtors 111.40 58.19 39.56 51.90 52.21
Cash and Bank Balance 86.56 24.35 73.87 18.00 82.46
Loans and Advances 266.07 233.68 180.61 159.95 105.92
Current Liabilities 774.22 691.97 616.32 554.54 497.34
Provisions 49.73 62.44 55.61 43.11 33.07
Net Current Assets 36.64 -80.29 -144.66 -151.14 -75.75
Miscellaneous Expenses not w/o 58.54 65.80 64.46 12.90 0.00
Total Assets 1,442.83 1,151.16 865.67 693.96 544.84
Contingent Liabilities 255.75 197.82 159.31 138.57 113.18
FINANCIAL RESEARCH
INDEX
1 STATEMENT OF OBJECTIVE
2 OBJECTIVE OF STUDY
3 INTRODUCTION OF THE TOPIC
4 DATA SOURCES
5 ANALYSIS
6 CALCULATIONS
STATEMENT OF OBJECTIVE
The main objective of preparing this report is to make a research work on financial aspects of
the concerned company. The main contents of this financial research include the analysis of the
financial statements i.e. Balance sheet, Profit and Loss accounts and other related analysis of
financial information.
“In this report of TVS Motor Company Ltd. the main objective of financial research is
related with the PROFITABLITY ANALYSIS of concerned matters of Profit & Loss account.”
All the research and analytical work shown in this report is totally unofficial and not binding
to any legal or official purpose.
OBJECTIVE OF STUDY
Financial Management is one of the main functions of the management. The three
broad activities of financial management are:
1. Financial analysis, financial planning, financial control
2. Management of the firm’s asset structure
3. Management of the firm’s financial structure
Here in this project report the main focus is lying on the research and analysis of the financial
statements and position of the TVS Motor Company Ltd. All the information and research work in
this report is just for the sake of analytical development and form the point of view of research
power.
By doing this activity of research of financial information the interested parties can come to
know the main facts and figures of the concerned company and then a lot many decisions can be
taken relating to investments, future profitability, forecasts relating to the future growth of the
company.
In this financial research report all the research work is carried form the information from the
financial statements like balance sheet, profit and loss account and working capital structure.
INTRODUCTION OF TOPIC
The topic for making research on this project of TVS Motor Company Ltd. is about
ROFITABILITY ANALYSIS of financial statements i.e. Balance sheet and Profit & loss account.
Profitability analysis is of vital importance for a business firm. Profitability analysis includes
mainly comparison of sales turnover, expenses, profit before tax, profit after tax,
appropriations made after tax payment, return on equity comparison, comparison of selling
and administrative expenses etc.
If properly analyzed and interpreted Profitability analysis can provide valuable insights in to
a firm’s performance. It is helpful in assessing corporate excellence, judging creditworthiness,
forecasting share price, etc.
The profitability analysis is very useful to judge the current financial position of the firm
from an outsider point of view and also from the owner’s point of view to control the costs and
making changes relating to the performance to improve the efficiency.
In accordance to the research work all the comparisons and analysis is been made on the basis
of the first of the last five year’s data so as to judge the proper accuracy of the financial changes.
DATA SOURCES
The data sources are broadly of two types namely:
1. Primary data source
2. Secondary data source
1. PRIMARY DATA SOURCE:
Primary data source are called as the sources from which the information is directly received
by the way of interviews, seminars, lectures, public poll, telephone, post etc.
In PRIMARY DATA SOURCE the main fault is that the cost of collecting data is too high as
well as the time is more required to do all the procedure.
2. SECONDARY DATA SOURCE:
Secondary data source are called as the sources from which the information is received by
way of mediums like television, magazines, internet, newspapers, templates, books by authors,
company booklets etc.
Information can be get much easier and faster and with least cost from the SECONDRY
DATA SOUNRCES.
The data sources used in this report are from the secondary data sources, which includes
mainly internet, reference books by authors and company brouchers.
CALCULATIONSProfitability analysis
PROFIT & LOSS ACCOUNT (Rs. In Cr)Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03
INCOME:
Total Income
[A]
4,521.06 3,873.17 3,412.65 3,297.54 3,180.38
EXPENSES:
Raw Materials 2,865.65 2,381.79 1,984.60 1,847.40 1,898.50
Excise Duty 618.48 496.79 445.34 439.80 406.75
Power & Fuel Cost 43.10 36.47 27.41 29.34 20.85
Other Manufacturing Expenses 72.03 63.58 64.97 69.25 44.43
Employee Cost 171.39 155.20 139.73 132.68 101.67
Selling and Administration
Expenses502.51 446.94 390.35 392.66 332.19
Miscellaneous Expenses 27.10 9.05 61.84 81.69 83.70
TOTAL EXPENSES
[B]4300.26 3589.82 3114.24 2992.82 2888.09
EBIT (operating profit)
[A-B]220.80 283.35 298.41 304.72 292.29
Total debt
Interest
633.56
42.35
385.04
20.99
186.64
8.33
119.01
10.30
121.89
11.24
EBDT 178.45 262.36 290.08 294.42 281.05Depreciation 87.60 93.91 89.63 79.89 79.91
EBT 90.85 168.45 200.45 214.53 201.14
Tax 24.25 51.45 62.88 76.04 73.19
EAT 66.60 117.00 137.57 138.49 127.95
Equity Dividend 20.19 30.88 30.89 31.41 27.72
Equity Dividend (%) 85.00 130.00 130.00 130.00 120.00
Earning Per Share (Rs.) 2.80 4.93 5.79 5.83 5.39
Book Value 34.07 32.26 28.58 24.21 183.10
No of shares 237543557 237543557 237543557 237543557 237543557
CALCULATIONS
Profitability analysis
% CHANGES IN PARTICULARS (Rs. In Cr)
PARTICULARS 2007 2006 2005 2004 2003SALES TURNOVER
% CHANGE
4,473.44
+43.78
3,731.75
+19.94
3321.25
+6.75
3,260.01
+4.78
3,111.28
100
INTEREST
% CHANGE
42.25
+276.78
20.99
+86.74
8.33
-25.89
10.33
-8.36
11.24
100TAX
% CHANGE
24.25
-66.87
51.45
-29.70
62.88
-14.09
76.04
+16.66
73.19
100EAT
% CHANGE
66.6
-47.95
117.00
-8.56
137.57
+7.52
138.49
+8.24
127.95
100EPS
% CHANGE
66.6
237543557
-48.05
117.00
237543557
-8.53
137.57
237543557
+7.42
138.49
23754355
7
+8.16
127.95
237543557
100
EPS (Rs.) 2.80 4.93 5.79 5.83 5.39
FORMULA:
VALUE OF CUREENT YEAR
% CHANGE IN THE VALUES =
VALUE OF THE BASE YEAR (2003)
EARNING AFTER TAX
EPS =
NO OF SHARES
ANALYSIS
Profitability analysis is very useful from the company point of view it helps in to know about
the sales trend, profit changes, debt position, price of shares etc. It is also useful from the outsider’s
point of view it helps to know the debt payment position of the company, investment opportunity,
market value of the firm etc. From research point of view it shows the real picture and helps into take
decisions about to make necessary changes if any deviations are found due to any financial decision.
1. SALES TURNOVER:
Sales turnover is the net sales of the firm. Here in case of TVS Motors Ltd. the sales turnover
has subsequently increased due to the increased marketing efforts and increased selling and
administrative expenses.
(Rs. In Cr)
SALES TURNOVER
% change
20074,473.44
+43.78
20063,731.75
+19.94
20053321.25
+6.75
20043,260.01
+4.78
20033,111.28
100
2003 :Its total two-wheeler sales was 4,86,189 units. The newly-launched TVS Fiero F2 sold 4,028 units
in 2003. The recently-launched TVS Scooty Pep registered sales of 4,047 units. The company was
working on increasing its production by twice the present level.
2004 :
The company launched its new model Centra in 100cc segment which sold about 14,188 units. The
scooterette sales grew 37 per cent. The total no of units sold were 5, 70,671.
2005 :
6,79,099 units with a substantial increase in the sales of Scooty in 2004-05.
2006:
The motorcycles sales recorded 8,06,708. This represents the highest volumes ever in the history of
TVS Motor Company both in motorcycles as well as in the overall two-wheeler segment. The
launch of TVS Star City &Victor GLX & TVS Apache added to the significant sales growth,
received overwhelming response in the markets where it has been launched in March.
2007:
TVS Motor Co. records highest ever two wheeler sales of 15,28,214 units in 2006-07 compared to
2005-06. This year company launched TVS Apache RTR 160 and new TVS scooty Teenz.
There has been a tremendous increase of 43.78% in the last five year. The sales &
promotional expenses have increased up to 51% in last 5 years. The overall result of the
increase in the sales was annual launch a new model.
2. INTEREST: (Rs. In Cr)
Total Shareholders Funds2007809.27
2006766.12
2005678.83
2004574.95
2003422.95
Total Debt 633.56 385.04 186.84 119.01 121.89
Total Liabilities 1,442.83 1,151.16 865.67 693.96 544.84
Debt as a % of total liabilities 43.91 % 33.45 % 21.58 % 17.15 % 22.37
Interest
% change
42.25
+276.78
20.99
+86.74
8.33
-25.89
10.33
-8.36
11.24
100
2003:During 2003 the payment of interest was 11.24 cr. The portion of unsecured loan in total debt
was 66.33% so due to the heavy burden of unsecured loan the interest payment was high.
2004:During 2004, the payment of interest reduced only to 91 Lacs because the portion of unsecured
loans was 68.49% which was higher than the previous year’s portion of unsecured loan.
2005:In 2005, the portion of unsecured loans in the total debt was only 6.33%. So, the payment of
interest, 8.33 Cr was much reduced in spite of a big amount of debt.
2006:In 2006, the amount of debt was about double than the debt of 2005 with the portion of unsecured
about 19.85%. The payment of interest 20.99 Cr increased to thrice paid in 2005.
2007:During 2007 the payment of interest was 42.25 cr. The portion of uncured loan in total debt was
29.58%. The debt was also 44% of the total liability so, ultimately the payment of interest was
double than the amount of interest paid in 2006.
There has been a tremendous increase in interest payment except 2004. There has been
increase of 276% in the payment of interest. This is mainly because of the increasing portion of
debt in the capital structure. The portion of debt has almost doubled in the last five years in
comparison of 22% of 2003 to 43% of 2007.
3.TAX:
(Rs. In Cr)
TAX
% change
200724.25
-66.87
200651.45
-29.70
200562.88
-14.09
200476.04
+16.66
200673.19
100
2003:In 2003, the portion of unsecured loan was 66.33% so, the payment of interest was much
higher and due to this the tax liability was reduced.
2004:During 2004, the portion of unsecured loan was 68.49%. However, the payment of interest
was lesser than 2004 because of the lesser amount of debt than 2003. So this has increased the tax
liability.
2005:In 2005, the portion of unsecured loan was about 6.33% but the depreciation charged was
much higher than 2003 & 2004.So, the tax liability was lesser than 2004.
2006:In 2006, the tax liability has much reduced due to increase in payment of interest and
depreciation charged.
2007:Due to the law operating profit and high payment of interest the tax liability has almost
reduced to half of the tax payment of 2006.
To conclude the Tax liability has reduced 66% in 2007 except 2004 because of low
portion of debt capital. Because most of the part of the earning is spent on the payment of
interests as a result of it the EBT decreases and the tax liability also decreases.
4.EAT:EAT means Earning After Tax. It is the profit after making deductions of interest,
depreciation and tax.
(Rs. In Cr)
EAT
% change
200766.6
-47.95
2006117.00
-8.56
2005137.57
+7.52
2004138.49
+8.24
2003127.95
100
2003:Due to the savings in the Employee cost and Excise duty the Company managed to increase
the profit in spite of increased expenses.
2004:During 2004, the Company has managed to increase the profit due to increase in sales and
decrease in Raw material costs & Miscellaneous expenses.
2005: This year the Company had a slight fall in profit because of the increasing expenses but due
to the efficient control over the miscellaneous expenses and interest payment, the Company
managed to control fall in the profit.
2006: This year the Company had to face the fall in the profit due to increase in Selling &
Administrative expenses. However there was a big fall in the miscellaneous expenses but the
payment of interest was much higher.
2007:During the year the Sales turnover was very high due to the launch of the new Apache but the
increase in Raw material cost, Selling & Administrative expenses and Miscellaneous expenses and
also increase in the payment of interest led the profit to decline to the lowest of the last five year.
The EAT has reduced 47% as compare to 2003. The portion of borrowed capital has
reduced the tax liability but higher rate of interest. There has been mammoth increase in the
payment of interest which is almost about 276%, which clearly shows the increase in the rates
of interests which reduces the profit.
5.EPS: (Rs.
In Cr)
EPS
200766.6
237543557
2.80
2006117.00
237543557
4.93
2005137.57
237543557
5.79
2004138.49
23754355
7
2003127.95
237543557
5.39
% change -48.05 -8.53 +7.42 8.16 100
2003:Due to the savings in the Employee cost and Excise duty the Company managed to
increase the profit in spite of increased expenses. Because of the sufficient profit the EPS was also
very good.
2004:Because of the increase in sale the Company managed to increase the profit and that has
changed the EPS slightly upward.
2005:In spite of the increasing expenses and interest payment the Company managed to
maintain EAT with a slight fall and due to this the EPS also fall with a slight decrease.
2006: The increase in Selling & Administrative expenses and high payment of interest has
heavily affected EPS to the lowest of the last 4 year.
2007: Due to the increase in Raw material cost, Selling & Administrative expenses,
miscellaneous expenses and high payment of interest led to the lowest EPS of the last 5 years.
The effect of decrease in EAT has also lower down the EPS almost to the 2.8 Rs in
comparison to 5.4 Rs. of 2003. This accounts for almost 50% reduction in EPS. Further the
portion of debt in the capital structure has also doubled so this has affected the EAT in form of
payment of interest so ultimately the EAT has also declined and as a result of it EPS has also
declined.
SUMMARY
From the analysis of the all the parameters of the profitability the short summary about each
parameter is as follows:
1. SALES TURNOVER:
There has been a tremendous increase of 43.78% in the last five year. The sales turnover
has increased due to the increased marketing efforts and increased selling and administrative
expenses. The overall result of the increase in the sales was annual launch a new model.
2. INTEREST:
There has been a tremendous increase in interest payment except 2004. The portion of debt
has almost doubled in the last five years from 22% to 43% of 2007 with the increase of 276% in
the payment of interest. This is mainly because of the increasing portion of debt in the capital
structure.
3.TAX:
The Tax liability has reduced up to 66% in last five years 2007 except 2004 because of
low portion of debt capital. Because most of the part of the earning is spent on the payment of
interests as a result of it the EBT has decreased and the tax liability has also decreased.
4.EAT:
The EAT has reduced 47% in last five years. The portion of borrowed capital has reduced
the tax liability. There has been mammoth increase in the payment of interest which is almost about
276% which has reduces the profit.
5.EPS:
The effect of decrease in EAT has also lower down the EPS from Rs.5.4 To Rs. 2.8 in last
five years. This accounts for almost 50% reduction in EPS. Further the portion of debt in the
capital structure has also doubled so this has affected the EAT so ultimately the EAT has also
declined and as a result of it EPS has also declined.
CONCLUSION
Financial research is of analytical in nature. Financial research and analysis provides a
balanced evaluation of corporate performance calls for looking at it from four perspectives: customer
perspective, internal perspective, innovation and learning perspective and financial perspective.
Analysis of financial information provided useful figure by the comparison of which useful
conclusions can be drawn.
Here in this research report of TVS Motor Company Ltd. the research work has been done on
the profitability criteria of the company. The profitability analysis in this report covers the topics
relating to sales turnover, payment of interest, EBIT, EBT, TAX, EAT and EPS.
The high inflation and restricted availability of retail finance will continue to affect the
prospects of the two-wheeler industry. However, the company will have the benefit of all the new
products launched towards the end of 2007 –08. This will help the company to reverse the declining
trend in sales and to report improved results.
LIMITATION OF THE STUDY
Every research has its own limitations. It cannot be an exact science. The main limitation of
this financial research is as follows:
1. TIME PERIOD: Financial research usually requires the information of the time period of minimum 10 to 15
years to have exact measure of the variations due to the changing circumstances.
2. LIMITATION OF FINANCIAL RESEARCH METHODS: Financial research requires the use of different techniques and established theories to have
perfect measure of the changes occurring in the business which is not feasible to use due to the
requirements of other data requirements.
3. LIMITATION OF SKILL :
Financial analysis just provides the figure and reasons for the occurrence of the changes in
the financial position but the results which fits in one situation might not fit in other situation as well
it differs from person to person as skill of analysis differs from person to person.
4. LIMITATION OF THE DATA SUFFCIANCY:The main limitation of this report is that the insufficiency of the data required. Financial
research generally requires all types of financial statements and reports which is not available in all
cases so work of analysis becomes tedious.
5. LIMITATION OF BIAS:Financial research is done by researchers and all the researchers have their own different
opinion on the same situation again if the opinion of the researcher is biased, the purpose of the
research might get defeated.
6. LIMITATION OF THE RESOURCES:Financial research requires sufficient monetary resources. Since sufficient monetary
resources are not made available to do the research, secondary data sources have to be used which is
not at all fully reliable.
7. LIMITATION OF USEFULNESS:Financial research is not just a paper process its main usefulness is laid with its proper and
effective use in removing the mistakes and improving the decisions but it ultimately depends upon
the value of the results and analytical power of the decision maker.
SUGGESTION
After making the research work on Profitability of TVS Motor Company Ltd. few points
have been derived from the research and on the basis of that I would like to make following
suggestions.
The company should reduce the portion of borrowing capital in the capital structure.
Currently the portion of debt in capital structure is 43 %.
The selling and promotional expenses have increased though to have substantial increase
in sales selling and promotional expenses should be increased and promotional activities should
be conducted.
The balance between the debt and equity is required to be maintained so as a result of
it EAT as well as EPS can be increased to more.
The company should adopt the PLOUGH BACK POLICY to reform the capital
structure and to have the advantages of minimization of tax and burden on interest payment.
Due to the increase in the rate of interests the company should maintain a ratio between
Dividend payment and Depreciation. If the portion of depreciation is increased then it can have a
big future benefit and the Tax liability can also be minimized so the company can have huge future
benefit from its own funds.
BIBLIOGRAPHY
WWW.TVSMOTOTR.IN
Encyclopaedia of Management by Philip A. Vale
Financial Management by Prasanna Chandra
Financial Management by Khan & Jain