A SUMMER TRAINING REPORT ON STUDY AND ANALYSIS OF FINANCIAL STATEMENTS AT JAY USHIN LIMITED SUBMITTED IN PARTIAL FULFILMENT FOR THE REQUIREMENT OF THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION (MBA) TO MAHARSHI DAYANAND UNIVERSITY, ROHTAK BY ANSHUL GUPTA ROLL NO. 2903 MBA (3rd SEM.)
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A
SUMMER TRAINING REPORT
ON
STUDY AND ANALYSIS OF FINANCIAL STATEMENTS
AT
JAY USHIN LIMITED
SUBMITTED IN PARTIAL FULFILMENT FOR THE
REQUIREMENT OF THE AWARD OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION (MBA)
TO
MAHARSHI DAYANAND UNIVERSITY, ROHTAK
BY
ANSHUL GUPTA
ROLL NO. 2903
MBA (3rd SEM.)
AMITY BUSINESS SCHOOL, MANESAR
BATCH (2009-2011)
DECLARATION
I, Anshul Gupta, Roll No. 2903, MBA (3rd semester) of Amity Business School, Manesar, hereby declare that the Summer Training Report entitled, “Study & Analysis of financial statements”, at Jay Ushin Limited is an original work and the same has not been submitted to any other institute for the award of any other degree.
A seminar presentation of the Training Report was made on ________________ and the suggestion as approved by the faculty was duly incorporated.
Presentation-In-Charge Signature of the Candidate
Signature: ________________
Name of the Faculty: ________________
Countersigned:-
Director of the Institute
ACKNOWLEDGEMENT
“If the words are symbol of undiluted feelings and token of gratitude then let the words play the heralding role of expressing my feelings.”
Making a project is a result of meticulous efforts put in by many minds that contribute to the final report formation. This is an honest effort towards putting forward whatever I have gained as a valuable experience that will surely help me move up the learning curve towards the path I have chosen.
I am indeed thankful to honorable Prof (Dr) R C Sharma, Ex-Director, Amity Business School, Manesar, who has provided the wonderful opportunity of getting exposed to industrial and business working know-how. I extend my deepest thank to my mentor and guide, Dr. Vikas Madhukar, Professor, Amity Business School for giving me the opportunity to understand the project and for providing me the necessary information whenever required.
I would like to render my sincere thanks to Mr. S.K Aggarwal, General Manager (Finance), Mr. Aloak Kumar Tulsiyan (Finance Controller),Mr. Abhay Harlalka, Assistant (Finance Controller) , and Satya Prakash Sharma, Executive (Finance) Jay Ushin Limited for their immense encouragement, guidance and invaluable lecture sessions throughout my training. They all have been an inspirational mentor guiding me through every step of my project, thus making the entire Project a complete learning process.
Never the last, I would take the opportunity to thank to all the departmental heads of “JAY USHIN LTD.” who gave their precious time in providing me with valuable information whenever needed.
ANSHUL GUPTA
MBA (3rd SEM)
INTRODUCTION
Finance is defined as the provision of money when it is required. Every enterprise needs finance to start
and carry out its operation. Finance is the lifeblood of an organization. So, finance should be managed
effectively.
Financial statements are the soul of every business. It defines the financial soundness of the business.
Every investor or stake holder must go through the financial statements before investing in any
organization. From the Company or Entrepreneur point of view financial statements are very important to
know how well the business operations going on. Financial statements are the end products of the
financial accounting process. The financial statements mean presenting the financial information in
concise form. Every company needs to analyze the performance of financial statements to know the
inefficiency in their business operations. Analysis of financial statements is a process of determining the
financial strength and weaknesses of a firm by establishing the strategic relationship between the items of
financial statements like balance sheet, profit & loss account and other operative data. The process of
financial statement analysis is given below:-
Selection of information necessary for analysis of financial statements.
Methodical classification of data.
Interpretation, Drawing conclusion and explaining the meaning and significance of data.
The present study analyses the financial statements of Jay Ushin Ltd. to know the company liquidity,
profitability, solvency and financial soundness. Descriptive research is used in this study to know the
present financial position of the company and mainly my source of data is secondary and the tools used in
this are comparative statement, common size statement and ratio analysis. Two types of financial
statements are used balance sheet and profit loss account for analyzing and interpreting.
The subsequent chapters in present study will suggest simple steps to help you read an annual report
demystify financial statements and help you develop an investment tool-kit for evaluating companies.
SIGNIFICANCE OF THE STUDY
Analysis of financial statement is an important tool to weigh the worthiness of a company shares so
this study help the investors and shareholders gauge a company’s revenue profile, its utilization of
funds, profitability and future earnings prospects because investor’s interest lies in the appreciation
of a company’s stock price and the likely-hood of a company paying dividends.
Present study helps the creditors to know about the company ability to repay its debts and
manager’s to know the company ability to finance the future expansion. It provides information to
government for tax levies.
This study will provide a new direction to the organization by pinpointing their deficient and
efficient areas in their financial statements and providing the suggestions to the organization to
improvise upon its deficiencies.
It will help other students to know how financial statements give a complete picture of company’s
business functions, operational efficiency and their credit worthiness.
OBJECTIVE OF THE STUDY
To know the liquidity position of the company.
To know the solvency position of the company.
To know the profitability of the company.
To know determine the area of improvement in the working of company.
To determine the financial performance of the company.
FOCUS OF THE STUDY
The core of the study consists of financial statements which include two elements: the balance
sheet, and profit & loss account, both pointer’s to a company’s financial health. They provide
valuable insight about a company to its various stakeholders like government, creditors, managers,
shareholders and investors, so the focus of study is to know the company profitability, liquidity,
solvency and financial position of a company by analyze the balance sheet and profit & loss
statement with the help of various tools and technique.
CONCEPTUALISATION
Financial statements
The financial statements are the end product of the financial accounting process. The financial
statements means presenting financial information presented in concise form and the financial
information is related to the financials of the company. The financial statements are prepared by
the firm, firstly to communicate with different parties about the financial position of the firm and
secondly to analyze the performance and operations of the firm for further planning.
Analysis of financial statements
Analysis of financial statements is a process of evaluating the relationship between component
parts of financial statement to obtain a better understanding of a firm’s position and performance.
It determine the financial strength and weakness of a firm by establishing strategic relationship
between the items of the balance sheet, profit & loss account and other operative data.
Process of Analysis
1) Selection of information necessary for analysis of financial statements.
2) Methodical classification of the data.
3) Interpretation and drawing conclusion.
Types of Analysis
Horizontal analysis
Vertical analysis
1) Horizontal analysis
Comparison of financial data of a company for several years. The figures for this type of analysis
are presented horizontally over a number of columns. The figures of various years are compared
with standard or base year.
Tools employed in horizontal analysis are:-
Comparative statements.
Trends percentage & analysis
a) Comparative statements
Comparative statements contain the changes (increase or decrease) in the financial statements of
two or more periods.
The changes are shown in absolute figures and percentage:-
It helpful in analyzing the changes in the performance of two or more periods of a firm
Two or more firm
There are two types of comparative statements:-
Comparative Balance sheet
Comparative Income statement
Comparative Balance sheet
The comparative balance sheet analysis is the study of the trend of the same items, groups of item
and computed items in two or more balance sheet of the same business enterprises on different
dates. It helps in forming an opinion about the progress of enterprises.
Comparative Income statement
This statement exhibits the working results of the enterprise for a given period of time and serves
the purpose of comparison. It gives an idea of the progress of a business over a period of time. The
working results of two or more firms or two or more periods of the same firm can be expressed in
money or percentage.
b) Trend analysis
This method determine the direction upward or down wards and involves the computation of the
percentage relationship that statement item bears to the same item in base year. The information
for a number of years is taken up and one year, generally the first year, is taken as base year.
E.g.:- If sales figure for the year 1995 to 1999 are to be studied, then the sales of 1995 will be
taken as 100 and percentage of sales for all other years will be calculated in relation to the base
year, i.e. 1995.
2) Vertical analysis
The study of relationship of the various items in the financial statements of one accounting period.
Figures from financial statements of a year are compared with a base selected from the same year’s
statement.
Tools employed in the vertical analysis are:-
Common-size financial statements.
Financial ratios.
A. Common size financial statement
The common size balance sheet and income statements are shown in analytical percentage. The
figures are shown as percentage of total assets, total liabilities and total sales.
There are two types of common size financial statements:-
a) Common size Balance sheet
b) Common size Income statement
Common size Balance sheet
A statement in which balance sheet items are expressed as the ratio of each asset to total assets and
the ratio of each liability is expressed as a ratio of total liabilities is called common size balance
sheet.
The common size balance sheet can be used to compare companies of different size. The
comparison of figures in different periods is not useful because total figures may be affected by a
number of factors.
Common size Income statement
The item in income statements can be shown as percentages of sales to show the relation of each
item to sales. A significant relationship can be established between items of income statement and
volume of sales.
The increase in sales will certainly increase selling expenses and not administrative and financial
expenses. In case the volume of sales increase to a considerable extent, administrative and
financial expenses may go up. In case the sales are declining the selling expenses should be
reduced at once.
A relationship is established between sales and other items in income statement end this
relationship is helpful in evaluating operational activities of the enterprises.
B. Financial ratios
A ratio: Is the mathematical relationship between two quantities in the form of a fraction or
percentage.
Ratio analysis: is essentially concerned with the calculation of relationships which after proper
identification and interpretation may provide information about the operations and state of affairs
of a business enterprise.
The analysis is used to provide indicators of past performance in terms of critical success factors of
a business. This assistance in decision-making reduces reliance on guesswork and intuition and
establishes a basis for sound judgment.
This is the mostly used tool for analysis in financial analysis. Ratio analysis expresses the
relationship in a mathematical form between two items or a group of items related to each other is
a logical manner. It is based on the fact that a single figure is not going to communicate
meaningful information but when compared with other item expresses significant information.
There are various ratios that are used in this project:-
A: Liquidity Ratios
Liquidity refers to the ability of a firm to meet its short-term financial obligations when and
as they fall due.
The main concern of liquidity ratio is to measure the ability of the firms to meet their short-
term maturing obligations. Failure to do this will result in the total failure of the business,
as it would be forced into liquidation.
Current Ratio
The Current Ratio expresses the relationship between the firm’s current assets and its current
liabilities.
Current assets normally include cash, marketable securities, accounts receivable and inventories.
Current liabilities consist of accounts payable, short term notes payable, short-term loans, current
maturities of long term debt, accrued income taxes and other accrued expenses (wages).
The rule of thumb says that the current ratio should be at least 2 that are the current assets should
meet current liabilities at least twice.
What does the calculated ratio tells us? In 2000, the company only had 85 cents worth of current
assets for every dollar of liabilities. This grew to 92 cents in 2002 indicating increasing trend on
liquidity; however the company is still unable to support its short-term debt from its currents
assets.
Quick Ratio
Measures assets that are quickly converted into cash and they are compared with current liabilities.
This ratio realizes that some of current assets are not easily convertible to cash e.g. inventories.
The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its
short-term obligations from its “quick” assets only (i.e. it ignores stock).
B: Asset Management/Activity Ratios
If a business does not use its assets effectively, investors in the business would rather take their
money and place it somewhere else. In order for the assets to be used effectively, the business
needs a high turnover.
Unless the business continues to generate high turnover, assets will be idle as it is impossible to
buy and sell fixed assets continuously as turnover changes. Activity ratios are therefore used to
assess how active various assets are in the business.
Note: Increased turnover can be just as dangerous as reduced turnover if the business does not
have the working capital to support the turnover increase. As turnover increases more working
capital and cash is required and if not, overtrading occurs.
Debtors Turnover Ratio: If a firms sells its goods on credit than this ratio helps to know how
quickly the debtors are collected. This is calculated as percentage by taking net credit sales or total
sales and dividing it by average debtors. With the help of this we can also calculate the amount of
days or months within which the debtors are calculated.
Working Capital Turnover Ratio: It measures the velocity or utilization of the working capital
of the firm during the year. This is calculated by dividing average net sales by average working
capital. In this if the turnover period is more than more working capital is required if it is less than
less working capital is required.
Fixed Asset Turnover Ratio: The ratio indicates the extent to which the investments in fixed
assets contribute towards sales. It measures the firm’s ability to generate net sales from fixed
assets. It is calculated by dividing net sales by average fixed assets.
Capital Turnover Ratio: It measures the relationship between net sales and the capital employed.
This ratio measures the effectiveness of the firm in utilizing its resources. This ratio is the indicator
of the overall profitability of the firm. This is calculated by dividing net sales by average capital
employed.
Total Asset Turnover Ratio: This ratio measures the ability of the firm to use its sales to generate
sales. This considers all the assets. It is calculated by dividing net sales by net fixed assets.
C: Financial Leverage (Gearing) Ratios
The ratios indicate the degree to which the activities of a firm are supported by creditors’
funds as opposed to owners.
The relationship of owner’s equity to borrowed funds is an important indicator of financial
strength.
The debt requires fixed interest payments and repayment of the loan and legal action can be
taken if any amounts due are not paid at the appointed time. A relatively high proportion of
funds contributed by the owners indicate a cushion (surplus) which shields creditors against
possible losses from default in payment.
Note: -The greater the proportion of equity funds, the greater the degree of financial
strength. Financial leverage will be to the advantage of the ordinary shareholders as long
as the rate of earnings on capital employed is greater than the rate payable on borrowed
funds.
The following ratios can be used to identify the financial strength and risk of the business.
Total Debt Ratio: This indicates what percentage of the company’s assets is provided by provided
via debt. The measure gives an idea to the leverage of the company along with the potential risks
the company faces in terms of its debt-load. This is calculated by dividing total debt by total assets.
Proprietary Ratio: It relates to the proprietors funds to total assets. It helps the owners to know
the owners contribution to the total value of assets. This ratio shows the long-time solvency of the
organization it is calculated by dividing proprietor’s funds by the total tangible assets.
D: Profitability Ratios
Profitability is the ability of a business to earn profit over a period of time. Although the profit
figure is the starting point for any calculation of cash flow, as already pointed out, profitable
companies can still fail for a lack of cash.
A company should earn profits to survive and grow over a long period of time.
Profits are essential, but it would be wrong to assume that every action initiated by
management of a company should be aimed at maximizing profits, irrespective of social
consequences.
Profitability is a result of a larger number of policies and decisions. The profitability ratios
show the combined effects of liquidity, asset management (activity) and debt management
(gearing) on operating results. The overall measure of success of a business is the
profitability which results from the effective use of its resources.
Note: Without profit, there is no cash and therefore profitability must be seen as a critical success
factors
Gross Profit Ratio: This ratio expresses the relationship between Gross profit and sales. It
indicated the efficiency of production or trading operation. A high gross profit ratio is a good
management as it implies that cost of production is relatively low. This is calculated by dividing
gross profit by net sales.
Net Sales: Net profit ratio establishes a relationship between net profit (after taxes) and sales. It is
determined by dividing the net income after tax to the net sales for the period and measures the
profit per rupee of sales.
Office & Administrative Expense: this ratio measures the relationship between the indirect
expenses to the net sales and here we are taking office and administrative expenses. This is
calculated by dividing administrative expenses by net sales.
Return on Assets: Profitability can be measured in terms of relationship between net profit and
total assets. It measures the profitability of investment. The overall profitability can be known by
applying this ratio. This is calculated by dividing net profit by net sales.
RESEARCH METHADOLOGY
Research Design
Descriptive research is used in this study because it will ensure the minimization of bias and
maximization of reliability of data collected. The researcher had to use fact and information
already available through financial statements of earlier years and analyze these to make critical
evaluation of the available material. Hence by making the type of the research conducted to be
both Descriptive and Analytical in nature. From the study, the type of data to be collected and the
procedure to be used for this purpose were decided.
Sources of Data
The main source of data to conduct this study is secondary data, but primary data is also used to
collect some general information.
1. Primary Data
The information is gathered through discussion held with the executives of the finance
department in JAY-USHIN LTD.
2. Secondary Data
Data collected from the annual report of JAY-USHIN LTD.
Data collected from the published report of JAY-USHIN LTD.
Articles collected from the official website of JAY-USHIN LTD.
Data collected from the various business magazines and books.
The data collected from the above mentioned sources will be processed, analyzed, interpreted, and
presented in the study.
Methodology used
Types of financial statement adopted
Following two types of financial statements are adopted in analyzing the firm financial
position:-
a) Balance sheet
b) Income statement
Types of financial statement analysis
The financial statements are analyzed based on two basic analyses:-
a) Horizontal analysis- In horizontal analysis we use comparative statement and trend
analysis.
b) Vertical analysis- In vertical analysis we use common size statement and financial
ratios.
Tools used for financial statement analysis
Following financial analysis tools are used in order to interpret the financial position of the
firm
Ratio analysis
Comparative analysis
Common size analysis
Percentage
PLAN OF THE STUDY
The structure of present study is as follows:
Chapter 1 of this study covers the introduction of the study, significance of the study,
objectives of the study, focus of the problem, conceptualization and plan of the study. The
chapter also includes research methodology containing the nature of research, sample size
and analysis pattern used to conduct the research.
Chapter 2 explores the significant literature published on the present study reflecting
understanding of the relevant theoretical and empirical background of the problem.
Chapter 3 consists of industry & company profile which gives a thorough study about the
company.
Chapter 4 consists of data analysis and inferences.
Chapter 5 of this study contains findings and conclusions providing the end result of the
study. The last part gives the limitation of the study thus providing significant scope for
further research.
Literature Review
Timo Salmi, “A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis”,
Business Economics, April (1994), this paper provides a critical review of the theoretical and
empirical basis of four central areas of financial ratio analysis. The research areas reviewed are the
functional form of the financial ratios, distributional characteristics of financial ratios,
classification of financial ratios, and the estimation of the internal rate of return from financial
statements. It is observed that it is typical of financial ratio analysis research that there are several
unexpectedly distinct lines with research traditions of their own. A common feature of all the areas
of financial ratio analysis research seems to be that while significant regularities can be observed,
they are not necessarily stable across the different ratios, industries, and time periods. This leaves
much space for the development of a more robust theoretical basis and for further empirical
research. Financial ratios are used for all kinds of purposes/ these include the assessment of the
ability of a firm to pay its debt, the evaluation of business and managerial success and even the
statutory regulation of a firm’s performance. And they became norms and affect performances. In
this paper two principles have been used to identify use of financial ratios i.e. normative use,
which measures the firm ratio with the standard and secondly the empirical use, which is for
predictive purposes
Amir et al, “Essential of Financial Analysis”, Business Economics, April (1996), Ratio analysis
is a mostly used analytical tool for measuring the performance of a firm. As the ratios are easily
calculated because of which it has a mass appeal, their interpretation is difficult to understand,
especially when ratios provide conflicting signals. Ratios are often criticized on subjectivity
grounds that the analyst picks and choose ratios to analyze the performance of the firm.
Mahalakshmi N, “How to Analyses Financial Statements”, Outlook Profit, (2009), Being able
to read, understand and interpret financial statements of companies is of similar importance to
stock market investor. Some of us may have studied accounting as a discipline. But, investing in
equities is an art one cannot master through sheer academic pursuit and excellence in college
grades. It requires skills to analyze a company’s business activities before buying the share. In
doing so regularly, one will over a period of time, be able to develop an investment tool kit to
evaluate and steer investment decisions in equities. Where and how do you begin? Certainly not by
relying on the market grapevine or mere hearsay, like “taaza khabar” (hot news), or “aaj ka tip”
(tip of the day). While it is important to have your ears to ground, sound investing begins by
reading and understanding a company’s annual report.
INDUSTRY PROFILE
EVOLUTION OF INDIAN AUTOMOBILE COMPONENTS INDUSTRY
The Indian auto components industry has a long history. It made a small beginning in the 1940s
with Hindustan Motors and Premier Automobiles. The 1950-70s period resulted in ancilliarisation
and growth with the coming up of TELCO, Bajaj, and Mahindra, on the one hand, and the
Government policies of reservation for small-scale industries, and local content requirements, on
the other. The entry of Suzuki with joint venture with the Government of India as Maruti laid
emphasis on the quality and technology of automobile components, leading to increased foreign
collaboration (Okada, 2004).Economic liberalization of the 1990s brought.
The Indian auto component industry is one of India's sunrise industries with tremendous growth
prospects. From a low-key supplier providing components to the domestic market alone, the
industry has emerged as one of the key auto components centers in Asia and is today seen as a
significant player in the global automotive supply chain. India is now a supplier of a range of high-
value and critical automobile components to global auto makers such as General Motors, Toyota,
Ford and Volkswagen, amongst others.
The entry of new generation vehicles and demand for genuine spare parts also helped in adding to
the sales for the companies. Industry experts opine that growing demand for genuine spare parts
would strengthen the sector.
As per a report by the Automotive Component Manufacturers Association of India (ACMA), the
turnover of the auto component industry is being estimated at around US$ 19.2 billion in 2009-10.
The report states that 31 per cent of the auto component industry is dominated by engine parts, 19
per cent by drive transmission and steering parts, and 12 per cent each by suspension & braking
parts and body & chassis, while equipments and electrical parts capture 10 and 9 per cent,
respectively.
According to the Investment Commission of India, India is among the most competitive
manufacturers of auto components in the world. India is also becoming a global hub for research
and development (R&D). Many international auto-component majors including Delphi, Visteon,
Bosch and Meritor have set up operations in India.
Further, increased demand for the passenger vehicles in the country created positive impact for the
auto component manufacturers. The component manufacturers registered 55 per cent growth on a
year-on-year basis during the quarter ending March 2010. The growth was attributed to the
increasing demand of the original spare parts by the customer. On an overall basis, 30 component
makers saw rise in revenue in spite of global slowdown in the auto sector. Major players like
Bosch, Motherson Sumi and Amtek Auto reported nearly 50 per cent growth in top line, with
double-digit surge in profit.
Policy Initiatives
The government has taken many initiatives to promote foreign direct investment (FDI) in the
industry.
Automatic approval for foreign equity investment up to 100 per cent of manufacture of
automobiles and components is permitted
The automobile industry is deli censed
Import of components is freely allowed
Looking Ahead
According to ACMA,
Overseas auto-component manufacturers, especially small and medium enterprises (SMEs)
should invest more in capacity enhancements and Greenfield manufacturing in India to
meet growing domestic demand for auto-components
Investments in Auto-IT sector is a high potential area
To encourage new wave of partnerships at the Tier 2/3 level covering the entire automotive
supply chain to address not only product technology, but also "Process Technology"
AUTO COMPONENTS OVERVIEW
A US$15-billion industry in 2006-07; ~20% exports (US$2.9 billion)
The Auto Components industry has experienced high growth in the past few years
Domestic market CAGR of 30% in the last 4 years
Exports CAGR of 40% in the last 4 years
India’s share, 0.9% of the global Auto Components Industry, is growing rapidly
The Indian auto component sector has been growing at 20% per annum since 2000 and is
projected to maintain the high-growth phase of 15-20% till 2015.
Investments in the auto component Industry in India
Magneti Marelli, the auto component maker of Fiat group, has forayed into the country's
spare parts aftermarket by entering into a partnership with Carnation Auto, a multi-brand
car servicing facility. The company also plans to increase its revenue from India to around
US$ 429.66 million by 2015, and expects the country to grow faster compared to other
global markets.
Hyundai WIA, the car component subsidiary of Hyundai Motor Company, plans to set up
an auto component facility at Nellore, Andhra Pradesh with an investment of US$ 259.72
million. The facility is expected to be set up in two phases and would become operational
by April 2011.
Rane Group, a Chennai based auto component manufacturer, is planning to invest US$
56.11 million for augmenting capacity for meeting increasing demand during 2010-11.
Ashok Minda Group, an auto component manufacturer plans to raise private equity of
around US$ 26.8 million for expanding its business.
The world's largest automotive component manufacturer, Bosch, plans to invest US$ 433.5
million in India over the next three years. "India will be an important market for the
company in the immediate future," said Bernd Bohr, Chairman of the Stuttgart-based
Bosch Automotive Group..
The Tamil Nadu government has cleared the proposal of Tyre manufacturer, JK Tyre &
Industries Ltd, for setting up a new production facility in the state, which would attract
around US$ 346 million in investment.
SWOT ANALYSIS
STRENGHTS
Is globally cost competitive
Adheres to strict quality controls
Has access to latest technology
Provides support to critical infrastructure and metal industries
WEAKNESSES
Industry has low level of research and development capability
Industry is exposed to cyclical downturns in the automotive industry
Most component companies are dependent on global majors for technology
OPPORTUNITIES
May serve as sourcing hub for global automobile majors
Increasing globalization of the auto industry supply chains
Significant export opportunities may be realized through diversification of export basket
THREATS
The presence of a large counterfeit components market poses a significant threat
Pressure on prices from OEMs continues Imports pose price based competition in the
replacement market
Further marginalization of smaller players likely.
Favorable factors:-
In spite of several handicaps there are a number of favorable factors, which are
Trained and skilled human resources
Wide Industry base manufacturing 97% of component required
Growing entrepreneurship
Growing domestic market
Expanding global markets
Investments by non-resident Indians
Economic liberalization
Challenges: -
There are several challenges, which the industry has to overcome at industry level and
organizational levels. Few of these are:-
1. Small in size: - The Indian auto component industry is wide with over 400 firms in the
organized sector, but small in sales turn over which is estimated to be less than Rs. 15000
Crores for the organized sector. This sector is the fastest growing sector in Auto industry
growing at the rate of 28%. The industry also exports close to RS 180 Crores at around
12% of combined sales. It is currently a Small and fragmented industry by global
standards.
2. Rejected parts per million (PPM):- Rejection level is very high as comparison with other
countries. An A.T.Kearney survey, found defect rates in India, even among the better
suppliers in the range of 1000-2000 PPM against the Japanese average of 100-200 PPM.
3. Lower labour productivity: - The advantage of low cost labour is negated due to lower
productivity level of Indian work force. Indian Labour productivity is lower relative to the
rest of the world.
4. Higher Cost of Finance in India: - India has one of the highest interest rates for Capital
and working capital. These can range from 12% to 18% and higher. Most of the Indian
companies work for financial institution. Where as In countries like USA Europe funds are
available at 1/3 the cost. This makes big difference on the health of the company.
5. High Cost of logistics: - The Cost to transport parts within the country is high due to high
cost of fuel, and poor turnaround of vehicles. The cost to export can be around 5 to 25 %
depending on the commodity. Ports in India are inefficient and ship turnaround times are
higher than international standards. A finished product takes additional week to leave the
Indian shores due to various documentation and other port formalities. A container load
may cost 3000 US $ to USA. It is inefficient for individual suppliers to export small
container loads.
High Cost and poor Quality of Raw materials: - Raw material like steel, polymers, castings etc
are at times 20% to 50% more expensive than other countries and the quality of these raw
materials also are not comparable to international standards. Steel is the major raw material used
for automotive applications and the same is increasing every quarter. Government may have to
think of reducing the import duties in order to bring in competition for local manufacturers.
COMPANY PROFILE
INTRODUCTION
Jay-Ushin Ltd. a JPM Group company was incorporated as a Joint Venture company with U-Shin Ltd, Japan
for manufacture of auto electrical, mechanical & electronic components for four wheelers in 1986. It is a
leading OEM manufacturer of automotive assemblies in India. Its products include lock sets, latches,
switches & body parts. The company is a major OE supplier to almost all makers of four wheeler as well
as two wheelers in India includes Maruti Suzuki Limited, Hyundai Motors India Ltd., General Motors,
Honda Siel, Honda Motor Cycle & Scooters Division, Mahindra & Mahindra and Tata Motors Ltd..
U-Shin Ltd. engages in the design, development, manufacture, sale, and export of various system devices
and control machines for automotive, industrial machinery, and home security units. It also offers
mechanical, electrical systems, and components for automotive, industrial machinery, and home security
unit. The company operates in three divisions: Automotive Parts, Industrial Equipments, and Home Security
Unit. The Automotive Parts division offers steering lock unit, lock sets, keyless entry, door latches, heater
control panels, door handles, switches, and sensors. The Industrial Equipments division provides
equipments for agricultural/constructive/industrial machines, equipments for telecommunication, meter
gauge for medical use, harness, cable wire, lump, operator's seat, electric fuel pump, electric measurement,
and communication device. The Home Security Unit division offers security system for home, hotel, and
office buildings; touch keys; handle sets; and electronic locks. The company, formerly known as YUHSHIN
SEIKI KOGYO CO., LTD., was founded in 1926 and is headquartered in Tokyo, Japan.