Hindustan machine tools limited

Hindustan Machine Tools Limited

(HMT)

A

PROJECT REPORT

Submitted To:- Submitted By:-

Dr. Kiran Mehta DEEPAK KUMAR

Associate Professor (Finance) NAVEEN KUMAR

Chitkara Business School

CHITKARA BUSINESS SCHOOL

CHITKARA UNIVERSITY, PUNJAB

2014

LETTER OF TRANSMITTAL

11th

of March, 2015

To

Dr. Kiran Mehta

Course Instructor

Associate Professor (Finance)


Chitkata University

Rajpura (Punjab)

Subject: Submission of project report.

Dear Mam,

This is to inform you that we have completed the Financial Management project that you had

assigned us for the course module of “Financial Management” March 2015. For the project, we

selected “Hindustan Machine Tools Limited”.

In writing this report, we have followed the instructions that you have given us in the class, and

we have also applied relevant concepts that we have learnt throughout our course module. We

have defied our core competencies, strategies in different level in inventory and financial

calculations. The contents provided in this report are all our own, though some information and

references have been taken from different sources to facilitate our report.

However, we will be glad to clarify any discrepancy that may arise.

Finally, we would love to express our gratitude for your supportive thoughts and kind

consideration in and outside of the class.

Yours sincerely,

Deepak Kumar Shekhawat (F&B-1420981098)

Naveen Kumar (FMP-1420981012)

LETTER OF AUTHORIZATION

December 16, 2014

To

Dr. Kiran Mehta

Course Instructor

Associate Professor (Finance)


Chitkata University

Rajpura (Punjab)

Subject: Seeking permission to conduct visit in a company

Dear Mam,

We the MBA students of Chitkara Business School, Chitkara University are writing to request

permission to conduct a visit in a company as a requirement of our Special Project subject. We

are currently studying Financial Management and our performance task in this subject is to make

a study of “Hindustan Machine Tools Limited”. The study will include various factors which

drive Inventory level in a company and move on to another in addition to some

recommendations based on the findings of this visit and its conclusion.

If approval is granted, documentation should take no longer than two (2-3) hours and to be done

on your convenience. The data/results of the study will remain absolutely confidential and to be

used on educational purpose only.

Your approval to conduct this study will be greatly appreciated.

Thank you.

Yours sincerely,

Deepak Kumar Shekhawat (F&B-1420981098)

Naveen Kumar (FMP-1420981012)

ACKNOWLEDGEMENT

A mammoth thesis of this nature calls for intellectual nourishment, professional help, and

encouragement from many quarters. I would like to express my gratitude to:

The pioneers in the field of Financial Management who have shaped their understanding

through their rich and varied contributions.

Professors, seniors and classmates for providing the stimulus for making this project

successful.

A number of academics and practitioners for generously sharing their insight and

experience with us.

It is my immense pleasure to work under the guidance of Associate Prof. Dr. Kiran Mehta

(Finance Faculty of Chitkara Business School), and we heartily thank them for providing me

the guidance whenever needed. I am also thankful to beloved The Dean Dr. Sandhir Sharma,

who gave me guidance in each and every step of the way. We would also like express our

profound gratitude to Dr. Ashok K Chitkara, Chancellor for his guidance, encouragement and

compassion in providing facilities and helping throughout the way.

My heuristic approach towards the project was one of the major contributors in the outcomes that

we arrived at. I’d like to thank my institution, Chitkara University – Rajpura (Punjab), for

providing me this great opportunity and attempting to inculcate the traits needed to succeed.

I am also thankful to various industry experts and executives for sharing relevant information

and valuable thoughts with me and helped me in writing my thesis.

CHAPTER 1 : INTRODUCTION

INDUSTRY PROFILE

The machine tool industry constitutes the backbone of the industrial sector and is vital for the

growth of the Indian machine tool industry. Even though the Indian machine tool industry is a

small segment of the engineering industry, it plays a very important role in the development and

technology up gradation of the engineering industry. The quality and cost of engineering

products depends on the quality of mother machine tools and their automation level. The

development of the machine tool industry is therefore of paramount importance for a competitive

and self-reliant industrial structure.

The growth of Indian machine tool industry and major user industries clearly shows the close

inter dependencies of indigenous machine tools and the major user industries. This level of

performance of the major user industries has been made possible only because of support of

indigenous manufacture large and small, to meet almost all the requirement of machine tools,

conventional, CNC special purpose and flexible manufacturing lines required by them.

Had the indigenous machine tool industry not been able to meet the major user industries

demand, then these machine tools would have to be imported, at much higher prices, irrespective

of rising cost of foreign exchange or not. This would have severely affected not only the country

GNP and the overall economy of the country but not severely impaired the country space and the

defense sector.

PROFILE OF COMPANY HMT

By end of the Second World War, the government of India confronted by a big problem of

disposing the colossal war waste. Ultimately, a committee was constituted to inquire into the

possibilities. The committee report of 1948 proposed the establishment of a government owned

machine tool industry. This was expected to fulfill two aspects. The first was being utilization of

the Rs.4000 million worth of metallic waste. The second was the incorporation of a state owned

infrastructure – manufacturing facility. The result was the birth of THE HINDUSTAN

MACHINE TOOLS LIMITED, which diversified in due course of time to the present stature of

the multi core, multi location, and multi unit, multi product industrial giant HMT Ltd.

The HMT Ltd was started as a single factory to produce Tool Room Lathe at Bangalore in

collaboration with M/s Oerlikon of Switzerland in 1953, with a 6 capacity to manufacture around

400 machines per year. Since then different collaborations, continued in house R&D and

tremendous marketing efforts brought HMT, to present status.

The growth of HMT Ltd. was characterized by the forward and backward integration of

technology and product diversification. Thus the company that stated with manufacturing and

selling lathes expanded its machine tools products range to evolve as the ultimate solution in

metal cutting. The product diversification efforts took the company to the business of watches in

1962, tractor in 1971, die-casting on plastic machinery in 1971, printing machinery in 1972,

presses in 1972, lamps & lamp making machinery in 1976, food processing machinery in 1980,

CNC systems in 1986, ball screws in 1986 and reconditioning in 1990.

The multi-product activities made HMT Ltd. change its identity as Hindustan Machine Tools

Limited. Today HMT Ltd has 16 manufacturing units with 22 products divisions spread through

the length and breath of India. A subsidiary viz., HMT (international) Ltd undertakes the exports

of the company. They are also export agents for general other Indian companies.

HMT Ltd was restructured in 1992 to facilitate better administration of the multi-product

business activities. Accordingly, the following business group was established.

Machine tools business group, to concentrate on mental cutting machines. ‰

Industrial machinery business group to deal with printing machines, die casting and

plastic injection molding machines food processing machines and metal forming

machines

Agricultural business group to concentrate on tractor

Engineering components business group to deal with casting and ball screws

Consumer product business group, to deal with watches and lamps

IN ADDITION TO THESE BUSINESS GROUPS, THE COMPANY OWNS THRESS

SUBSIDIARIES AS FOLLOWS:

HMT (international) Ltd. which undertakes overseas project & exports ‰

PRAGA Tools Ltd. which manufacturers machine tools ‰

HMT bearing Ltd which manufacture precision bearing in collaboration with M/S Kozo

Japan

As per the revival plan of this public sector industry a turn around plan has introduced in early

days of this millennium and re-organized as HMT Ltd holding company including tractor

division and presently comprises of the following subsidiaries.

1. HMT Machine Tools Limited.

2. HMT Watches Limited

3. HMT Chinar Watches Limited

4. HMT Bearing Limited

5. HMT International Limited

6. PRAGA Tools Limited

Machine Tools industry , being the mother industry , has strategic importance and is a major

support for growth of various other industries. Initially it started with an objective of producing a

limited range of machine tools, required for building an industrial edifice for the country. Thus,

Hindustan Machine Tools Limited, or HMT began in a small way to meet a big commitment -

"To manufacture mother machines to build modern industrial India".

Organization Structure

CORPORATE VISION

To establish ourselves as one of the world’s premier companies in the engineering field

having strong international competitiveness

To achieve market leadership in India through ensuring customer satisfaction by

supplying internationally competitive products and services

To achieve sustained growth in the earnings of the group on behalf of shareholders.

CORPORATE MISSION

Objectives & Goals

To encourage the modernization of Indian Industry through the supply of engineering

goods and services of world class excellence

To maintain technological leadership through continuous efforts to update product

technology and manufacturing methods

To globalize our operations by developing a mix of international markets and businesses

To ensure a satisfactory return on capital employed, to meet the growth needs and the

aspirations of our stakeholders

To present an active, pleasant and productive working environment

The product range of HMT machine tools, Bangalore ‰

Heavy duty lathes ‰

Single and multi spindle automates ‰

Radial drilling machines ‰

Multi spindle drills ‰

Cylindrical & surface grinders ‰

Laser cutting machines ‰

CNC turn mill centers ‰

CNC wire cut EDM

PINJORE FMS & FMC ‰

Horizontal machining centers ‰

Vertical machining centers ‰

Milling machines ‰

Broaching machines

KALAMASSERY ‰ (KERLA)

CNC turning center ‰

Turn mill center ‰

Flexible turning cell ‰

Copying lathes ‰

Center lathes ‰

Offset printing machines ‰

Paper cutting machines

HYDERABAD ‰

Special purpose machines ‰

Horizontal machining center ‰

FMS ‰

CNC horizontal boring machines ‰

Bed type & floor types boring machines

AJMER ‰

Grinding machines ‰

SPM grinders ‰

CNC grinders

FACILITIES AVAILABLE IN DIFFERENT MACHINE TOOL UNITS ‰

CNC ram type plano miller ‰

Horizontal machining centers 9 ‰



Horizontal jog boring machines ‰

CNC turning centers ‰

Turn mill centers ‰

Slide way grinders ‰

Cylindrical grinders ‰

Internal grinders ‰

Precision gear shapers ‰

Precision gear hobbers ‰

Gear grinders ‰

Induction hardening machines

3D co-ordinate measuring machines

CHAPTER 2 : INVENTORY

Meaning of Inventory

Inventory is the collection of unsold products waiting to be sold. Inventory is listed as a current

asset on a company's balance sheet.

How it works/Example:

Inventory is commonly thought of as the finished goods a company accumulates before selling

them to end users. But inventory can also describe the raw materials used to produce the finished

goods, goods as they go through the production process (referred to as "work-in-progress" or

WIP), or goods that are "in transit."

There are generally five reasons companies maintain inventories:

To meet an anticipated increase in demand;

To protect against unanticipated increases in demand;

To take advantage of price breaks for ordering raw materials in bulk;

To prevent the idling of a whole factory if one part of the process breaks down; and,

To keep a steady stream of material flowing to retailers rather than making a single

shipment of goods to retailers. Inventory can also be used as collateral to obtain financing in

some cases. The basic requirement for counting an item in inventory is economic control rather

than physical possession. Therefore, when a company purchases inventory, the item is included

in the purchaser's inventory even if the purchaser does not have physical possession of those

items. Inventory is usually classified in its own category as an asset on the balance sheet,

following receivables. It is important to note that the balance sheet's inventory account should

also reflect costs directly or indirectly incurred in making an item ready for sale, including the

purchase price of the item as well as the freight, receiving, unpacking, inspecting, storage,

maintenance, insurance, taxes, and other costs associated with it.

Types of Inventory

Raw Materials

Work-in-Process

Finished Goods

Other Types of Inventory

Importance of Inventory

Inventory is a current asset on your company’s balance sheet. More important, it is a major part

of your ongoing business operations. For manufacturers, inventory includes raw materials used

to make and assemble products. For resellers, it includes products you acquire to resell to

customers. In either case, you need inventory to earn revenue.

Revenue and Profits

As a product seller, inventory is the driving force behind your ability to generate revenue and

profits. Revenue is the money you collect at the time you sell inventory. Profit equals your final

income after you subtract your variable costs. This means the ability to get inventory at the

lowest cost possible and sell it at the highest price is key to a successful, profitable operation.

Management

Managing your inventory in a cost-efficient way helps you optimize your profits. This begins

with negotiating the lowest costs with your suppliers. Buying in volume or committing to

suppliers in long-term relationships can help with this. Managing inventory once you have it is

vital as well. If you order too much inventory, you have to pay more money for employees to

organize it and manage it. You have more expenses for storage areas where you hold it. You also

risk waste on expired or rotted items. Having too little inventory can lead to stock-outs, which is

bad for customer service.

Turnover

Turning over inventory efficiently is also important. Calculating your inventory turnover ratio

allows you to see how efficiently you sell through your inventory. The formula is costs of goods

sold divided by your average inventory level for a given period. A high turnover rate means you

get products off the shelf while they have maximum value to customers. You also make room for

newer merchandise while it’s trendy or in demand. A lower turnover ratio leads to higher

management costs and more waste. It also forces you to have more sales promotions to clear out

excess products.

Just-in-Time

A common approach to inventory management in the latter 20th and early 21st centuries is just-

in-time or JIT inventory. This is a technology-driven method intended to keep your inventory at

ideal levels where you have enough on hand to cover customer demand, but not too much to lead

to high costs. To use JIT, you need strong relationships with key suppliers so you can integrate

your inventory data through shared software databases. This allows for automated ordering so

suppliers can quickly get new inventory out to your distribution center or stores as needed.

Methods for Inventory Control

ABC System.

This system includes three groups of products. The first group (A) includes large, costly

products; the second group (B) includes somewhat less-costly products; and the third group (C)

includes small, cheap products. The ABC System focuses on product types, not quantity. If you

use inventory tracking software, you should be able to use this system just fine. The ABC

System will help you know how long it will take to reorder certain products, based on their

group.

Min-Max System.

This is the simplest method of inventory control. You simply draw two lines, which represent a

maximum amount of inventory and a minimum amount. When your stock of a certain product

reaches the minimum line, it’s time to reorder. However, you can’t order more than the

maximum line. The simplistic approach of this method can be both a good thing and a bad thing.

It’s easy to use, but it could leave you with shortages or overstocks, if you’re not careful.

Two-Bin System.

As its name suggest, this system includes two bins: One bin with products you sell day to day,

and another bin with products that are sold only when the first bin is empty and an order has

been placed to refill it. This is also a fairly simple approach, though it can still require a lot of

work. Be sure to rotate through the backup bin fairly often and try not to stock up too much on

products or your carrying costs will rise.

Order-Cycle System.

In this system, every 30, 60 or 90 days you go through your inventory and check product levels.

You order more of products that you suspect will sell out before the following scheduled

inventory checkup. This is the worst of the four inventory control methods. It is fraught with

danger. If you only look at your inventory levels every 30 days or so, you could run into

overstock problems or shortages. You should steer clear of this inventory control method

CHAPTER 3

Types of Inventory for manufacturing concern

Your business inventory consists of your stock, the goods that you offer for sale and any other

materials you need to run your businesses. Maintaining an appropriate inventory is crucial to the

profitability of any small business, where inventory amounts may be smaller than in a large

company. Running out of goods means you may not be

able to meet demand, while having too many goods means your money is tied up in inventory

that you cannot sell.

Raw Materials

This type of inventory includes any goods used in the manufacturing process, such as

components used to assemble a finished product. Raw materials may also include partially

finished goods or materials. For example, for an orange juice company, oranges, sugar and

preservatives are raw materials; while for a computer manufacturer, chips, circuit boards and

diodes are raw materials. Inventory items may be classified as raw materials if the organization

has purchased them from an outside company, or if they are used to make components.

Work-in-Process

Work-in-process inventory items are those materials and parts that are waiting to be made into

something else. These may include partially assembled items that are waiting to be completed.

Work-in-process inventory items may include finished goods that have not yet been packaged

and inspected, as well as raw materials that have moved from storage to a preassembly area. For

example, in an orange juice company, the oranges may come in to a storage area, where they are

raw goods, but once they have been moved out of the storage area and onto the assembly line for

juicing, they become work-in-process inventory. In a small company, work-in-process goods

may be stored in the same area as raw materials and finished goods.

Finished Goods

Finished goods are any products that are ready to be shipped out or sold directly to customers,

including to wholesalers and retailers. Finished goods may be waiting in a storage area or on a

shop floor. If the amount of inventory of finished goods increases faster that the amount of raw

goods and work-in-process goods, then production may need to slow down until more finished

goods are sold. In some businesses, goods are not included in the finished goods inventory until

Inventory includes any raw materials that are used to manufacture your finished goods. Systems

they are sold. For example, in companies where goods are made to order.

Other Types of Inventory

Maintenance, repair and operating inventory are all the items an organization needs in order to

operate, such as office equipment, packing boxes and tools to repair equipment. There are also

other types of inventory that are classified based on the purpose they serve. These include transit

inventory, which are products or components that are being moved from one location to another,

such as from a warehouse to a factory; buffer inventory, which are excess inventory items that

are kept on hand to protect against supply problems, such as poor quality or slow delivery of raw

materials; and anticipation inventory, which are items that an organization stocks up on in case

of excess demand -- such as in the build up to Christmas shopping.

CHAPTER 4: Analysis of Inventory Management

Hindustan machine tools limited

Automotive