1. INTRODUCTION An organizational study refers to the complete understanding of an organization in all dimensions. Ashok Leyland is a well known automobile manufacturing company in India. Ashok Leyland believe that its historical success and future prospects are directly related to combination of strengths. The referred unit is a core limb of Ashok Leyland, the nation’s pioneering automobile manufacturer. The study includes the brief study of the core departments of Ashok Leyland, Chennai. Different officials working in various departments have provided very important data in this report. Every effort has been made to understand the functions and activities of various departments as well as the manufacturing process. 1
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Summer internship-Organizational Study At Ashok Leyland, Chennai
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1. INTRODUCTION
An organizational study refers to the complete understanding of an organization in all dimensions.
Ashok Leyland is a well known automobile manufacturing company in India. Ashok
Leyland believe that its historical success and future prospects are directly related to
combination of strengths. The referred unit is a core limb of Ashok Leyland, the nation’s
pioneering automobile manufacturer.
The study includes the brief study of the core departments of Ashok Leyland, Chennai.
Different officials working in various departments have provided very important data in
this report. Every effort has been made to understand the functions and activities of
various departments as well as the manufacturing process.
1.1. OBJECTIVES OF THE STUDY
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To familiarize with business organization.
Getting practical experience regarding the organizational function.
To understand the functions of HR, Finance, Production and Marketing
departments.
To understand the culture in the organization and its effect on employees.
To get industrial exposure and experience.
1.2. SOURCES OF DATA
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The methodology used for the study is through the collection of primary and
secondary data.
Primary data
Direct observation
Live discussion with the managers and the staff members.
Secondary data
Annual Reports
Business Journals
Existing Records
Website of the company.
2. PROFILE OF THE STUDY
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2.1. INDUSTRY PROFILE:
AUTOMOBILE INDUSTRY HISTORY:
In the year 1769, a French engineer by the name of Nicolas J. Cugnot invented the first
automobile to run on roads.
This automobile, in fact, was a self-powered, three wheeler, military tractor that made use of
steam engine. The range of the automobile, however, was very brief and at the most, it could
only run at a stretch for fifteen minutes. In addition, these automobiles were not fit for the
roads as the steam engines made them very heavy and large, and required ample starting
time. Oliver Evans was the first to design a steam engine driven automobile in the U.S.
The automobile industry finally came of age with Henry Ford in 1914 for the bulk
production in cars. This lead to the development of the industry and it first begun in the
assembly lines of his car factory. The several methods adopted by Ford, made the new
invention ie) car, popular amongst the rich as well as masses.
According to the history of automobile industry U.S, dominated the automobile markets
around the globe with no notable competitors. However, after the end of Second World War
in 1945, the automobile industry of other technologically advanced nations such as Japan
and certain European nations gained momentum and within a very short period, beginning
in the early 1980s, the U.S automobile industry was flooded with foreign automobile
companies, especially those of Japan and Germany.
The current trends of the Global automobile industry reveal that in the developed countries
the automobile industry are stagnating as a result of the drooping car markets, whereas the
automobile industry in the developing nations, such as India and Brazil, have been
consistently registering higher growth rates every passing year for their flourishing
automobile markets.
INDIAN AUTOMOBILE INDUSTRY:
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India is one of the fastest growing automobile industries in the world. After 1960, the
automobile industry saw rapid growth and many automotive manufacturers started
production.
The automobile industry in India is the seventh largest in the world with and annual
production of over 2.6 million units in 2009. In 2009, India emerged as Asia’s fourth largest
exporter of automobiles, behind Japan, South Korea and Thailand. By 2050, the country is
expected to top the world in car volumes with approximately 611 million vehicles on the
nation’s roads.
A well developed transport network indicates a well developed economy. For rapid
development a well-developed and well-knit transportation system is essential. As India’s
transport network is developing at a fast pace, Indian automobile industry is growing too.
Also, the automobile industry has strong backward and forward linkages and hence provides
employment to a large section of the population. Thus the role of automobile industry
cannot be overlooked in the Indian economy. Indian automobile industry includes
manufacture of trucks, buses, passenger cars, defence vehicles ,two wheelers etc.., The
industry can be broadly divided into the car manufacturing, two-wheeler manufacturing and
heavy vehicle manufacturing units.
The major car manufacturers are Hindustan Motors, Maruti Udyog, Fiat India Pvt. Ltd, Ford
India Ltd., General Motors Pvt. Ltd., Honda Siel Cars India Ltd., Hyundai Motors India
Ltd., Skoda India Pvt. Ltd., Toyota Kirloskar Motor Ltd., to name a few.
The two wheeler manufacturing is dominated by companies like TVS, Honda Motorcycle &
Scooter India Pvt. Ltd., Hero Honda, Yamaha, Bajaj etc..,
The heavy motors like buses, trucks, defence vehicles, auto rickshaws and other multiutility
vehicles are manufactured by Tata-Telco, Ashok Leyland, Eicher Motors, Bajaj, Mahindra
and Mahindra etc..,
INDIAN AUTOMOBILE MARKET:
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Many foreign companies have been investing in the Indian automobile market in various
ways such as technology transfers, joint ventures, strategic alliances, exports and financial
collaborations. The auto market in india can boast of attractive finance schemes, increasing
purchase power and launch of latest products.
Some vital statistics regarding the automobile market in India has been mentioned below:
India ranks 2nd in the global two-wheeler market
India is the 4th biggest commercial vehicle market in the world
India ranks 11th in the international passenger car market
India ranks 5th pertaining to the number of bus and truck sold in the world.
HEAVY VEHICLES MARKET:
Heavy vehicles market in India comprises of trucks, machines, ambulances and school
buses. The popular heavy vehicle brands in India are Volvo, Eicher, Tata, Telco, Ashok
Leyland and Swaraj Mazda.
Following are the major players in the Indian Heavy Vehicles Market:
Tata Motors is the largest automobile manufacturing company in India that
manufactures a wide range of heavy vehicles adhering to world class standards. It is
the market leader in commercial vehicles in all the segments, be it heavy vehicles,
medium size vehicles, small vehicles, buses or defence vehicles. The heavy vehicles
manufactured by Tata Motors have highly developed braking structure, high ground
authorization, better direction competence and a muscular body. The advanced
engine imparted to these heavy vehicles makes them a class apart from the other
heavy vehicles running on the Indian roads and Highways. Tata Motors leads this
segment with a market share of 61%.
Ashok Leyland is an exclusively heavy vehicle manufacturing company situated in
Chennai and was initiated in the year 1948. It is one of India’s biggest producers of
heavy vehicles such as trucks, buses, military vehicles and also the second biggest
commercial vehicle firm in India heavy vehicle division with a market share of
around 27%. Ashok Leyland is also renowned for producing auto spare parts and
engines for marine and industrial submission.
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Eicher Motors was initiated in 3rd September, 1960. The first firm to manufacture the
first tractor in India. The indigenously manufactured tractor was introduced in the
Indian market straight from Eicher’s Faridabad factory. The history of the firm can
be traced back to 1948, when Goodearth Company was established for vending and
repairs of imported tractors in the nation.
Swaraj Mazda, a tie up between Mazda and Swaraj Enterprise, Swaraj Mazda
represents advanced Indian expertise and manufacturing. The firm has Research and
Development improvement edge on international scale. The firm manufactures
various products such as Bus, Ambulance, Trucks etc.
The modern automobile market in India has been considering key issues in the process of
growth:
Customer care, and not just service
Domestic as well as multi-national investments
Searing through cut-throat competition
Road safety
Anti-pollution norms
Co-ordination with government to enable advancement
Used vehicle trade
The future of Indian automobile market is bright as it looks forward to manufacturing and
implementing new innovations such as electric cars as provided by Reva, alternate fuels like
CNG and LPG and probably customized internet automobile orders.
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2.2. COMPANY PROFILE:
Ashok Leyland has been a major presence in India’s commercial vehicle industry since
1948, the year it was born. The origin of Ashok Leyland can be traced to the urge for
self-reliance, felt by independent India. Pandit Jawaharlal Nehru, India's first Prime
Minister persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive
manufacturing.
They are one of the India’s leading manufactures of commercial vehicles and special
vehicles, engines for industrial purpose, gen sets and marine requirement equipments. For
over five decades, Ashok Leyland has been the technology leader in India’s commercial
vehicle industry, molding the country’s commercial vehicle profile by introducing
technologies and product ideas that have gone on to become industry norms.
Ashok Leyland at the time of its inception was known as Ashok Motors. It was
assembling Austin cars at the first plant, at Ennore, near Chennai. In 1950, the company
started assembly of Leyland commercial vehicles and soon the local manufacturing under
license from British Leyland, participation in the equity capital, in 1954, the company
was re christened Ashok Leyland.
In 1987 the overseas holding by LRLIH (LAND ROVER LEYLAND
INTERNATIONAL HOLDINGS LIMITED) was taken over by a joint venture between
the Hinduja group, the Non Resident Indian Transnational group and IVECO Fiat SPA
part of the Fiat group and Europe’s leading truck manufacturing company. Ashok P
Hinduja is the chairman of the company. The Hinduja group also associated with Ennore
Foundries Limited, Automotive Coaches and Components Limited, and Gulf Ashley
Motors Limited.
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The subsidiary holdings are Ashley Holdings Ltd., Ashley Investment Ltd., and Ashok
Leyland Project Services. The chief competitors of the company are;
Mahindra
Volvo
Tata Motors
With a commanding strength of the about 12,000 employees the company is looking
forwards to enhance the scope of its action. It is aiming at expanding its production
operation overseas to make it a more globally accessible company. It is looking to
acquire a small to medium sized commercial vehicle manufacturers in China and other
developing nations, which have an established product line. An example would be the
2007 acquisition of the Czech based Avia’s truck business rechristened Avia Ashok
Leyland Motors.
Since its inception, Ashok Leyland has been a major presence and these years have been
punctuated by a number of technological innovations which went to become industry
standard. This tradition of technological innovations and leadership was achieved through
years of vigorous in-house research and development.
From 18 seater to 82 seater double-decker buses, from 7.5 tonne to 49 tonne in haulage
vehicles, from numerous special application vehicles to diesel engines for industrial,
marine and genset applications, Ashok Leyland offers a wide range of products.
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Ashok Leyland has seven manufacturing plants -
Ennore Plant, Chennai.
Hosur Plants Unit I, Unit II and Unit II A.
Alwar, Rajasthan.
Bhandara, Maharashtra.
Pantnagar, Uttarakhand
Early products of Ashok Leyland included the Leyland Comet bus chassis sold to many
operators including Hyderabad Road Transport, Ahmedabad Municipality, Travancore
State Transport, Bombay State Transport and Delhi Road Transport Authority.
In the popular metro cities, four out of five state transport undertaking buses come from
Ashok Leyland. Some of them like the Double Decker and Vestibule buses are unique
models from Ashok Leyland, tailor made high-density routes.
Statistics reveal that the company is India’s largest exporter of medium and heavy duty
trucks. It sells close to 83,000 medium and heavy vehicles each year. The company has a
near 98.5% market share in the Marine Diesel engine markets in India. At 60 million
passengers a day, Ashok Leyland buses carry more people than the entire Indian Railway
network.
The Five AL Values are:
1. International
2. Speedy
3. Value Creator
4. Innovative
5. Ethical
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GROWTH MILESTONES OF ASHOK LEYLAND:
1966 – Full air brakes introduced
1967 – Double Decker buses introduced.
1968 – Power steering offered.
1979 – Multi-axle trucks introduced.
1980 – Integral bus with air suspension.
1992 – Self-certification status for defence supplies.
1994 – ISO 9001 Certification
1997 – India’s first CNG powered bus.
1998 – QS 9000 Certification
1999 – CNG (Compressed Natural Gas) introduced.
2000 – Euro-I, Engines/vehicles introduced.
2002 – ISO 14000 Environment Management System Certification.
2002 – Exclusive Machine line – 2 for Hino cylinder.
4- Superior - - Performance which is consistently significant beyond job
requirements contributes in related area also.
3- Good - Performance which adequately meets job requirements
and occasionally produces good over and above requirements
2- Barely satisfactory - Just meets minimum job requirements
1- Unsatisfactory - Does not meet job requirement at all.
The appraisal form also consists of customer satisfaction survey where the need, service
provider and period of assessment are all identified. It also follows graphical scale
method using a five point scale based on the criteria
1)Quality ( Customer needs, service information, quality works, complaints etc..,).
2)Delivery (Delivery time, point of use, use or parts/service information)
3)Communication (Interaction with customers, listening to customer views, timely
feedback, and review changes with the customer)
4)Responsiveness (Responding to customer complaints, changes to customer needs)
5)Improvement (Positive attitude for improvement, implementation & effectiveness of
improvement and improvements at the customer end)
Overall Customer Rating = 1+2+3+4+5
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EMPLOYEE RETENTION
Performance linked pay
The company has an annual appraisal system in place and pursuant to this system,
performance linked pay, annual variable pay and/or commission is paid to the employees.
Employee motivation
Ashok Leyland targets 100% of its employees to be involved in its continuous
improvement activities. Reward systems such as IMPROVE, RISE, BITES, 100% CLUB
and GEMBA passport scheme motivates people to contribute their ideas.
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INCENTIVES
1) Surcharge on Direct Booking Incentive.
2) Special Incentive Scheme.
Employee welfare schemes
The following are the welfare schemes available to the employees.
Canteen facilities
Medical claims
Transport facilities
Ashok Leyland school for their children
Scholarship schemes
Recreation facilities
BENEFITS
1) Tuition fee refund:
Reimbursement of expenses related to course fees, examination fees and purchase of
books is allowed upto 75% of amount spent per academic year subject to a maximum
amount as given by personnel administration.
2) Major medical plan:
Benefits will be available within the laid down overall limits for self dependants viz.
reimbursement of medical expenses and interest free loan
3) Medical reimbursement:
Domiciliary expenses incurred on domiciliary medical treatment shall be reimbursed
subject to the annual limits fixed from time to time.
4) Domestic travel:
Boarding and lodging expenses per diem allowance, when an employee opts to makes his
own arrangements , out of pocket expenses, other expenses such as local conveyances,
office phone calls.
5) Conveyance reimbursement:
It is made on self certification of expenses by the executives. This will stand withdrawn
in the event of company transport being provided.
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6) Vehicle loan:
Interest free loan upto 100% of the cost of a new two wheeler subject to a maximum
limit stipulated from time to time.
7) Group term insurance:
It is in addition to the accident insurance cover provided by the company for executives.
In the event of accidental death, the beneficiaries will receive benefit under both policies.
8) Sixth day compensation (ie. Saturday):
Executives in CG 25 (Corporate Grade) and below will be paid 7.5% of basic salary for
every 6th day (optional) worked. The 6th day compensation as indicated above will be
considered as salary for the purpose of contribution to PF and eligibility for bonus/ Ex-
gratia.
9) Maternity leave:
Total period: 12 weeks leave with pay (6 weeks before delivery and 6 weeks immediately
following the delivery) for lady executives.
10) Leave:
All executives are eligible for privilege leave (PL)-30 days, sick leave (SL)- 7 days,
casual leave (CL)- 7 days, national and festival holidays. All leave will be credited in
January, every year.
11) Retirement age:
The age of retirement from company’s service will be the last day of the calendar month
in which the executive attains the age of fifty eight years.
3) MOTIVATION
CREATING MOTIVATING ENVIRONMENT
GEMBA:
Gemba is a Japanese word meaning “Real Place” where the real action takes place.
In the manufacturing business, Gemba is the shop floor; in a service business, the place
where the customer and the service come together. It is also the quality of human
interaction in the workplace between co-workers, with customers and business partners.
Launched in June 2005 as a company- wide initiative, Mission Gemba’s objective is to
provide information, develop skills and empower employees to reach world-class levels
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in quality, cost and delivery. The logic is simple and undisputable: value is created at the
Gemba and the Gemba knows its work best.
GEMBA KAIZEN:
Three ground rules for practicing kaizen in Gemba.
1. House Keeping
2. Muda Elimination [Waste Elimination]
Waste of over production
Waste of inventory
Waste of waiting
Waste of Motion
Waste of transportation
Waste of Producing Rejects
Waste of processing
3. Standardization.
GEMBA MISSION:
N7i+1
New 7 initiatives
1. Increase in the number of GEMBA
2. 5s [SEIRI,SEITON,SEISO.SEIKETSU,SHITSUKE]
3. EEI (Effort and Ergonomy index)
4. CMI (Cost management initiative)
5. Inventory Initiative
6. Critical machine uptime
7. Quality
8. Safety.
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EMPOWERMENT AND PARTICIPATION
IMPROVE Improve is an annual company- wide event to record, recognize and award employees for their positive involvement in organizational growth innovation and customer satisfaction.
RISEThe expansion for RISE is Reward For Individual Search For Excellence. It is an integrated award and is given to the associates. If an employee does some good activity or work apart from his usual one he is being awarded with RISE.
TQM – Total Quality Management The main objective of the TQM cell is to set human in a good manner to achieve the goals. The quality circle includes 6 people which include 5 associates and 1 executive. Their main function is to identify the problem, find the solution and to implement it.
HR MOBILITY
PROMOTION OPPORTUNITIES
Promotions is based on the seniority, eligibility for post , efficiency, skill, qualification
etc.., The management decides whether to fill a post of outside recruitment or through
promotion. Workman shall be considered for promotion to a post based on certain rules.
He has rendered a minimum period of qualification service of five years.
He possesses the qualification prescribed for the post to which he is to be
considered.
Fulfills prescribed attendance.
SEPARATIONS
Separation involves cessation of services of personnel from an organization. When
people leave the organization, Exit interviews are usually conducted to know the reasons
for leaving. The common reasons given are:
Better opportunities
Lack of growth
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ALLOWANCES
House rent allowance
Washing allowance
Uniform and stitching allowance
Night shift allowance
Conveyance allowance
Milk and vitamins allowances
Flexibility allowance
Quality certification allowance
Direct production allowance
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b) FINANCE DEPARTMENT OF ASHOK LEYLAND LTD.
Finance is considered as the life blood of business. This is because in the modern money-
oriented economy, finance is one of the basic foundations of all kinds of economic
activities. Finance function may be defined as the procurement of funds and their
effective utilization.
RESPONSIBILITIES OF FINANCE DEPARTMENT:
The pricing department is responsible for the fixing of prices for sales of the
vehicles and for buying of raw materials and semi finished goods.
Treasury section is responsible for all kinds of funding managements such as
investments.
Taxation section is responsible for remittance of tax, filing of returns, handling of
litigations etc..,
Costing and Budgeting department is responsible for the unit costing of each
product in particular, such as spare parts and a vehicle as whole.
The FSG (Finance account Service Group) deals with the payables and
recievables at regional offices.
The Explore finance department deals with the FSG exporting of items.
The same functions and responsibilities are allotted to the accounting and finance
department of the manufacturing plants in Ennore, Hosur-1, Hosur-2,
Hosur-2A, Alwar, Bhandara, Pantnagar.
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DEPARTMENTAL STRUCTURE:
MANAGING DIRECTOR
CFO
Pricing Manufacturing Units
Treasury
Ennore
Direct
Taxation Hosur-1
Indirect
Costing and Budgeting Hosur-2
Corporate Consolidation Hosur-2A
FSG Alwar
( Finance account Service Group)
Bhandara
Explore finance Pantnagar
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DEPARTMENTAL STRUCTURE
(AUTHORITY FLOW)
37
MANAGING DIRECTOR
CHIEF FINANCING OFFICER
GM-FINANCE
AGM-FINANCE
DGM-FINANCE
ASST. MANAGER
SENIOR OFFICER
OFFICER
DIVISIONAL MANAGER
MANAGER
SENIOR MANAGER
DEPUTY MANAGER
ROLE OF FINANCE:
Recorder (accounting) of all Financial Transactions
Reporting of Financial Performance
Arranging long and short term funds – Capital and Debt
Working Capital Management
Compliance of tax and other corporate laws
Risk Management
Controllership function
Audit coordination
Investor Relations
PROCESS & ACTIVITIES OF FINANCE:
a) Financial Accounts
Quarterly, Half-yearly and annual results published as per listing requirements
Limited Review / audit coordination.
Annual Reports – Disclosures made are comprehensive; complied much before
they become mandatory
Early completion of accounts, audit process; forefront in adherence to accounting
standards & other guidelines.
Audit Committee – comprises of Stalwarts from the profession.
Automation of processes
b) Financial Planning & Control
Financial Planning includes estimating the amount of capital to be raised and
laying down the policies as to administration of the financial plan.
Monthly MIS: Very Comprehensive with wider coverage and highly informative.
Monthly review covers business volumes, market share, physical and financial
parameters including alerts on laggards, exceptions in all fronts.
Exception reporting and Profit management measures form integral part of this
process
c) Treasury Management
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- Raising of Funds
- Funds Management
- Debt Servicing
- Risk Management
• Financial instruments for Funds raising would depend on end use of funds; de-
risking is an important consideration in deciding the instrument.
• Capex and long term working capital requirements are funded through share
capital and long-term debt.
• Financial Instruments used include
- Long term funds: Shares, GDR, ECBs, Debentures, term loans etc.
-Short term Funds: Cash credit, Demand Loans, Commercial paper, FCNR,
etc.
• Major funds raising in AL include GDR of US$134 Mn. in 1995 & ECB of
US$315Mn incl. US$ 200 Mn. in Dec 2007.
• Level of debt (Long-term): Rs. 2280.44 cr as on 31/3/10
• Banking relationships for working capital is managed through Consortium of
banks comprising of 14 banks – Fund based Rs.600 cr & Non-fund based Rs.750
cr.
• Funds Management includes managing collections and outflows and
surplus/deficit management. Closer working with Marketing and Units is vital.
• Surplus management includes investment in Fixed Deposits, Mutual Funds, etc.,
Direct investment in equity avoided.
• Debt Servicing includes repayment of principal and payment of interest on due
dates and ensuring that commitments made are adhered to.
• Risk Management is vital since organization is exposed to both currency as well
interest rate risks. Risks offer both threats and opportunities (can increase income
or reduce expenditure). Results depend on how well they are managed.
• Credit rating
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Long Term / WC Short Term
CRISIL AA (-) P1+
ICRA LAA(-) A1+
d) Costing & Pricing
• Strategic pricing of products, quotes for various tenders.
• Special pricing for export contracts.
• Monitoring of cost of production of various models and for make or buy decisions
• Project / capex evaluations for optimization and for making commitment
decisions
e) Taxation
• Compliance with Direct (Income Tax Act, Wealth Tax) & Indirect Taxes (Excise,
Customs, Service Tax, Sales tax etc).
• Tax planning is an important component of business decisions.
• Recent major developments include introduction of Service Tax legislation and
VAT across many States.
• Aligning the business process across the organization and maximizing the benefits
against such legislations is a major task handled by Finance.
• Regular tasks include remittance of tax, filing of returns, handling of litigations
etc.
f) Investor Relations
• In AL, Mutual Funds, FII etc.., hold 32% of shareholding besides public who hold
10%.
• FII & Mutual Funds represent investment community who track company’s
performance continuously very closely.
• Dissemination of data relating to company’s performance and developments very
important and sensitive.
• Handled through presentations in periodic investor meet, web-cast, tele-
conferences, individual meets, address in TV etc.
• Presentations made are hosted in company’s website
PLANNING & MANAGING CASH FLOWS:
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1. Planning cash flows
Rolling Quarterly cash forecast prepared and monitored weekly seeking
explanation for variance in order to control and direct operations.
2. Management of daily funds
• Collections from 49 locations pooled under cash management system in to
centralized accounts with consortium banks at Chennai.
• Various payments reported are collated and funded for in the various bank
accounts depending on the expected debits.
• Surplus for the day, if any, invested for tenor which is based on requirement of
funds back in to the system.
• Deficit funded through short term loans from banks, availed based on best
product available / rate offered
STRATEGIC GOALS:
• Raise resources to the tune of roughly US$ 1.8 billion for funding expansion plans
of AL, Nissan and other JVs over the next 3 years
• Achieve optimum funding mix / restructuring of companies to minimize the cost
of raising of funds.
• Maximize tax efficiencies to improve cost competitiveness of products and
improve viability of projects.
• Make globalization a reality through acquisitions and setting up of new ventures
abroad by leveraging AL’s strengths.
• Bench mark financial processes to the best in the world and improve the bar;
maintain high standards of financial discipline.
• Maintain excellent relations with international investor community through
effective communication for international offerings.
FINANCIAL CHALLENGES AHEAD:
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• Global slow down challenging break even.
• Decrease in Margins due to inability to pass on cost increases due to competitive
pressures – partially compensated by increase in volumes.
• Profitability pressures due to changes in business mix and commodity price
movements.
• Forex management – unforeseen volatility in major currencies; particularly