INTRODUCTION

WORKING CAPITAL

Working Capital Management is the process of planning and controlling the level and mix
of current assets of the firm as well as financing these assets. Specifically, Working Capital
Management requires financial managers to decide what quantities of cash, other liquid assets,
accounts receivables and inventories the firm will hold at any point of time .It measures how much
in liquid assets a company has available to build its business .A short term loan which provides
money to buy earning assets. Positive working capital is required to ensure that a firm is able to
continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and
upcoming operational expenses. The management of working capital involves managing
inventories, accounts receivable and payable and cash.

Capital is what makes or breaks a business, and no business can run successfully without
enough capital to cover both short- and long-term needs. Maintaining sufficient levels of short-term
capital is a constantly ongoing challenge, and in today’s turbulent financial markets and uncertain
business climate external financing has become both harder and more costly to obtain. Companies
are therefore increasingly shifting away from traditional sources of external financing and turning
their eyes towards their own organizations for ways of improving liquidity.

One efficient but often overlooked way of doing so is to reduce the amount of capital tied-
up in operations, that is, to improve the working capital management of the company. Working
capital is a financial metric of operating liquidity which describes the amount of cash tied up in
operations and defines the short term condition of a company. A positive working capital position is
required for the continuous running of a company’s operations, i.e. to pay short term debt
obligations and to cover operational expenses. A company with a negative working capital balance
is unable to cover its short-term liabilities with its current assets.

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Working capital is calculated with the following formula:

Working Capital = Current Assets - Current Liabilities

 Current assets are any assets that are liquid enough to be turned into cash within the
following twelve month period.
 Current liabilities are obligations due within the upcoming twelve month period.
 A financially efficient company will have more than enough current assets to cover their
current Liabilities.
 Efficient working capital management helps maintain the smooth operation of the net
operating cycle, also known as the cash conversion cycle (ccc) – the minimum amount of
time required to convert net current bassets and liabilities into cash.
 Working capital management commonly involves monitoring cash flow ,current assets and
current Liabilities through ratio analysis of key elements of operating expenses, including
the working capital ratio, collection ratio,and the inventory turnover ratio.
 The above formula includes three important balance sheet accounts which all have a direct
impact on the business, namely accounts receivable (A/R), accounts payable (A/P) and
inventory.These accounts are often referred to as the three areas of working capital.
 Money owed to the company for products/services that have been delivered to customers
but not yet paid for.
 The raw materials, work-in-progress goods and finished goods that are ready or will be
ready for sale.Inventory represents a key asset to most businesses as the turnover of
inventory is a primary source of revenue generation and subsequently earnings for the
shareholders/owners of the company.
 Money owed to suppliers for goods and services that the company has purchased on
credit. Clearly,the importance of the above components differs between companies and

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 NEED FOR THE STUDY

The main aim of any firm is to maximize the wealth of shareholders. This can be achieved
only by a steady flow of profits which in turn depend on successful sales activity. To generate
sales, investment of sufficient funds in current assets is required. The need of current assets should
be emphasized, as the sales don’t convert into cash immediately but involved a cycle of
operations, namely operating cycle. VARUN MOTORS is multi product dealing unit with varying
cycle for each product. The capital requirement for each department in an organization of VARUN
MOTORS is large which (depends on the product target for that particular year) calls for an
effective working capital management. Monitoring the operation on cycle duration is an important
aspect of working capital

Working capital is the life blood and nerve center of a business. Just as circulation of
blood is essential in the human body for maintaining life, working capital is very essential to
maintain the smooth running of a business. No business can run successfully without an adequate
amount of working capital. However, it must also be noted that working capital is a means to run
business smoothly and profitably. Thus, concept of working capital has its own importance in a
going concern.

A study of changes in the uses and sources of working capital is necessary to evaluate the
efficiency with which the working capital is employed in a business. This involves the need of
working capital analysis. Through this we know the short term liquidity or the working capital
position of a firm.

Some prominent issues that are to be addressed are:-

 Duration of raw material stage (depends on regularity of supply, transactions time).

 Duration of work in progress (depends on length of manufacturing cycle, consistency in
capacity utilization).
 Duration at the finished goods state (depends on pattern of production & sale).

Thus a detailed study regarding the working capital management in VARUN MOTORS is
to be done to consider the effectiveness of working capital management, identify the shortcoming
in management and to suggest for improvement in working capital management.

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 OBJECTIVES OF THE STUDY

 To study in general the working capital management procedure in VARUN MOTORS.

 To analyze and apply operating cycle concept of working capital in VARUN MOTORS.
 To know how the working capital is being financed.
 To know the various methods to be followed by VARUN MOTORS for inventories and
accounts receivables.
 To give suggestions, if any, for better working capital management in VARUN MOTORS.

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 SCOPE OF THE STUDY

The scope of the study is identified after and during the study is conducted. The main scope of the
study is to check the management of working capital ( current assets and current liabilities) of only
FMCG sector. The study analysed the liquidity position and working capital management of a
limited sample consisting of only five companies i.e.Nestle ,HUL, Britannia, ITC, and Dabur.The
study of working capital is based on only one tool i.e.Ratio analysis. Further the study is based on
last 10 years annual reports of the five companies taken into consideration. As only FMCG sector
was studied so the findings could only be generalized to this sector’s firm.

The main scope of the study was to put into practical the theoretical aspect of study into real life
work experience.The study of working capital is based on tools like ratio analysis,statements of
changes in working capital.further the study is based on last 5 years annual reports of VARUN
MOTORS

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 METHODOLOGY OF THE STUDY

Methodology adopted is collection of information in a systematic manner in order to

analyses and verify a phenomenon. The information is collected through primary and secondary
sources during the course of the study. That information was utilized for computing ratios after the
analysis of which interpretation were made.

There are two types’ data collection methods.

Primary data:

Primary data is collected fresh or first hand and for first time which is original in nature.
Primary data is collected through personal interviews will concern officer and staff to support the
secondary data.

Secondary data:

 Most of the computations are made from the figures contained in the Working Capital
Management provided by the company.
 Collection of some of the information regarding theoretical aspects by referring standard
text and books.
 Observation of functioning of the Finance Department.
 Research methodology used for study includes both primary& secondary sources of data.
However most of study is conducted based on secondary sources.
 Secondary sources of data mainly include annual reports of VARUN MOTORS. Statement
of changes in working capital for the past 5 years is done using the data taken from these
financial reports. Similarly time series analysis of operating cycle and calculations of ratios
is done. Apart from this, the website of VARUN MOTORS is referred to know the
products, product facilities, network etc.

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 LIMITATIONS OF STUDY

 Although every effort has been made to study the “Working Capital Management” in
detail, in an organization of VARUN MOTORS size, it is not possible to make an
exhaustive study in a limited duration of 6weaks.

 It is not possible to include data of 2012-13, as the audited financial report has not come
yet (at the time of preparation of this report). However data of 2012-13 is included partially
from the unaudited financial reports of VARUN MOTORS.

 Apart from the above constraint, one serious limitation of the study is that it is not possible
to reveal some of the financial data owing to the policies and procedures laid down by
VARUN MOTORS. However the available data is analyzed with great effort to get an
insight into Working Capital Management in VARUN MOTORS.

 Time limitation factor i.e.,60 days is not sufficient to gain more knowledge.

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 CHAPTERISATION

CHAPTER 1

This chapter includes Introduction, Need, Objectives, Scope, Methodology, Limitations and

Chapterisation of the study.

CHAPTER 2:

This chapter includes Industry Profile and Company Profile of the Varun Motors.

CHAPTER 3:

This chapter includes Theoritical Framework Of The Working Capital Management.

CHAPTER 4:

This chapter includes Data Analysis and Interpretation on the Working Capital Management.

CHAPTER 5:

This chapter includes Summary,Findings and Suggestions on the Working Capital Management.

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 INDUSTRY PROFILE

Like many other nations India's highly developed transportation system has played a
very important role in the development of the country's economy over the past to this day. One
can say that the automobile industry in the country has occupied a solid space in the platform
of Indian economy. Empowered by its present growth, today the automobile industry in the
country can produce a diverse range of vehicles under three broad categories namely cars, two-
wheelers and heavy vehicles.

Today, India is among the world's largest producers of small cars. The New York Times
has rated India as a very strong engineering base with an incomparable expertise in the arena of
manufacturing a number of low-cost, fuel-efficient cars has encouraged the expansion plans of
the manufacturing facilities of a number of automobile leaders like Hyundai Motors, Nissan,
Toyota, Volkswagen and Suzuki.

Motor cycles manufacture makes up the major share in the two-wheeler segment of the
Indian automobile industry. About 50% of the motorcycles are manufactured by Hero Honda.
While Honda manufactures about 46% of the scooters, TVS produces 82% of the mopeds
running on the Indian roads.

About 40% of the three-wheelers manufactured in India are used for transporting goods
with Piaggio manufacturing 40% of the vehicles sold in the Indian market. On the other hand,
Bajaj has emerged as the leader in manufacturing three-wheelers used for passenger transport.
The firm produces about 68% percent of the three wheelers used for passenger transport in
India. The Indian passenger vehicle segment is dominated by cars which make up about 80% of
it. Maruti Suzuki manufactures about 52% of passenger cars while the firm enjoys a complete
monopoly in the manufacture of multi-purpose vehicles. In the utility vehicles segment
Mahindra makes up a 42% share.

FUTURE PROSPECTS

All in all, this bodesbodes very well for the industry outlook over the forthcoming
years. As a result, the job opportunities in this sector are going to remain huge, especially for
trained professionals involved in key production areas. Foreign firms looking to capitalize on
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the local talent are likely to offer iteration and provide accelerated growth prospects for
ambitious and local firms hoping to grow their footprints are also likely to step-up iheir hiring
and upward movement of staff

GOVERNMENT POLICY

During the early stages, the automobile industry was not accorded much importance by
the Indian Government. However, the attitude changed during the 1990's. A number of reforms
were initiated in 1991. Liberal policies affected during this period, proved to be beneficial to
the automobile industry. The fiscal measures, tax reliefs and reforms in equity regulations and
foreign exchange led to significant growth in the automobile sector. A reduction in the
percentage of tariffs imposed on exports and a change in the banking policies was instrumental
in the expansion and growth of the banking sector.

Prior to the mid 1990's, the Indian automobile sector comprised of indigenous
companies. The automobile market in India was however, opened upto foreign investors in
1996. International names like Ford, Hyundai, Toyota, Volvo, Daimler Chrysler and GM
Honda were thus, able to make their foray into the Indian automobile sector. Furthermore, the
auto emission rules issued by the government in recent years ensured that the vehicles
manufactured in India, catered to international standards. At present, the automobiles sector
contributes 4 % to the GDP. About 9.7 million automobiles were manufactured in 2005-2006.
Export figures had crossed the magic figure of one billion during 2003-2004.

A reduction in the tariff imposed on car exports has been effected by the Indian
government. There has also been a removal of the minimum capital investment required from
new investors.

The new policy is also in favor of reduction in excise duty for small automobiles and low
emission and multi utility cars. The tariff policy is also to be reviewed on a regular basis in
order to affect a balance between domestic industry and international trade. There has also
been a proposal for tax relaxation on investment of more than Rs.500 Crore.

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Tata Safari on display in Poznan, Poland.

In July 2010, the Economic Times reported that PSA Peugeot Citroen was planning to
«-enter the Indian market and open a production plant in Andhra Pradesh with an annual
capacity of 100,000 vehicles, investing EUR 700M in the operation. PSA's intention to utilize
this production facility for export purposes however remains unclear as of December 2010. In
2009 India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after
Japan (1.77m), Korea (1.12m) and Thailand (0.26m) by allowing foreign carmakers 100%
ownership of factories in India, which China does not allow.

In recent years, India has emerged as a leading center for the manufacture of small cars.
Hyundai, the biggest exporter from the country, now ships more than 250,000 care annually
from India. Apart from Maruti Exports' shipments to Suzuki's other markets, Maruti Suzuki
also manufactures small cars for Nissan, which sells them in Europe. Nissan will also export
small cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to
Asian and African markets, and is in preparation to launch electric vehicles in Europe in 2010.
The firm is also planning to launch an electric version of its low-cost car the Tata Nano in
Europe and in the U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and
small SUV models in the U.S. market. Bajaj Auto is designing a low-cost car or Renault Nissan
the product worldwide. Renault Nissan may also Automotive India, which will market the
manufacturer Ashok Leyland in another small car.

INTERNAL AUDIT

 Information of audit observation of all the divisions under the unit.

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  Finalization of audit report after scrutiny of replies submitted by the various divisions
against the audit observations.
 Collection with various divisions under the unit for the collection of replies for annual
submission to government auditor.

FINANCIAL SERVICES DEPARTMENT

This department deals with financial services and therefore it has to invest as well as borrow
funds from different companies. VARUN MOTORS borrows funds from different financial
institutions/banks and invest in different securities. The functions of financial services
department are listed below

Placement of short term funds

 Arrangement of funds
 For-Ex risk management
 Lease financing
 Funds management.

SWOT ANALYSIS

SWOT is a strategic planning method used to evaluate the Strengths,

Weaknesses/Limitations, Opportunities and Threats involved in a business venture.

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STRENGTHS:

 MarutiUdyog Limited (MUL) is in a leadership position in the market I with a market

share of 48.74.
 Major strength of MUL is having largest network of dealers and after sales service
centers in country.
 Strong brand value and loyal customer base are big strength for MUL.
 ALTO still beats the small car segment with highest number of sales
 MUL as good market share and hence it's after sales service is amajor revenue.

WEAKNESS:

 Low interior quality inside the cars.

 Government intervention due to having share in MUL.
 Younger generation started getting a great affinity towards new foreign brands.
 Maruti hasn't proved itself in SUV segment like other players.

OPPORTUNITIES:

 MUL has launched it LPG version of Wagon R and it was a good move simultaneously.
 MUL can start R & D on electric cars for a much better substitute of the fuel.
 Export capacity of the company is giving new hopes in American and UK market.
 Maruti'scervo 600 has a huge potential in tapping the middle class segment and act as a
strong threat to Nano.
 Economic growth of the country is constantly increasing and the government is working
hard to increase and the government is working hard to increase the GDP to double
digit.

THREATS:

 MUL recently faced a decline in market share from its 50.09% to 48.09% in the
previous year (2011).

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  Tata motors recent launches like nano 2012, Indigo e-cs are imposing major threats to
its respective competitor's segment.
 China may give a good competition as they are also planning to enter into Indian car
segment.

TAXATION

The direct tax department of VARUN MOTORS works as per the income tax act. The
tax payment is made in advance as per the income tax rules. Since the total income of VARUN
MOTORS is greater than 40 lakh rupees, an audit u/s 44AB known as Tax audit is done by the
external auditors after the statutory audit. Usually the statutory auditors are the ones who
undertake the tax audit.The company prepares all the documents for the audit. The documents
contain details which are more or less the same as prepared for the statutory audit except for
certain changes that are made as per the Income Tax Act. For instance, depreciation as per the
companies act for P&M is say 25%, but as per IT Act it is 15%. So the changes are
accommodated for.

An important concept to be followed in direct taxes is TDS i.e. Tax Deducted at

Source. During the financial year 2010-11, tax to be deducted at source at the following rates.

PROVIDENT FUND TRUST

Provident fund:

A fund built by a contribution made by the employee during his working life and an
equal contribution by his employer @ 12% of his salary at present and is payable back to him
all together with interest on exit from employment. Originally set up to provide monetary
security to employees after retirement, it has, over the years developed into a broad plan for
social security which covers the retirement, buying house, medical/marriage/education
expenses etc.

Types of provident fund:

1) Statutory provident fund: all industries and establishments whose number of regular
employees exceeds 20 or more people are bound to contribute towards these funds. Such
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 provident fund is compulsory for employees drawing salaries (basic +DA) of up to
Rs.6500/- p.m.

2) Voluntary provident fund: in VPF scheme the employee contributes more towards the
PF over and above the 12% as mandated by the government. This additional voluntary
contribution enjoys all the benefits of PF, exceptthat the company does not contribute an
equal amount. But still, the interest rate is equal to the rate of interest for PF and the
withdrawal on retirement is tax free. The benefit of such PF is voluntary and the benefit of
provident fund can be extended by setting up a private PF trust and by getting the same
recognized under Income tax act, 1961 or by getting the establishment/employees covered
under the EPF scheme, 1952 on voluntary basis.

Besides these two categories there are various types of provident funds listed as under:

1) Public Provident Fund: this kind of provident fund is designed for self employed
people like doctors, lawyers, businessmen etc.
2) Exempted provident funds: an establishment covered under the EPF&MP Act 1952 is
required to comply with the statutory provisions of the schemes framed under the act.
However, the act provides for grant of exemption from the operation of EPF scheme,
1952 to the establishment, if it fulfills the 31 conditions prescribed in the said act.
3) Unrecognized Provident Funds: it is the provident fund which is not recognized by
the commissioner of income-tax. The employee and the employer both contribute
towards this fund. The employee’s contribution to URPF is not treated as deductible
expenditure

The chairman of the trust is usually the head of the finance function and there is a separate
secretary for each trust.

VARUN MOTORS, New Delhi Employees Provident Fund was formed on 1-10-1981, for the
benefit of employees of the company. Employees of Delhi/Noida based units and their
branches/sites, IVP Goindwal, EMRP Mumbai are members of the fund.

The board of trustees consists of

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 1) 4 representatives of the management
2) 4 representatives of the employees

Management trustees are appointed with approval of CMD and employee’s trustees are
nominated by elected trade unions. The term of office of trustees is five years.

VARUN MOTORS, New Delhi Employees Provident Fund has been granted relaxation
from the provisions of the Employees Provident Fund Scheme, 1952 and is recognized under
fourth schedule to IT act, 1961.

The group is mainly responsible for matters relating to:

⮚ Provident Fund managed by the trust.

⮚ Pension under employee’s pension scheme, 1995, being managed by EPFO.

Provident fund responsibilities:

The responsibilities with respect to PF mainly include:

Management of Funds

 Managing of monthly PF contribution from the participating Units/Divisions.

 Monitoring timely collection of interest/maturity proceeds of securities.
 Timely processing of refundable/ non-refundable withdrawals of members.
 Final settlements/transfer-out in respect of persons who cease to be member of the fund.
 Attending to the queries of members either in person or in writing.
 Ensuring the transfer of PF accumulations of new members/transferee from previous
trust/EPFO to avoid problem at later stage.

Investment of surplus funds:

 Effective portfolio management of surplus funds on monthly basis ensuring the full
compliance of guidelines/investment pattern issued by the Ministry of Labour.

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  Bids are called from the empanelled arrangers and funds are placed with the H1 bidder.
All the investments are duly approved by the Board of Trustees.

 At present the corpus of the fund is Rs.400 crores

Interest to members:

 Interest on member’s funds is credited to members a/c annually at the statutory rate
declared by EPFO and approved by board of trustees.

 Till date the trust has managed to pay interest to its members from its own resources.

Accounts and audit:

 Maintenance of accounts of provident fund.

 Preparation of annual accounts statements viz. receipt and payment a/c, income and
expenditure a/c and balance sheet of the fund.
 Issue of Annual PF statements to members.
 Annual audit of PF accounts by statutory auditors.

Compliance of statutory provisions:

 Compliance of statutory provisions like returns (monthly/annual) under EPF & MP acts
1952.
 Deduction/deposit of TDS, filing of e-TDS return quarterly and issue of TDS
certificates.
 Timely payment of statutory dues like monthly inspection & EDLI charges to EPFO
account.
 Submission of audited annual accounts to EPFO
 Inspection of PF records by enforcement officers of EPFO and reply of queries raised
by them.

Meetings of PF trust:

 Agenda items for meeting of board of trustees are prepared.

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  Meeting of board of trustees as per the statutory provisions is held.

 Minutes and other related work is recorded.

FUTURE PLANS

On May 11, 2011, Maruti announced its plans to design new car models at its Rohtak
Plant in India. The new car models will be crafted for the next four years for the Indian and
International Market.

Maruti is experimenting with new car models in an effort to stay ahead of its competition
and will be responsible for 25 per cent of Suzuki, its parent company's, revenues. In the
financial year 2010-2011 Maruti Suzuki reported a net sales figure of 37,522 crore rupees.

Maruti will invest in a new plant in Gujarat which will produce 6 million units a year
which is being done in an effort to make the company the leader in the car market. The
company is having a look at different plants as shown by the Government of India.

In another effort, Maruti will introduce four new cars in the Indian market: The mass-
market hatchback, a utility vehicle, a new and improved Swift, and a unique SX4.

The company plans to release the design of the YE3, the hatchback by June-July 2011
while the car will actually be shown in the Auto Expo 2012. The company plans to design the
YE3 without any involvement of Suzuki which is a major feat since most of its cars have been
designed in collaboration with Suzuki in the past The YE3 will be a four-door, four seat
hatchback and will be available in a 600-800cc engine and a five speed manual transmission.

The company also plans to launch the Maruti R3 under a different name. The Maruti R3
is a Multi-Utility Vehicle that will come in a Rs.7 lakhs - Rs.9 lakhs ex-showroom price and is
a six-seater compact van strapped with three rows of seats and rear-hinged rear doors. The car
will come in both 1.2 litre K Series engines and a 1.6 litre Variable Valve Timing engine, each
of which have been present in the popular models of Swift and SSX$. The R3 will compare to
an Innova. The company plans to sell it in emerging markets. It will be showcased in the Auto
Expo 2012. The company plans to get a diesel engine for the car from Volkswagen.

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 The third new model of Maruti, the new Swift will be launched by July 2011 will a 13
litre multi-jet diesel engine and a 1.2 litre K-Series engine. The new Swift fall in the Rs. 3.5 -
5.5 lakhs bracket depending on the model and approximately 17,000 units will be produced
each year.

Along with coming up with new cars and new plants, Maruti is also expanding its
transportation capacity. The company has forged partnerships for this with the Adani group to
set up a mega car terminal at the Mundra port.

MARUTI INSURANCE:

Launched in 2002 Maruti Suzuki provides vehicle insurance to its customers with the
help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal
Sundaram. The service was set up the company with the inception of two subsidiaries Maruti
Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited.

This service started as a benefit or value addition to customers and was able to ramp up
easily. By December 2005 they were able to sell more than two million insurance policies since
its inception.

MARUTI FINANCE:

To promote its bottom line growth, Maruti Suzuki launched Maruti Finance in January
2002. Prior to the start of thisservice Maruti Suzuki had started two joint ventures Citicorp
Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its
client in securing loan. Maruti Suzuki tied up with ABN AmroBank, HDFC Bank, ICICI
Limited. Kotak Mahindra, Standard Chartered Bank, andSundaram to start this venture
including its strategic partners in car finance. Again the company entered into a strategic
partnership with SBI in March 2003. Since March 2003, Maruti has sold over 12,000 vehicles
through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across
India.

"Maruti Finance marks the coming together of the biggest players in the car finance
business. They are the benchmarks in quality and efficiency. Combined with Maruti volumes

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and networked dealerships, this will enable Maruti Finance to offer superior service and
competitive rates in the marketplace".

ISSUES AND PROBLEMS:

On 24 February 2010, March

Maruti Suzuki India announced recalling of 100,000 A-Star hatchbacks to fix a fuel
leakage problem. The company will replace the gaskets for all 100,000 A-Star cars.

Maruti Suzuki True Value:

Unique Advantages:

 India's largest certified used car dealer network.

 358 outlets in 210 cities and growing. .
 All car related services under one roof.
 Professionally trained manpower.
 Complete peace of mind.

Maruti true value business expend the family of Maruti customers, providing reassurance
to existing Maruti customers about resale of their cars and further emphasizes Maruti
commitment towards enhancing customer satisfaction by continuous association during the
vehicle owne ship life cycle.

No one knows your maruti car better than Maruti-based on this premise, Marutichanalises its
expertise to ensure that transaction in pre owned cars are transparent and fair. Through that
company endeavors to extend the relationship and emotional connect that it enjoys with the
customer.

Related :

 Warranty

 E-Brochure

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  Don't Take Chances

Quick's:

 True Value Certification

 Cars Buyer Guide

 Dealer Location

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 COMPANY PROFILE

Established in the late 50’s (VARUN MOTORS) is a name which is recognized across the
industrial world. It is largest manufacturing enterprise in India and one of the leading
international companies in the field of power equipment manufacturer.

VARUN MOTORS offers a wide spectrum of products and services to core sectors of
the Indian economy, viz., power, transportation, oil & gas, renewable energy, defence.etc. A
dynamic 45000 strong team embodies the VARUN MOTORS philosophy of professional
excellence to take up future challenges.

With corporate headquarters at New Delhi, 14 manufacturing units, one subsidiary, a

widespread regional services network and project sites all over India and abroad, VARUN
MOTORS is India’s industrial ambassador to the world with an export presence in more than
70 countries.

VARUN MOTORS has a consistent track record of growth, performance and

profitability. The world bank in its report on the Indian public sector, has described VARUN
MOTORS “one of the most efficient enterprise in the industrial sector at par with international
standards of efficiency” VARUN MOTORS has already obtained

ISO-9000 certification for quality management and all major units/divisions of the
company including the corporate office have been upgraded to the latest ISO-9000: 2000
VERSION.VARUN MOTORS has secured iso-14001 certification for environmental
management system and OHSAS-18001 certification for occupational health & safety
management systems, for all its major units.

VALUES

 Zeal to excel and zest for change.

 Integrity and fairness in all matters.

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  Respect for dignity and potential of individuals.

 Strict adherence to commitments.

 Ensure speed of response.

 Foster learning, creativity and team work.

 Loyalty and pride in the company

MAJOR PLAYERS IN AUTOMOBILE INDUSTRY

Indian automotive companies

 Chinkara Motors: Beachster, Hammer, Roadster 1.8S, Rockster, JeepsteiSailster

 Hindustan Motors: Ambassador ICML: Rhino Rx

 Mahindra: Major, Xylo, Scorpio, Bolero, Thar, Verito, Genio Premier Automobiles
Limited: Sigma, RiO San Motors: Storm

 Tata Motors: Nano, Indica, Indica Vista, Indigo, Indigo Manza, Indigo CS, Sumo,
Venture, Safari, Xenon, Aria.

Foreign automotive companies in India:

Vehicles manufactured or assembled in India:

Manufactured only in Chennai, India, the ilO is one of Hyundai's best selling globally exported
cars.

Maruti Swift, Maruti Suzuki, a subsidiary of Japan's Suzuki Motor, is the largest automobile
manufacturer in India.

 BMW India: 3 Series, 5 Series, XI.

 Fiat India(in collaboration with Tata Motors): Grande Punto, Linea.

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 Ford India: Figo, Ikon, Fiesta, Endeavour.

 General Motors India

 Chevrolet: Spark, Beat, Aveo U-VA, Aveo, Optra, Cruze, Tavera.

 Honda Siel: Jazz, City, Civic, Accord.

 Hyundai Motor India: Santro, ilO, i20, Accent, Verna Transform, Sonata

 Transform.

 Land Rover: Freelander 2

 Maruti Suzuki: 800, Alto, WagonR, Estilo, A-star, Ritz, Swift, Swift DZire, SX4, Omni,
Versa, Eeco, Gypsy.

 Mercedes-Benz India: OClass, E-Class.

 Mitsubishi (in collaboration with Hindustan Motors):[81] Lancer, Lancer Cedia, Pajero

 Nissan Motor India: Micra, Sunny.

 Renault India: Fluence

 Toyota Kirloskar: Etios, Corolla, Innova.

 Volkswagen Group Sales India:

 Audi India: A4, A6, Q5.

 Skoda Auto India: Fabia, Laura, Superb, Yeti.

 Volkswagen India: Polo, Vento, Jetta, Passat.

24
Hyundai Daewoo Motors Eicher Motors Fond

General Motors Ind Auto Ltd. Tata motors Hindustan Motors

Mahindra Maruti SUZUKI Tayota Honda

BMW Swaraj Mazda Ltd. Skoda Chevorlet

These are the companies that bring to us our dream machines. This is where it all starts
from the bourgeoisie Maruti 800, the up market A-star, the stately Mercedes, the 'Indian*
Indica,the racy Hero Honda, the Tata truck and the rest. « Went your way through the
automobile companies, their history and product lines. Find out hitherto unknown facts about
the vehicles you use. Did you know that the Hindustan Motors was the first vehicle
manufacturing company to be set up in India? And it is the same Hindustan Motors which
manufactures both the sturdy Ambassador and the elegant Lancer, in association with
Mitsubishi of course.We present information on all the manufacturers that are part of the Indian
automobile industry. Make this your one stop auto info bank.

VARUN GROUP FACT SHEET:

Varun Group is a leading Business conglomeration with business spread across Automobile,
Auto financing, Construction, Hospitality & Entertainment industries for the past 62 yrs with
62 Showrooms & 72 Service centers across Andhra Pradesh. With an employee base of over
6500, and an annual turnover of over Rs. 1800 Cr. With Automobile sales volume of 90,000
Varun Group has became a household name in Andhra Pradesh.

1. Varun Finance / Lakshmi Finance

2. Varun Bajaj

3. Varsha Builders Pvt Ltd

4. VarunMaruti

25
5. Varun JCB

6. Varun Mahindra Navistar

7. Varun Multiplex

8. NovotelVarun Beach

9. Varun Bharat Benz

10. Varun Training Institute

 PROMOTERS OF THE VARUN GROUP

Mr. PrabhuKishore is a visionary, entrepreneur and a successful businessman.

He is the Chairman and Managing Director of Varun Group which is known across Andhra
Pradesh through their flagship company, Varun Motors Pvt Ltd

Mr. Prabhu Kishore started his business career at the age of 19 yrs, taking care of his
family business of Automobile Dealerships in Vijayawada, M/S. Padmaja Commercial
Corporation and soon started his own Business ventures - Lakshmi Finance and Varsha
Builders in 1980s. In 1992, through the establishment of Varun Motors in Visakhapatnam he
spread his automobile dealership business throughout Andhra Pradesh.Today, Varun Motors is
a household name in Andhra Pradesh, serving millions of customers since its inception,
representing automobile brands such as Bajaj Auto, Maruti Suzuki, JCB, Mahindra Navistar
and Bharat Benz. Varun Group, under the leadership of Mr. Prabhu Kishore is fast emerging as
the leading automobile.

Mrs. Lakshmi Kishore hails from a business family in Vijayawada, Andhra Pradesh.

Educated with a degree in English Literature, she has been a pillar of support to the
VarunGroup.Balancing the family responsibility with hands on approach to various aspects of
the Group business, Mrs. Lakshmi Kishore is a business woman par excellence.

Mr. VarunDev, holds a Masters degree in Engineering from Warwick University in UK and
26
has worked with Suzuki in Hungary. He joined the family business in 2007 and is currently
taking care of the automobile business of JCB, Mahindra and Daimler dealerships of the
Group.

Ms. Varsha holds an MBA in Hospitality degree from Les Roches School of Hotel
Management, Switzerland and a BscHons Management degree from The University of
Manchester, United Kingdom. She is the Owner’s Representative for the Hospitality Sector in
the Group. With a keen eye for Interior Design, Marketing, Operations and New Projects, she
pursues various aspects in the Hospitality & Entertainment Vertical.

 MANAGEMENT TEAM: MANAGEMENT TEAM

Mr. P V SatyanarayanaExecutive Director Varun Motors (Bajaj Division) Varun

Finance, Lakshmi Finance &Varun Leasing. Mr. P V Satyanarayana holds a Bachelors
Degree and is associated with Varun Group for the past 27 years. He held several key positions
as Director in VarunBajaj, VarunMaruti and Varun Finance businesses in Vijayawada region.
He currently serves as Executive Director for Bajaj division & Financing business of the Group
across Andhra Pradesh

Mr.T.VinodKumar
ExecutiveDirector
VarunMotors(JCB&MahindraNavistarDivisions)
MrVinod is a Degree holder in Mechanical Engineering and has 25 years of experience in
Varun Group. He has served the Group as CEO and later as Director of Varun Bajaj in
Visakhapatnam
He currently serves as Executive Director of Varun JCB and Varun Mahindra Navistar
businesses acrossAndhraPradesh

Mr.V.Subbarao

Executive director Varun

27
with HCL and has 10years experience in office Automation. He now serves as Executive
Director of VarunMaruti across Andhra Pradesh. Mr. G V P Raju is a Bachelors Degree holder
and is with the Group since 23 years, leading Accounts and Finance of Varun Motors.

ACHIEVEMENTS

VARUN MOTORS has put in place a number of initiatives, as follows,

1. Strengthening company’s core businesses of Power Generation, Transmission &

Distribution, Transportation and Industrial Systems & Products, through accelerated project
completion and consequent benefits to customers, along with new initiatives in marketing,
technology, facility up-gradation and modernization, enhancing operational effectiveness etc.
motors pvt ltd (Bharat Benz Division)

Mr. V Subba Rao holds a Bachelors Degree and has served the Group as a Director of Varun
maruti in Visakhapatnam .He is now the Executive Director of Varun Bharat Benz division
across Andhra Pradesh.

Mr.G V P Raju

Vice president (Finance)

Varun motors

Mr. Raju holds a Bachelors degree and served the Group as a CEO and later as Director of
VarunMaruti in Hyderabad. Mr.Raju was previously associated

2. Business Development efforts in related and allied areas utilizing the organizational
strengths and forming customer focused specialized business groups e.g. formation of Oil
Sector R&M Business Group to address business in Renovation and Modernization of off-
shore and on-shore oil platforms, downstream petroleum refining areas and Power Plant
Operational Services Group to provide Operations and Maintenance (O&M), Services for
Power Plants.

28
3. After Market Services being the areas for future growth, spares and R&M services business
have been integrated into one focused group. R&M for hydro sets is an area having major
growth opportunity which VARUN MOTORS is poised to tap.

4. Exploring Business opportunities in areas like Energy Conservation, Water Management,

Pollution Control and Waste Management, Ports, LNG terminals etc.

5. Positioning for Information technology Business leveraging the domain knowledge inPower
Sector& Engineering field to provide IT enabled services for Power Sector and software
services for Engineering Industry. Sustain and Enhance Exports for products and services
through multi-pronged approaches like entering new territories, focus on product sales, entry
into IPP segment, offering O&M and LTSA, EPC, becoming a service center for international
Original Equipment Manufacturers (OEMs) and setting up of manufacturing assembly and
repair centers in the regions of demand etc. VARUN MOTORS is also taking steps to re-
position it-self to meet the demands of the new market economy through suitable strategies
keeping in view the ultimate objective of enhancing value for its stakeholders.

BUSINESS VERTICALS OF THE GROUP:

Automobile

 Established in 1950s.

 20% Year on year growth for the last 7 years.

 One of the largest Automobile dealers in the country.

 Rs. 1500 cr annual turnover

Auto-Financing

 Established in 1980s.
 40% YOY growth in the last 5 years.
 Business penetration in to the remote corners of AP.
 Rs. 100 annual disbursement.

29
Infrastructure

 Established in 1980s.
 Built over 1.3 million SFT in the last 5 years.
 Backward integration to meet infrastructure needs of Group's automobile dealerships.

Hospitality & Entertainment

 Established in 1980s.
 Built First 5-star hotel - NovotelVarun Beach in Vizag, which was awarded as THE
BEST 5-STAR HOTEL PROJECT - PAN INDIA (2011) - by Zee Businesss& RICS.
 Opened First 6-screen multiplex in Vizag..
 Govt of AP awarded "Best dealer award for payment of tax (VAT) & Compliance to
AP VAT provisions in "2001-02 and 2006-07".Received "Bajaj Star dealer" award
many times from Bajaj Auto Limited.
 Best Emerging JCB dealer for FY 09-10 in the first year of operation.
 Best dealer award for "Highest key account generation" by Mahindra Navistar in FY
2011-12.
 NovotelVarun Beach awarded "Best Hotel Project Pan India" by Zee Business & RICS
in 2011.
 NovotelVarun Beach awarded "Best New Hotel" by HICSA in 2012.
 Received "Best Employer of the Year" (in the Area of "Corporate Social
Responsibility") Award for the year 2013 by Labour Department, Govt of AP.

RISKS AND CONCERNS

1. Since most of the projects in industry are being contemplated on BOO/BOOT basis, various
issues viz. business model of the Project, revenue collection, operation and maintenance etc.
would need to be suitably addressed to gain entry in the business.

2. Railways have indicated 3% growth in 10th plan as against 6% growth during the 9 th plan,
which would result in scanty order flow for Electric locos and dip in demand for electrics for
Locos.

30
3. Collaborators are increasingly restricting export territories under license agreements in order
to protect their market share in territories outside India particularly where VARUN MOTORS
has built up references and strengths.

RECENT ACHIEVEMENTS OF VARUN MOTORS

VARUN MOTORS got ShramBhushan Award

VARUN MOTORS’s Finance got ICWAI Award for Excellence in Cost Management

VARUN MOTORS's R&D contributed Rs 50,270 crore turnover in 2007-08

VARUN MOTORS manufactured 800 MW thermal sets

VARUN MOTORS net profit up 60 pc

Corporate social responsibility in VARUN MOTORS

 As part of its corporate social responsibility, during the year VARUN MOTORS
undertook socio-economic and community development programs to promote
education, improvement of living conditions and hygiene in villages and communities
located in the vicinity of its manufacturing plants &project sites spread across the
country.

 During the year, nine social & welfare projects were completed by various units of
VARUN MOTORS. These include construction of commun ,mity facilities in villages,
up gradation of schools, scholarship schemes for underprivileged children, providing
water facilities, organizing eye camps, and creation of self employment opportunities

 Reaching out to the distressed victims in the flood ravaged areas of Andhra Pradesh and
Karnataka, VARUN MOTORS has made a humble contribution to help alleviate their
suffering.

 As part of social commitment, 3626 act apprentices were trained in the company. In
addition, 70`` students/trainees from various professional institutions underwent
vocational training.

31
  An initiative to serve poor people for diagnosis and medication with nominal charges

The Diagnostic facilities include

 There are 6 Consultant doctors (General Physicians, Orthopedic & Pediatrician)

 "Sanjivani" a pharmacy providing medication to people at a very low price

 The current beneficiaries of the centre are on an average 200 per day

Branches -

VIPRoad,Siripuram,Visakhapatnam 
Gajuwaka,Visakhapatnam 
Openning Soon @ Srikakulam, Vizianagaram, Vijayawada

MOU signed by VARUN MOTORS

The Memorandum of Understanding (MoU) for the year 2010-11 between BHARAT
Heavy Electrical Limited (VARUN MOTORS) and the Ministry of Heavy Industries & Public
Enterprises was signed by B. Prasada Rao, CMD (VARUN MOTORS) and Dr. Satyanarayana
Dash, Secretary (Department of Heavy Industry, Ministry of Heavy Industries & Public
Enterprises) in the presence of Functional Directors on the board of VARUN MOTORS and
other senior officials of the Ministry.

 A MOU has been signed in between VARUN MOTORS and Nuclear Power
Corporation of India Ltd. To form a joint venture to carry out EPC activities for power
plants based on atomic energy both within the country and outside.

 Order for largest ever Hydro Project-1,200 MW PunatsangchhuHydro electric projects,

Bhutan.

 734 MW commissioned overseas – a new record.

32
 (b) Organisational Profile

 Company: Incorporation, Objectives, Nature of Activity and Financial Structure - Initial

& Present.

 Organization: Departmentalization of Functions, viz., Production, Finance, Marketing,

Materials, R&D, Personnel, etc., and Organization Chart.

 Manpower Particulars: Total number of Employees-Category wise;

Managerial/Supervisory/Workers; Skilled/Unskilled; Permanent/Temporary

AUTOMOBILE INDUSTRY INFRASTRUCTURE: Manufacturing Facilities

Automobile industry has world class manufacturing facilities that can fulfill all the
requirements of the clients with precision. It Infrastructure includes special purpose and general
purpose CNC turning centers, CNC vertical turning centers to handle simple and complex
machining job to exact requirement. Over the years, it have acquired skills to built own special
purpose machinery such as vertical turning CNC drilling machine, CNC horizontal turning,
CNC turning machine for specific needs.

It has three world class manufacturing units located in the fully developed industrial
estate of Sohna, close to the NCR of Delhi. The combined area of all the units are 75,000
square feet. All the manufacturing units are equipped with latest technology based advance
machines like CNC machining centres, CAD/CAM facilities, idea.

Best Practices:

33
 The idea of best practices for the company is based on finding - and using - the best
ways of working to achieve business objectives. Applying best practices is viewed as an
opportunity for mutual learning and sharing of the experience. It's highly skilled employee are
trained to follow such as practices for production of the products. Industry actively participates
in Total Productive Maintenance (TPM), Advanced Product Quality Planning (APQP), Failure
mode and effects analysis (FMEA), Kaizen, 5S and more.

COMPANY PROFILE OF MARUT1 SUZUKI

Maruti Suzuki is India and Nepal's number one leading automobile manufacturer and the
market leader in the car segment, both in terms of volume of vehicles sold and revenue earned.
Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by
Suzuki of Japan. The BJP-led government held an initial public offering of 25% of the
company in June 2003. As of 10 May 2007, the government of India sold its complete share to
Indian financial institutions and no longer has any stake in MarutiUdyog.

Maruti Suzuki plant in Manesar

MarutiUdyog Limited (MUL) was established in February 1981, though the actual
production commenced in 1983 with the Maruti 800, based on the Suzuki Alto k10 car which
at the time was the only modern car available in India, its only competitors - the Hindustan
Ambassador and Premier Padmini were both around 25 years out of date at that point.

34
Through 2004, Maruti Suzuki has produced over 5 Million vehicles. MarutiSuzukis are sold in
India and has produced over 5 Million vehicles. MarutiSuzukis are sold in India and various
several other countries depending upon export orders. Models similar to MarutiSuzukis (but
not manufactured by MarutiUdyog) are sold by Suzuki Motor Corporation and manufactured in
Pakistan and other South Asian countries.

The company exports more than 50,000 cars annually and has an extremely large
domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was the
India's largest selling compact car ever since it was launched in 1983. More than a million units
of this car have been sold worldwide so far. Currently, Maruti Suzuki Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is
commonly used to refer to this compact car model. Its manufacturing facilities are located at
two facilities Gurgaon and Manesar south of Delhi.

Manufacturing process in Manesar plant

Maruti Suzuki's Gurgaon facility has an installed capacity of 350,000 units per annum.
The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant with a
capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity of

35
100,000 engines and transmissions. Manesar and Gurgaon facilities have a combined capability
to produce over 700,000 units annually. More than half the cars sold in India are Maruti Suzuki
cars. The company is a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per
cent of Maruti Suzuki. The rest is owned by public and financial institutions. It is listed on the
Bombay Stock Exchange and National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In
all, over six million Maruti Suzuki cars are on Indian roads since the first car was rolled out on
14 December 1983.

Maruti Suzuki offers 15 models, Maruti 800, Alto, WagonR, Estilo, A-star, Ritz, Swift,
Swift DZire, SX4, Omni, Eeco, Gypsy, Grand Vitara, Kizashiand the newly launched Ertiga.
Swift, Swift DZire, A-star and SX4 are manufactured in Manesar, Grand Vitara and Kizashi
are imported from Japan as completely built units (CBU), remaining all models are
manufactured in Maruti Suzuki’s Gurgaon Plant.

Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars for
three decades. Suzuki's technical superiority lies in its f to pack power and performance into a
compact, lightweight engine that is clean and fuel efficient. Nearly 75,000 people are employed
directly by Maruti Suzuki and its partners. It has been rated first in customer satisfaction
among all car makers in India from 1999 to 2009 by J D Power Asia Pacific.

COMPANY MILESTONES:

 1970: The Indian government launched a new car company called Maruti Technical
Services Limited which created competition for the existing Ambassador Car Company.

 1971: The government changed the name of the company to Maruti Limited. Indira
Gandhi's son, Sanjay Gandhi became the managing director of the company.

 1977: The Company was liquidated as a result of corruption. There was a Maruti
Scandal in 1978 where the court issued a notice to Maruti. Sanjay Gandhi passed away.

 1981: The Company was re-established when the founders' mother, Indira Gandhi took
charge. The Company was now called MarutiUdyog Limited. After partnership with
36
 Japanese giant Suzuki Motor Corporation in a Joint Venture Agreement, the company
was called Maruti Suzuki Company.

 1983: Maruti produced its first car, the Maruti 800. It took the company thirteen months
to produce this car. This changed the landscape of the Indian car market as Maruti 800
was the most cost-effective and fuel-efficient car in India.

 1984: Maruti produced a large mini-van called the Omni that seated up to eight people.
This was an addition to its existing offering of the Maruti 800.

 Between 1985 and 1995: Maruti launched the Gypsy, the Maruti 1000, the Zen, the
Esteem, and the Maruti On Road Service, a 24-hour service which gives customers 24
hour access to technicians and vans who are ready to help with any problem of the car
round the clock. In 1987, the company made its first export sale, selling 500 cars to
Hungary.

 1996: This was a prominent year for Maruti as five new models of its cars were
launched including the Gypsy (E), Omni (E), Gypsy King (E), the automatic Zen and
the Esteem in a 13 liter engine. Gypsy has the engine from the Esteem. The engine had
a horsepower of 65 bhp.

 2000: Maruti launched India's first call center and the Altrura, a luxury car. It also
introduced the 16-Valve MPFI G13BB engine in the Gypsy and the power increased to
80 bhp.

 2002: The WagonR Pride, Esteem (diesel version), Alto Spin LXi were
introduced. Maruti Finance was started diversifying the company from its initial product
offering of only cars to finance. Maruti also inaugurated a children's park in Delhi as
part of it's Corporate Social Responsibility Initiative.

 2003:Maruti launched the Grand Vitara.

 2005:Maruti launched the Swift.

 2006:Maruti had produced up to six million cars.

37
  2007:Maruti launched the SX4, Swift Diesel and the company was renamed from
MarutiUdyog Limited to Maruti Suzuki India Limited

 2008: Maruti launched the Swift DZire, the A-Star and inaugurated the K-series engine
plant in Gurgaon.

 2009: The Company shipped the first batch of A-Star cars from the Mundra port.
FUTURE FOCUS

 To explore the luxury segment in automobile division

 To undertake more hospitality projects and expand in infrastructure segment

 To increase the auto-finanacing operations

MAJOR PLAYERS

Automobile

 Established in 1950s.
 20% Year on year growth for the last 7 years.
 One of the largest Automobile dealers in the country.
 Rs. 1500crore annual turnover

Division

 Varun motors pvt ltd –Maruthi Dealership,Bharat Benz Dealership

 Varun motors –Bajaj,JCB & Mahindranavistar Dealership

Auto-Financing

 Established in 1980s.
 40% YOY growth in the last 5 years.
 Business penetration in to the remote corners of AP.
 Rs. 100 annual disbursement
 Varun finance,lakshmi finanace,varun leasing

38
 Infrastructure

 Established in 1980s.
 Built over 1.3 million SFT in the last 5 years.
 Backward integration to meet infrastructure needs of Group's automobile dealerships.

Divisions

 Varun Builders pvt ltd

Hospitality & Entertainment

 Established in 1980s.
 Built First 5-star hotel - NovotelVarun Beach in Vizag, which was awarded as THE
BEST 5-STAR HOTEL PROJECT - PAN INDIA (2011) - by Zee Businesss& RICS.
 Opened First 6-screen multiplex in Vizag.

CORPORATE SOCIAL RESPONSIBILITY

Started Navaratnam-kesavarao charitable health centre as a part of CSR Initiative

 An initiative to serve poor people for diagnosis and medication with nominal charges
 The Diagnostic facilities include
 Digital X-Ray
 Serology
 Biochemistry
 Hematology
 There are 6 Consultant doctors (General Physicians, Orthopedic & Pediatrician)
 "Sanjivani" a pharmacy providing medication to people at a very low price
 The current beneficiaries of the centre are on an average 200 per day

ARTICLES RELATING TO THE COMPANY

THE HINDU (26/08/2009)

39
VISAKHAPATNAM: Sea Valley Resorts Private Ltd., part of the diversified Varun Group, on
Tuesday announced its entering into a management agreement with Accor Hospitality, one of
the world’s largest hotel operators, to manage hotel Novotel Visakhapatnam Varun Beach
which will open next year.

Speaking on the occasion, founder and managing director of Varun Group with interests in
automobile dealership, finance and construction with an annual turnover of
Rs.1,000crores,V.Prabhu Kishore, told media persons that it was a dream fulfilled. The hotel
would be opened in June-July next year. “This will give Vizag and Andhra Pradesh one of the
most outstanding properties. The largest in Vizag and AP if not in South India,” he said.

THE HINDU (09/09/2004)

Varun Motors' new showroom

HYDERABAD: The car market is growing steadily this year, and MarutiUdyog's strategy of
vendor consolidation is also paying off according to Kinji Saito, Director, Marketing and Sales,
MarutiUdyog. He was speaking to reporters after inaugurating Varun Motors' new showroom
here at Banjara Hills on Wednesday. This is the company's 298th showroom. Mr. Saito said
during April-August, Marutiregistered a growth of 20 per cent against 18 per cent by the car
industry, and 16 per cent by its competitors.

VALUES

Governance:

We are stewards of our shareholder’s investments and take that responsibility very seriously.
We are accountable and responsible for delivering superior results that make a difference in the
lives of the people we touch.

Respect:

We value the unique contribution of each individual. We believe in respect for human dignity
and we respect the need to preserve the environment around us.

Excellence:
40
We are committed to deliver and demonstrate excellence in whatever we do.

Loyalty:

We are loyal to our customers, to our company & to each other.

Integrity:

We work with highest ethical standards and demonstrate a behavior that is honest, decent and
fair. We are dedicated to that highest level of personal and institutional integrity.

Commitment:

We set high performance standards for ourselves as individuals and our teams. We honor our
commitments in a finely

Innovation:

We constantly support development of newer technologies, products, improved

processes,better services and management practices.

ORGANIZATION STRUCTURE

41
VARUN MOTORS CORPORATION PROFILE:

VARUN MOTORS is the largest engineering and manufacturing enterprise in India in the
energy-related / infrastructure sector, today. VARUN MOTORS was established more than 40
years ago, ushering in the indigenous Heavy Electrical Equipment industry in India - a dream
that has been more than realized with a well-recognized track record of performance. The
company has been earning profits continuously since 1971-72 and paying dividends since
1976-77.

VARUN MOTORS manufactures over 180 products under 30 major product groups and caters
to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry,
Transportation, Telecommunication, Renewable Energy, etc. The wide network of VARUN
MOTORS's 14 manufacturing divisions, four Power Sector regional centres, over 100 project
sites, eight service centres and 18 regional offices, enables the Company to promptly serve its
customers and provide them with suitable products, systems and services -- efficiently and at
competitive prices.

The high level of quality & reliability of its products is due to the emphasis on design,
engineering and manufacturing to international standards by acquiring and adapting some of

42
the best technologies from leading companies in the world, together with technologies
developed in its own R&D centres.

VARUN MOTORS has acquired certifications to Quality Management Systems (ISO 9001),
Environmental Management Systems (ISO 14001) and Occupational Health & Safety
Management Systems (OHSAS 18001) and is also well on its journey towards Total Quality
Management.
OVERSEAS BUSINESS

VARUN MOTORS has been exporting products and services in power and industry segment
for approximately 40 years. As of June 30, 2011, we have exported our products and services
to more than 70 countries. As of June 30, 2011, we had cumulatively installed generating
capacity of over 8,500 MW outside of India in 21 countries, including Malaysia, Iraq, UAE,
Egypt and New Zealand, and had approximately 5,200 MW in 19 countries under various
stages of execution. Our international operations encompass a wide range of our power and
industry segment products and services, including thermal, hydro and gas-based turnkey power
projects, substation projects and rehabilitation projects, as well as a broad range of products
(such as transformers, compressors, valves, oil field equipment, electrostatic precipitators,
photovoltaic equipment, insulators, heat exchangers, switchgear equipment, castings and
forgings) and after sales services. We are particularly active in the Middle East, Southeast Asia
and Africa and have been executing turnkey contracts since 1980. Our recently completed
projects outside of India include 2x126 MW gas turbine-based Siddhirganj peaking power plant
in Bangladesh, 4x126 MW gas turbine-based Sulaymanniah power project in Iraq, 2x42 MW
gas turbine-based Al Ghail power plant in UAE and 2x26 MW gas turbine generating sets for
Oman Refinery Company in Oman. 

The Company has been successful in meeting requirements of International markets, in terms
of complexity of work as well as technological, quality and other requirements.

VARUN POLICIES:

 Business Policy:

43
 In line with Company’s Vision, Mission and Values, we will strive for sustained growth with
profitability to emerge as a customer oriented and technologically competitive leader in supply
of products for Power and Industry sector.

 Quality Policy:

In its quite to be world-class, VARUN MOTORS pursues continual improvement in the

Quality of its Products, Services and Performance leading to Total Customers Satisfaction and
Business Growth, through dedication, commitment and team of all companies.

 Informational Security Policy:

VARUN MOTORS is committed to ensure Integrity, Confidentiality, Availability and

Security of its Information at all times for serving the needs of the organization in line with its
Vision, Mission & Values while meeting all regulatory requirements.

 Energy Management Policy:

VARUN MOTORS is committed to ensure to continuously enhance efficiency in all its

activities, products and services through the use of energy efficient technologies and prevention
of energy wastages, with the full participation of all employees.

 HSE Policy:

VARUN MOTORS Trichy is committed to being an environment friendly company in all its
activities, products and services and to provide safe and healthy working environment to all
persons working for or on behalf of the organization as an integrated part of business
performance through: Compliance with applicable legislation and other requirements the
organization subscribes. Continual improvement in the HSE Management

Systems performance through identification and prevention of injury, ill health, pollution and
conservation of resources. Providing a framework for setting and conservation of resources.

Providing a framework for setting and reviewing HSE objectives and targets. Communication
of this policy to all persons working for or on behalf of the organization and interested parties

44
BUSINESS LINE

Visakhapatnam, April 5:  

NovotelVarun Beach here has won the best new hotel award at the recent Hotel Investment
Conference - South Asia in the mid-market segment, according to MrPrabhu Kishore,
Chairman He was speaking at a press meet here on Thursday. He said earlier the hotel had won
the best hotel project awarded by Zee Business.

A supply network to protect the regular and planned course of production against the random
disturbance of running out of materials or goods.

JOINT VENTURE RELATED ISSUES

Suzuki's fifth global car modal, was designed and is made only in India. Maruti Suzuki is also
Suzuki's leading research and development arm outside Japan

Relationship between the Government of India, under the United Front (India) coalition and
Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian
media till Suzuki Motor Corporation gained the controlling stake.

This highly profitable joint venture that had a near monopolistic trade in the Indian automobile
market and the nature of the partnership built up till then was the underlying reason for most
issues. The success of the joint venture led Suzuki to increase its equity from 26% to 40% in
1987, and further to 50% in 1992. In 1982 both the venture partners had entered into an
agreement to nominate their candidate for the post of Managing Director and every Managing
Director will have a tenure of five years.

R.C. Bhargava was the initial managing director of the company since the inception of the joint
ventur

e. Till today he is regarded as instrumental for the success of Maruti Suzuki. Joining in 1982 he
held several key positions in the company before heading the company as Managing Director.
Currently he is on the Board of Directors. After completing his five year tenure, Mr. Bhargava
later assumed the office of Part-Time Chairman. The Government nominated Mr. S S L.N.

45
Bhaskarudu as the Managing Director on 27 August 1997. Mr. Bhaskarudu had joined Maruti
Suzuki in 1983 after spending 21 years in the Public sector undertaking Bharat Heavy
Electricals Limited as General Manager. In 1987 he was promoted as Chief General Manager.
In 1988 he was named Director, Productions and Projects. The next year (1989) he was named
Director of Materials and in 1993 he became Joint Managing Director.

OVERVIEW OF THE VARUN MOTORS CORPORATE FINANCE DEPARTMENT:

Basically the whole set up of the finance department is made so as to cover all the aspects
involved in the financial decisions. VARUN MOTORS is a debt free company and has its own
accounting policies. While to get a project, VARUN MOTORS presents its quote like other
participants and the whole procedure is carried on.

Firstly, we will analyze the various departments of finance at VARUN MOTORS. These can
be depicted as follows:

 Cash management
 Corporate books
 Internal audit
 Establishment and payroll
 Financial services department
 Taxation (direct and indirect)
 Provident fund trust
 Debtors
 Budgeting
 Administration and insurance

CASH MANAGEMENT

 Collections and disbursements are made to the units on the basis of their needs.
 Management of inflow and outflow of cash.
 Banking arrangement, cash credit limit, working capital requirements.
 Informing other departments about the deficit or surplus of funds.

46
  Making daily, weekly and yearly reports on the basis of data collected from different
manufacturing units.

CORPORATEBOOKS

 Finalization of accounts of corporate finance.

 Reconciliation of balance sheets of various accounts with the units.
 Preparation of Annual Report of VARUN MOTORS as a whole after collecting annual
reports of various units, duly certified by chartered accountant.
 Government audit of balance sheet

ESTABLISHMENT

 Preparation of payroll and pay slips.

 Check and pass
 Medical bills
 Entertainment bills & Telephone bills
 Conveyance bills

VISION VALUES

Maruti is India’s leader in the automobile industry. I believes that the customer is king.

It is making sure that performance, after sales service and customer support are really good in
India. Here are some key points from Maruti's vision statement:

1. Modernization of the Indian Automobile Industry

2. Developing cars faster and selling them for less.
3. Production of fuel-efficient vehicles to conserve scarce resources.
4. Production of large number of motor vehicles which was necessary for economic growth.
5. Market Penetration, Market Development Similarly Product Development and
Diversification.
6. Partner relationship management, Value chain, Value delivery network

47
Maruti has two values - capability and commitment. Maruti's vision is to appear as a Learning
Organization.

There are three processes that are critical to develop, reinforce and cascade a positive,
transparent, supportive and high performing work culture, systems and practices across the
company.

● The first process is the top level management's ability to walk the talk -the manager's
ability to deliver on time and at high efficiency levels.
● The second is a rewards and recognition program that helps in assessment.Each
member of the organization from the shop floor level to supervisors to the managers to
the lower staff is recognized and rewarded for their efforts. These include monetary
benefits and in-kind benefits. Employees are given the career development and career
growth rewards.
● The third process is using communication techniques like the Newsletter and the
Monthly magazine to highlight expectations and achievements of all the team members.

This three-tiered approach of walking the talk, rewards and recognition and communication
techniques is the three-pronged approach Maruti is taking to ensure that it's visions and values
are met with the topmost standards and that there is a high execution quotient in their work.

Maruti defines its vision statement on its website to include the following five areas:

Customer Obsession: Making sure that the customer gets what he desires.

Fast, Flexible and First Mover: It produces and sells cars as a rapid pace.

Innovation and creativity: It introduces new technologies and new models at a rapid pace

Networking and Partnership: It believes in partnering with various companies from

producing parts to hosting car shows.

Openness and Learning: People working in the company are given a chance to experiment
and explore.

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COMPANY HISTORY

In 1981, Maruti was launched. The company was started by the Government of India and was
initially called Maruti Technical Services Private Limited. The first Managing Director of the
company was Sanjay Gandhi, late-Indian Prime Minister Indira Gandhi's son.

During the period of 1985 to 1996, a few other significant developments took place including
Suzuki taking up 50% stake in Maruti, leading to a 50-50 joint venture between Maruti and the
Government of India and over 60 per cent of its partsbeing produced in India leading to lower
costs of production as the parts didn't have to be imported from abroad. When asked why
Suzuki was chosen as the partner of this established corporation, the chairman of Maruti, Mr.
R. C Bhargava said that the company went to Japan and none of the companies out of Nissan,
Mitsubishi and Daihatsu were ready to bring 40 per cent equity in India. Suzuki was the only
company which agreed to bring 26 per cent equity in India and raise it to 40 per cent thereafter.

The first car that the company produced was a four-door Maruti 800 and the second car that the
company produced was a Multi-Utility Vehicle called the Omni.

Between 1994 and 1996 Maruti released the Esteem, the Gypsy, the Omni, the Gypsy King,
Zen and Esteem. It also opened a second plant in Manesar whose capacity at the time of
opening was 2,00,000units.

In 2000 Maruti launched a call center. This was the first time a car company had ever launched
a call center in India. In this year, Maruti setup a website for its Wagon-R car, introduced a
new model of the Zen, got the IRTE National Award for its safety initiative, traffic
management and environment protection, launched the Baleno and the Wagon R with electric
power steering, joined hands with Sumitomo for providing after-sales service and introduced
the Suzuki Alto. The Gurgaon plant had stopped production due to a strike by the employees.

Maruti introduced its first CNG car in 2001. In the same year Maruti invested 550 crore rupees
in manufacturing cars.

49
In 2002 Maruti launched Maruti Finance to offer financial services like extended warranty and
finance for car insurance. It also hiked its car prices and launched the Versa. This was a good
year for Maruti in exports as it produced 16,000 cars for an order to Europe.

In the next few years Maruti got into collaboration with various companies to launch car-
selling schemes. They partnered with State Bank of India to launch a scheme where each
branch of the bank would sell a Maruti car. The company also tied-up with Reliance Industries
Limited for lease and fleet management. This was the same year Kumar Mangalam Birla joined
Maruti as an independent director.

From 2005-2007 Maruti became the market leader of Indian cars and in 2006 unveiled the new
Wagon-R in Punjab. In 2007, Maruti launched the SX4 sedan.

AWARDS and ACCOLADES

During Final year 2011-2012, the company, its products and services received reputed awards
and accolades instituted by independent expert groups, media houses and research agencies.

To Maruti Suzuki

Ranked No.l in the JD power Customer Satisfaction index for the 12th time in a row Maruti
Suzuki wins the Business world International Business Awards 2012 (Exports Auto and
Engineering Category) Ranked fourth in an index of thought leaders in India published by
London-based communication agency-globe scan.

50
MARUTI WINS ON CUSTOMER SATISFACTION 12TIMES IN A ROW

Customer satisfaction awards on servicing

ACHIEVEMENTS (AWARDS & RECOGNITION)

As one of the top Indian brands of cars, Maruti Suzuki has won many national and international
awards since it began production.

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

Working capital is regarded as life blood of business. Its effect in management ensures success of
business while its inefficient management leads to loss of profits and ultimate downfall. A study
of working capital is of major importance to internal and external analysis because of its close
relationship with the day to day operations in business. Working capital management is a
significant part of business decisions. Maintaining optimal level of working capital is the crux of
the problem with which a finance manager has to deal with because it involves the tradeoff
between risk and return.

A firm is required to carry adequate amounts of working capital so as to deal with

productive and distributive activities smoothly. Holding adequate amounts of raw material
smoothly in stock ensures uninterrupted production activity. Similarly sufficient stock of finished
goods has also to be maintained in anticipation of future demand and for this purpose, also needs
to be maintained in anticipation of future demand and for this purpose the firm needs funds. Goods
sold on credit do not return cash immediately. The firm will have to arrange for funds to finance
their accounts receivable for the period until they are collected. Along with this, a minimum level

51
of cash is required for ordinary operations of business . However, these assets have to be
maintained at appropriate level as both excess and shortage of working capital will pose problems
for the successful running of business. This calls for setting an optimal level of working capital.

Working capital management is particularly important for small firms. A small firm may
reduce its fixed assets requirements by renting or leasing plant and equipment but there is no way
before it to avoid an investment in current assets. A finance manager should therefore devote
considerable time to manage current assets. Further, owing to limited access to the capital markets,
the small firm has to rely heavily on trade credit and short term bank loans. Both affect net
working capital by increasing current assets.

NEED FOR WORKING CAPITAL

Given the objective of financial decision making to maximize the shareholders
wealth, it is necessary to generate sufficient profits. The extent to which profits can be earned will
naturally depend, among other things, upon the magnitude of the sales. A successful sales
programme is, in others words, necessary for earning profits by any business enterprise. However,
sales do not convert into cash instantly; there is invariably a time-lag between the sale of goods
and the receipt of cash. There is, therefore, a need for working capital in the form of current assets
to deal with the problem arising out of the lack of immediate realization of cash against goods
sold. Therefore, sufficient working capital is necessary to sustain sales activity. Technically, this
is referred to as the operation or cash cycle. The operating cycle can be said to be at the heart of
need for working capital. ‘The continuing flow from cash to suppliers, to inventory, to accounts
receivable and back into cash is what is called the operating cycle’. In other words, the term cash
cycle refers to the length of time necessary to complete the following cycle of events.

Concept of working capital:

 Gross Working Capital = Total of Current Asset
 Net Working Capital = Excess of Current Asset over Current Liability

52
 Current Assets Current Liabilities

 Cash in hand / at bank  Bills Payable

 Bills Receivable  Sundry Creditors
 Sundry Debtors  Outstanding expenses
 Short term loans  Accrued expenses
 Investors / stock  Bank Over Draft
 Temporary investment
 Prepaid expenses
 Accrued incomes

SIGNIFICANCE OF WORKING CAPITAL

53
 The prime objective of the company is to obtain maximum profit thought the business. The
amount of profit largely depends upon the magnitude of sales. However the sale does not convert
into cash instantaneously. There is always a time gap between sale of goods and receipt of cash.
The time gap between the sales and their actual realization in cash is technically termed as
operating cycle. Additional capital required to have uninterrupted business operations, and the
amount will be locked up in the current assets. Regular availability of adequate working capital is
inevitable for sustained business operation. If the proper fund is not provided for the purpose, the
business operations will be effected. And hence this part of finance to be managed well.

OPERATING CYCLE

Phase 3
Receivables
54
 Phase 2
Cash

Inventory
Phase 1

The operating cycle consists of three phases:

In phase 1, cash gets converted into inventory. This includes of raw materials, conversion of
raw materials into work-in-progress, finished goods and finally the transfer of goods to stock at
the end of the manufacturing process. In the case of trading organizations, this phase is shorter as
there would be no manufacturing activity and cash is directly converted into inventory. The phase
is, of course, totally absent in the case of service organizations.

In phase II of the cycle, the inventory is converted into receivables as credit sales are made
to customers. Firms which do not sell on credit obviously not have phase II of the operating cycle.

The last phase (phase III), represents the stage when receivables are collected. This phase
completes the operating cycle. Thus, the firm has moved from cash to inventory, to receivables
and to cash again.

CLASSIFICATION OF WORKING CAPITAL

Working capital can be classified on the basis of composition. Thus we have gross working
capital comprising current assets and net working capital, which is the difference between current
assets and current liabilities. Another classification of working capital is the permanent and
variable working capital. The types of working capital are discussed in detail in the following
sections.

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Gross working capital
Gross working capital is the amount if funds invented in the various components of current
assets. Current are the assets which can be converted into cash within an accounting year and
include cash, short-term securities, debtors and stock. This concept has the following advantages.

 Financial managers are profoundly concerned with current assets.

 Gross working capital provides the correct amount of working capital at the right time.
 It enables a firm to realize the greatest return on its investment.

56
  It helps in the fixation of various areas of financial responsibility.
 It enables a firm to plan and control funds and to maximize the returns on investment.

For these advantages, gross working capital has become a more acceptable concept in
financial management.

Net working capital

The net working capital is the difference between current assets and current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment within
an accounting year and include creditors (accounts payable), bills payable and outstanding
expenses. The concept of net working capital enables a firm to determine how much amount is
left for operational requirements.

Permanent working capital

Permanent working capital is the minimum amount of current assets which is needed to
conduct a business even during the dullest season of the year. This amount varies from year to
year, depending upon the growth of a company and the stage of the business cycle in which it
operates. It is the amount of funds required to produce the goods and services which are necessary
to satisfy demand at a particular point. It represents the current assets which are required on a
continuing basis over the entire year. It is maintained as the medium to carry on operations at any
time. Permanent working capital has the following characteristics:

It is classified on the basis of the time factor

(i) It constantly changes from one asset to another and continues to remain in the
business process.
(ii) Its size increases with the growth of business operations.

Temporary or variable working capital

It represents the additional assets which are required at different times during the operating year,
additional inventory, extra cash etc., seasonal working capital is the additional amount of current
assets-particularly cash, receivables and inventory which are required during the more active
business seasons of the year. It is temporarily invested in current assets and possesses the
following characteristics:
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 (iii) It is not always gainfully employed, though it may change from one asset to another,
as permanent working capital does and
(iv) It is particularly suited to business of a seasonal or cyclical nature.

Balance sheet working capital

The balance sheet working capital is one which is calculated from the items appearing in the
balance sheet. Gross working capital, which is represented by the excess of current assets, and net
working capital, which is represented by the excess of current assets over current liabilities are
examples of the balance sheet working capital.

Cash working capital

Cash working capital is one which is calculated from the items appearing in the profit and loss
account. It shows the real flow of money or value at a particular time and is considered to be the
most realistic approach in working capital management. It is the basis of the operation cycle
concept which has assumed a great importance in financial management in recent years. The
reason is that the cash working capital indicates the adequacy of the cash flow, which is an
essential pre-requisite of a business.

Negative working capital

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 Negative working capital emerges when current liabilities exceed current assets. Such a
situation is not absolutely theoretical, and occurs when a firm is nearing a crisis of some
magnitude.

Objectives of Working Capital Management

The basic objective of working capital is to provide adequate support for the smooth functioning
of normal business operations of a company. The term adequate working capital is subjective
depending on management’s attitude towards uncertainty/risk.

I. Maintenance of working capital.

II. Availability of ample funds at the time of need.
III. Meet day to day cash flow needs.
IV. Pay wages and salaries when they fall due
V. Pay creditors to ensure continued supplies of goods and services.
VI. Pay government taxation and provider of capital – dividends and
VII. Ensure the long term survival of the business entity.

SOURCES OF WORKING CAPITAL

The company can choose to finance its current assets by

 Long term sources

 Short term sources

A combination of them. Long term sources of permanent working capital include equity
and preference shares, retained earnings, debentures and other long term debts from public
deposits and financial institution. The long term working capital needs should meet through long
term means of financing. Financing through long term means provides stability, reduces risk or
payment. And increases liquidity of the business concern. Various types of long term sources of
working capital are summarized as follow:

Long term sources

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 Issue of shares It is the primary and most important sources of regular or permanent
working capital. Issuing equity shares as it does not create and burden on the income of the
concern. Nor the concern is obliged to refund capital should preferably raise permanent working
capital.

Retained earnings Retained earnings accumulated profits are a permanent sources of

regular working capital. It is regular and cheapest. It creates not charge on future profits of the
enterprises.

Issue of debentures It creates a fixed charge on future earnings of the company. Company
is obliged to pay interest. Management should make wise choice in procuring funds by issue of
debentures.

Long term debt Company can raise fund from accepting public deposits, debts from
financial institutions like banks, corporations etc. the cost is higher than the other financial tools.
Other sources sale of idle fixed assets, securities received from employees and customers are
examples of other sources of finance

Short term sources of temporary working capital:

Temporary working capital is required to meet the day to day business expenditures. The
variable working capital would finance from short term sources of funds. And only the period
needed. It has the benefits of, low cost and establishes closer relationships with banker.

Some sources of temporary working capital are given below:-

Commercial bank commercial bank constitutes a significant sources for short term or
temporary working capital this will be in the form of short term loans, cash credit, and overdraft
and though discounting the bills of exchanges.

Public deposits Most of the companies in recent years depends on this sources to meet their
short term working capital requirements ranging from six month to three years.

60
 Various credits Trade credit, business credit papers and customer credit are other sources of
short term working capital. Credit from suppliers, advances from customers, bills of exchanges,
promissory notes, etc helps to raise temporary working capital.

Reserves and other funds Various funds of the company like depreciation fund. Provision
for tax and other provisions kept with the company can be used as temporary working capital.

The company should meet its working capital needs through both long term and short term
funds. It will be appropriate to meet at least 2/3 of the permanent working capital equipments form
long term sources, whereas the variables working capital should be financed from short term
sources. The working capital financing mix should be designed in such a way that the overall cost
of working capital is the lowest, and the funds are available on time and for the period they are
really required.

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 If you have insufficient working capital and try to increase sales, you can easily over stretch the
financial resources of the business. This is called overtrading. Early warning signs include
Pressure on existing cash Exceptional cash generating activities. Offering high discounts for clear
cash payment Bank overdraft exceeds authorized limit Seeking greater overdrafts or lines of credit
Part paying suppliers or there creditor. Management pre occupation with surviving rather than
managing.

Estimating Working Capital requirements

In order to determine the amount of working capital needed by a firm, a number of factors
viz. production policies, nature of business, length of manufacturing process, rapidity of turnover,
seasonal fluctuations, etc. are to be considered by the finance manager.

Techniques for assessment of working capital requirements:

1) Estimation of components of working capital method:-

Since working capital is the excess of current assets over current liabilities, an assessment
of the working capital requirements can be made by estimating the amounts of different
constituents of working capital e.g., inventories, accounts receivable, cash, accounts payable, etc.

2) Percent of sales approach:-

This is a traditional and simple method of estimating working capital requirements.

According to this method, on the basis of past experience between sales and working capital
requirements, a ratio can be determined for estimating the working capital requirements in future.

3) Operating cycle approach:-

According to this approach, the requirements of working capital depend upon the
operating cycle of the business. The operating cycle begins with the acquisition of raw materials
and ends with the collection of receivables.

It may be broadly classified into the following four stages viz.

 Raw materials and stores storage stage.

62
  Work-in-progress stage.
 Finished goods inventory stage.
 Receivables collection stage.

The duration of the operating cycle for the purpose of estimating working capital requirements is
equivalent to the sum of the durations of each of these stages less the credit period allowed by the
suppliers of the firm.

Symbolically the duration of the working capital cycle can be put as follows: -

O=R+W+F+D-C

Where,

O=Duration of operating cycle;

R=Raw materials and stores storage period;

W=Work-in-progress period;

F=Finished stock storage p

D=Debtors collection period;

C=Creditors payment period.

After computing the period of one operating cycle, the total number of operating cycles that
can be computed during a year can be computed by dividing 365 days with number of operating
days in a cycle. The total expenditure in the year when year when divided by the number of
operating cycles in a year will give the average amount of the working capital requirement.

ADEQUACY OF WORKING CAPITAL

Working capital should be adequate for the following reasons:

 It protects a business from the adverse effect of shrinkage in the values of current assets.
 It is possible to pay all the current obligations promptly and to take advantage of cash
discounts.

63
  It ensures to a greater extent the maintenance of a company’s credit standing and provides
for such emergencies as strikes, floods, fires etc.
 It permits the carrying of inventories at a level that would enable a business to serve
satisfactorily the needs of its customers.
 It enables a company to extend favorable credit terms to customers.
 It enables a company to operate its business more efficiently because there is no delay in
obtaining materials etc. because of credit difficulties.
 It enables a business to withstand periods of depression smoothly.
 There may be operating losses or decreased retained earnings.
 There may be excessive non-operating or extraordinary losses.
 The management may fail to obtain funds from other sources for purposes of expansion.
 There may be an unwise dividend policy.
 Current funds may be invested in non-current assets.
 The management may fail to accumulate funds necessary for meeting debentures on
maturity.
 There may be increasing price necessitating bigger investments in inventories and fixed
assets.

When working capital is inadequate, a company faces the following problems:

 It is not possible for it to utilize production facilities fully for the want of working capital
 A company may not be able to take advantage of cash discount facilities.
 The credit-worthiness of the company is likely to be jeopardized because of the lack of
liquidity.
 A company may not be able to take advantages of profitable business opportunities.
 The modernization of equipment and even routine repairs and maintenance facilities may
be difficult to administer.
 A company will not be able to pay its dividends because of the non-availability of funds.
 A company cannot afford to increase its cash sales and may have to restrict its activities to
credit sales only.
 A company may have to borrow funds at exorbitant rates of interest.

64
  Its low liquidity may lead to low profitability in the same way as low profitability results in
low liquidity.
 Low liquidity would positively threaten the solvency of the business. A company is
considered illiquid when it is not able to pay its debt on maturity. It must be wound up
under section 433 of the companies’ act, 1956, upon its inability to pay its debt.

DANGERS OF EXCESSIVE WORKING CAPITAL

Too much working capital is as dangerous as too little of it. Excessive w

Working capital raises the following problems:

 A company may be tempted to overtrade and lose heavily.

 A company may keep very big inventories and tie up its funds unnecessarily.

 There may be an imbalance between liquidity and profitability.

 A company may enjoy high liquidity and, at the same time, suffer from low profitability.

 High liquidity may induce a company to undertake greater production which may not have
a matching demand. It may find itself in an embarrassing position unless its marketing
policies are properly adjusted to boost up the market for its goods.
 A company may invest heavily in its fixed equipment which may not be justified by actual
sales or production. This may provide a fertile ground for later over-capitalization.

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 CASH MANAGEMENT

Cash management is one of the key areas of working capital management. Apart from the fact
that it is the most liquid current assets, cash is the common denominator to which all current assets
can be reduced because the other major liquid assets, i.e. receivables and inventory get converted
into cash

Objectives of Cash Management:

The basic objectives of cash management are two:

 To meet the cash disbursement needs (payment schedule}

 To minimize the funds committed to cash balances.

Meeting the payment schedule:

A basic objective of cash management is to meet the payment schedule, i.e. to have sufficient
cash to meet the cash disbursement needs of a firm. The advantage of adequate cash is to prevent
insolvency.

 It helps in fostering good relationship with the trade creditors and suppliers of raw
material.
 A trade discount can be availed business opportunities within the due date.
 To take advantage of favorable business opportunities

Minimizing funds committed, to cash balances:

The second objective of cash management is to minimize cash balance. A high level of cash
balance will ensure prompt payment together with all the advantages. But it also implies that large
funds will remain idle. A low level of cash balance means failure to meet the payment schedule.
The main of cash management should be to have an optimal amount of cash balance.

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FUNCTIONS OF CASH MANAGEMENT

Cash Management functions are intimately, interrelated and intertwined Linkage among
different Cash Management functions have led to the adoption of the following methods for
efficient Cash Management:

Use of techniques of cash mobilization to reduce operating requirement of cash

Major efforts to increase the precision and reliability of cash forecasting.

Maximum effort to define and quantify the liquidity reserve needs of the firm.

Development of explicit alternative sources of liquidity

Aggressive search for relatively more productive uses for surplus money assets.

The above approaches involve the following actions which a finance manager has to perform.

 To forecast cash inflows and outflows

 To plan cash requirements
 To determine the safety level for cash.
 To monitor safety level for cash
 To locate the needed funds
 To regulate cash inflows
 To regulate cash outflow
 To determine criteria for investment of excess cash
 To avail banking facilities and maintain good relations with banker

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 INVENTORY MANAGEMENT

The other major current asset in inventory. The term inventory refers to the stock pile of the product a
firm is offering for sale and the components that make up the product. In other words, inventory is
composed of assets that will be sold in future in the normal course of business operations. The assets
which firms store as inventory in anticipation of need are:

 Raw materials.
 Working progress.
 Finished goods.

The raw materials inventory contains items that are purchased by the firm from others
and are converted into finished goods through the manufacturing process. The work in progress
inventory consists of items currently being used in the production process. They are normally
partially or semi-finished goods that are at various stages of production in a multi-stage production
process. Finished goods represent final or completed products which are available for sales. The
inventory of such goods consists of items that have been produced but are yet to be sold.

Inventory as a current asset, differs from other current assets because only financial managers are
not involved. Rather, all the functional areas, i.e. Finance, Marketing, production and purchasing
are involved.

The job of the Finance manager is to reconcile the conflicting viewpoints of the various
functional areas regarding the appropriate inventory levels in order to fulfill the overall objectives
of maximizing the owner’s wealth. Thus inventory management like the management of other
current assets should be related to the overall objective of the firms.

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 RECEIVABLES MANAGEMENT

The basic strategy to reduce the operating cash requirements of a firm is to achieve or
accelerates the collection of receivables so as to reduce the operating cash requirements ofirm, In
order to reduce the average collection period. The receivables represent an important an important
component of the current assets of a firm.

The term receivable is defined as debt owned to the firm by customers arising from sale of
goods or services in the ordinary course of business. When a firm makes an ordinary sale of goods
or service and does not receive payment, the firm grants trade credit and creates accounts which
would be collected in the future. Receivables management is also called trade credit management.
Thus the objective of receivables management is to promote sales and profits until that point is
reached where the return on investment in further finding of receivables is less than the cost of
funds raised to finance the additional credit.

The major categories of costs associated with the extension of credit and accounts receivable are

 Collection cost.
 Capital cost.
 Delinquency cost.
 Default cost.

Benefits: Apart from the costs another factor that has a bearing on accounts receivables
management in the benefit emanating from credit sales. When firms extend trade credit, i.e. invest
in receivables, they intend to increase the sales level. A firm may grant trade credit either to
increase sales to existing customers or attract new customers. The motive for investment in
receivables is growth – oriented, and protects its sales retention. The extension of trade credit has
a major investments in receivables will produce higher sales. The Accounts Receivables
Management should aim at a trade-off between profit and risk.

69
 DATA ANALYSIS AND INTERPRETATION

Working Capital Management is concerned with the problems that arise in attempting to manage
the current assets, the current liabilities and the inter-relationship that exists between them. The
term current assets refers to those assets which in the ordinary course of business can be, or will
be, converted into cash within one year without disrupting the operation of the firm. The major
current assets are cash, marketable and inventory. Current liabilities are those liabilities which are
intended at their inception to be paid in the ordinary course of business. Within a year out the
current assets of the earnings of the concern. The basic current liabilities are accounts payable,
bills payable bank overdraft and out standing expense.

The interaction between current assets and current liabilities is therefore the main them of
the theory of management of Working Capital Management.The calculate Working Capital
Management the data is collected from the Varun Motors Pvt. Ltd. for the year 2004-2009.

The major source of Working Capital Management finance for Varun Motors Pvt. Ltd is the banks
the follows banks provide Working Capital Management requirement of company.

1. State Bank of India

2. Andhra Bank

3. Indian Bank

There is a consolation arrangement between these bank and a lend bank in the consolation
approach would finance the Working Capital Management needs of the Varun Motors Pvt. Ltd.
The lend bank offer all necessary formalities will release the initial requirements of the company
and thereafter it obtains reimbursement from the member bank to the extent of their shares in
advance paid to Varun Motors Pvt. Ltd.

70
 WORKING CAPITAL MANAGEMENT IN VARUN MOTORS PVT. LTD.

The Company takes in to the Account current Assets Current liabilities for the purpose of
calculating the Working Capital Management.

Working Capital Management = Current Assets – Current Liabilities

The following table shows the Working Capital Management in 2013-18.

Rs. In Lakhs
Working Capital Management

CURRENT
CURENT WORKINGCAPITAL
YEAR LIABILITIES
ASSETS MANAGEMENT
2013-14 8152.24 10831.8 2679.56

2014-15 7937.55 10822.63 2885.06

2015-16 13045.18 11425.11 1620.18

2016-17 10557.73 12115.55 1557.82

2017-18 9273.09 11222.58 1949.49

INTERPRETATION:

71
 From the above table it can be seen that the Working Capital Management. The increased
in the Working Capital Management can be attributed to the increase in the operations of the
company. The operation in the net Working Capital Management in the Varun Motors.

RATIO ANALYSIS:

Ratio Analysis is power and widely used tool of Financial Analysis. A ratio is defined as the
systematic use of ratio to interpret the financial statements so that the strengths and weakness of a
firm as well as its historical performance and current financial condition can be determined the
term refers to the numerical of quantitative between two items variables. It means is “ an Indicated
quotient of two mathematical expression.

In financial analysis, Ratio is used as a bench mark for evaluating the financial
performance of a firm. Ratio help to summarize make qualitative judgment about the financial
performance.

LIQUIDITY RATIOS:

Liquidity ratios are important because they measures the ability of a firm in meeting it current/
short-term obligations i.e., within one year. The most common ratios which indicate the extent of
liquidity or like of its are :

1. Current Ratio

2. Quick Ratio

Current Ratio:

Current ratio may be defined as the relationship between current assets and current liabilities. It
measures the firm short-term financial position. A current asset includes cash and those assets,
which can be easily converted into cash within a year. Current liabilities include creditor, bills
payable, short – term loans etc.

CURRENT ASSETS

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CURRENT RATIO= --------------------------------------------- = 2:1

CURRENT LIABILITIES

Current Assets:

• Sundry debtors

Cash & bank balance:

• Bills receivable

• Stock

Current Liabilities:

• Bills payable
• Sundry creditors
• Out standing expenses
Current Ratio
CURRENT CURRENT CURRENT
YEAR ASSETS LIABILITIES RATIO

2013-14 8152.24
10831.8 0.752

2014-15 7937.55
10822.63 0.733

2015-16 13045.18
11425.11 1.141

2016-17 10557.71
12115.55 0.8714

73
 2017-18 9273.09
11222.58 0.8262

INTERPRETATION:

The above Ratio explains the relationship between current assets and current
liabilities it shows and the firms ability to cover its current liabilities through its current assets
Generally 2:1 is considered ideal for a concern i.e., the current assets should be twice the current
liabilities. If the ratio is less than 2 difficulties may be experienced in the payment of current
liabilities. Low of this ratio may lead to current insolvency. So the company has to raise current
position so as to create confidence among inventories. From the financial year 2017-18 the
current ratio has been gradually decreasing that is it was 0.761 in 2015-16 but again increasing
1.141 in 2015-16 and decrease in 2016-17 it is 0.8714.

QUICK RATIO:
In This ratio is calculated by dividing the total quick ratio assets by total current
liabilities. Generally the quick ratio 1:1 is considered to represent satisfactory financial condition.

74
Current assets without stock and prepaid expenses are called quick assets because the assets take
time in realization and also subject to fluctuation in value.

A Company with a low value of quick ratio may really be proposed and playing
its current obligations time by turning over its inventories efficiency.

The calculation of the quick ratio of the corporation from the year 2013-14 to 2017-18 is
tabulated as below.

Quick Assets

Quick Ratio = ---------------------------- = 1:1

Current Liabilities

Quick assets = cash + bank +bills receivable+ debtor

QUICK RATIO

YEAR QUICK CURRENTS QUICK RATIO

ASSETS LIABILITIES

2013-14 1645.47 10831.8 0.1519

2014-15 1566.32 10822.63 0.1447

2015-16 1727.11 11425.11 0.1510

2016-17 2987.44 12115.55 0.4373

2017-18 6727.24 11222.58 0.5999

75
INTERPRETATION:

The Acid Test Ratio is a rigorous measure of a firm’s ability to service short-term liabilities. This
ratio interpretation of the firm generally, speaking an acid test ratio 1:1 is considered satisfactory,
as a firm can easily need all current claims. The quick ratio has been deviating from the year to
year that is it was 0.1525 in 2013-14. Increase 0.151 in 2014-15 then for the decrease to 0.1447 in
and again decrease 0.4373 in 2016-17 and increase 0.5999 in 2017-18.

CASH TO CURRENT LIABILITIES:

Ratio of cash to current liabilities is significant because cash is the most liquid

current assets. Investment is marketable securities and deposits in bank are also considered in this

ratio since they can be converted into cash if required to meet current liabilities. This ratio

indicates the relationship between cash and bank balance with the current liabilities. The ideal

ratio is 0.5:1.

Cash & Bank Balance

Cash to Current Liabilities = ------------------------------------------ = 0.5:1
Current Liabilities

76
CASH TO CURRENT
LIABILITIES:

CASH CASH TO
CURRENT
& LIABILITIES CURRENT
YEAR
BANK BALANCE LIABILITIES

2013-14 373.33 10831.8 0.062

2014-15 184.55 10822.63 0.017

2015-16 555.4 11425.11 0.0486

2016-17 1373.08 12115.55 0.1133

2017-18 4652.54 11222.58 0.4145

INTERPRETATION:

77
 The ratio various from 0.017 to 0.062 generally depend up on the business operations the
ideal Ratio 0.5:1 but there the ration never reaches the ideal Ratio. So the company must increase
the cash and balance to meet the ideal Ratio. If not it will face severe problems to pay the current
liabilities.

NET WORKING CAPITAL RATIO:

The difference between current assets and current liabilities is called Net Working Capital
Management (NWC) is sometimes used as a measures of a firms liquidity. It is considered that
between two firms the one having the larger NWC has the greater ability to meet its current
obligations. This is not necessary so the measure of liquidity is a relationship, rather than the
difference between current assets and current liabilities.

Net Working Capital

Net Working Capital Ratio = --------------------------------------

Net Sales

Net Working Capital Management = Current Assets – Current Liabilities

NET WORKING CAPITAL MANAGEMENT RATIO:

WORKING
CAPITAL
YEAR MANAGEMENT SALES RATIO

2013-14 2679.56 3670.71

0.72

2014-15 3387.65
2885.08
0.85

78
 2015-16 2618.76
1620.18
0.61

2016-17 3094.66
1557.82
0.503

2017-18
1994.49 2570.96 0.7757

INTERPRETATION:

The above table and graphical representation is shown the changes in the net Working Capital
Management ratio. In the year 2012-13 the net Working Capital Management ratio is very low
i.e., 0.463 and the net Working Capital Management ratio is high in the year 2012-13 i.e., 0.92.
The difference between the current assets and current liabilities are influenced the net Working

Capital Management. So the company’s overall net Working Capital Management ratio is
satisfactory.

79
Fixed Assets Turnover Ratio:

The fixed assets turnover ratio measures by efficiency with which the firm is utilizing
its investment in fixed assets. It also indicates the adequacy of sales in relation to the investe4d in
fixed assets. Generally a high fixed assets turnover ratio indicates utilization of fixed assets in
generation sales, while a low ratio indicates inefficient management and utilization of fixed assets.

The calculation of fixed assets turnover ratio of the firm for five years is shown below in tabular
from and with a graphic representation at the end.

Sales
Fixed Assets Turnover Ratio = -----------------------
Fixed Assets

FIXED ASSETS TURNOVER RATIO:

YEAR SALES FIXED ASSETS RATIO

2013-14 3670.71
1147.67 3.19
2014-15 3387.65
1180.30 2.87
2015-16 2618.76
1212.25 2.16
2016-17 3094.66
1474.64 2.09
2017-18
2570.96 1749.57 1.469

80
INTERPRETATION:

The fixed assets turnover ratio shows the efficiency of utilizing the concerns fixed to maximize
is sales/ income operations. If the ratio is normal it shows that the concern is managing its fixed
assets effectively in generating sales/income from operations. By analyzing the above table it is
inferred that the fixed assets turnover ratio IS 4.04 highly in the year 2014-15. In the year 2015-
16 the fixed assets turnover ratio is 1.038 it is low with compare the other years. On the whole the
fixed assets turnover ratio is satisfactory.

81
Debtors Turnover Ratio:

If the firm extends credit to its customers, book debts are created in the firms account and they
are expected to be converted in to cash over a short period of time. So as to measure this period
the debtors turnover ratio is calculated. It shows how quickly the debtors are converted in to cash.
The liquidity of firm’s receivables can be assessed in two ways, debtors or receivables can be
assessed in two ways. Debtors or receivable turnover ratio.

Gross Sales
Debtors Turnover Ratio = --------------------------
Debtors

DEBTORS TURNOVER RATIO:

Rs in lakhs
YEAR Grass Sales DEBTORS RATIO

2013-14 3670.71 1071.70 3.42

2014-15 3387.65 1134.67 2.98

2015-16 2618.76 1243.16 2.10

2016-17 3094.66 1295.79 2.38

2017-18 2570.96 1735.10 1.481

82
INTERPRETATION:

This ratio indicates the number of times debtor’s turnover in each year. Generally the higher
value is acceptable. It depends on the liquidity to a great extent. The higher the value of debtor’s
turnover the more efficient is the management of the credit. From the above table it can be
inferred that the increase in sales the debtors also increasing. The debtor’s turnover ratio 2.62 is
very low in 2013-14 after that ratio has been Increasing. but it is decrease in the year 2017-18 as
1.481. As the debtors turnover and average collection period are inverse proportional. The
decrease in debtors, results and increase in average collection period on the whole the debtor’s
management turnover is satisfactory. 4+

83
STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL
YEAR 2013-2014:

84
INTERPRETATION:

In the 2013-14 current assets cash on hand 10.66 compared to 2015 year is 7.69 the in this years
different between 2.97 decreasing in 2008 year. Cash at bank compared to 2012-13 year increased 198.95.
Current liabilities decreased compared to 2013 year, borrowings, adj. Head due by creditors also increased
interest payable is 269.80 to decreased in 2013 year. Total compared to net Working Capital Management
compared to 2013-14 increased of 430.57.

85
STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL
YEAR 2014-15:

INTERPRETATION:

86
 In the 2014-15 current assets cash on hand 7.69 compared to 2014 is 8.43 the in this years.
Different between 0.74 increased in 2009 year. Stock in hand compared to 2014-15 years in decreased
303.99. Current liabilities decreased compared to 2014 year. Borrowings increased are 518.60. Creditors,
interest payable and other liabilities decreased of 7.10, 103.58, and 272.61 in 2004 year. Total compared to
net Working Capital Management compared to 2014-15 decreases of 205.52.

STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL

YEAR 2015-16:

87
INTERPRETATION:

88
 In the 2015-16 current assets cash on had 8.47 compared to 2011 year. 4.15. In these years.
Different between 4.32 decreased in 2015 year Cash at bank compared to 2015-16 years decreased
is 53.35.current liabilities borrowings and adi.head due by also decreasing is 413.58,173.75.
Creditors, other liabilities increased but interest payable is decreased in 2016 year. total compared
to net Working Capital Management compared to 2015-16 increased of 438.28 overall 2016
Working Capital Management is good

STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL

YEAR 2016-17:

89
 Particulars Year Changes in
Working Capital
2016 2017 Increase Decrease

Current Assets:
Cash on hand 4.17 5.80 1.63 -
Cash at bank 551.25 1367.28 816.03 -
Shares in other institution
Adj. Head due to 155.81 155.81 - -
Debtors 5012.11 6137.21 1125.10 -
Stock on hand 1171.71 1479.62 307.91 -
Not over due interest 1571.22 1392.01 - 179.21
Total 244.43 20.00 - 224.43
8710.68 10557.73
Current Liabilities:
Borrowings
Adj. Head due by 3946.49 4320.83 374.34
Creditors 5104.93 5172.64 17.71
Interest payable 58.94 62.71 3.77
Other liabilities 1702.84 1883.45 180.61
Total 663.65 675.92 12.27
Net Working 11476.85 12115.55
Capital Change 2766.15 1557.82
in Working Capital

Total
1557.85 307.91 1208.33
2766.15

INTERPRETATION:

90
 Current assets cash at bank increased is 816.03 compared to 2015.Year is 551.25 in this
year. Cash on bank compared to 2016-17 years increased is 1.63, stock on hand not over due
interest are decreased to 2016-17 years. Total current liabilities all increases compared to 2016-17.
the total net Working Capital Management increased in the year in 2010 2436.73.

STATEMENT SHOWING THE CHANGES IN WORKING CAPITAL

YEAR 2017-18:

Changes in
Year Working Capital
PARTICULARS
2017 2018 Increase Decrease

Current Assets:
Cash on hand 10.32 7.36 -- 2.96
Cash at bank 443.60 464.51 20.91
Shares in other institutions 155.81 155.81 - --
Adj. Head due to 5931.49 5962.95 31.46
Debtors 2050.73 1735.10 -- 315.63
Stock on hand 762.86 931.31 168.45
Not over due interest 8.20 16.05 7.85 --

Total
9363.01 9273.09

Current Liabilities:
Borrowings
Adj. Head due by --
2266.16 1028.22 --
Creditors
5095.09 71.35 --
Interest payable
66.24 8.25 200.42
Other liabilities
2231.61 3294.38 --
656.08 5166.44
Total
74.49
Net Working Capital 2031.19
Increase in 656.08
Working Capital
10315.18 11222.58

91
 952.17 1949.49

Total 1949.49 952.17 8.25 997.32

INTERPRETATION:

In the 2017-2018 current assets cash on hand are 10.32. Compared to 2013 7.36 the in this
years different between 2.96. increase in 2016 year.cash at bank compare to 2012-2013 year also increase
stock on hand 168.45 ,shares in other institutions decreases of 2013 year compared to 2017 year is no
chang .current liabilities decreases compared to 2007 year, borrowings, adj.head due by also increases.
Creditors, interest payable decreases of 8.25, . Other liabilities also increases in 2017 year. Total compared
to net Working Capital Management compared to 2017-18 increases of 1336.49. Overall 2017 Working
Capital Management is good.

92
 SUMMARY

During the early stages, the automobile industry was not accorded much importance by the
Indian Government. However, the attitude changed during the 1990's. A number of reforms were
initiated in 1991. Liberal policies affected during this period, proved to be beneficial to the
automobile industry. The fiscal measures, tax reliefs and reforms in equity regulations and foreign
exchange led to significant growth in the automobile sector. A reduction in the percentage of
tariffs imposed on exports and a change in the banking policies was instrumental in the expansion
and growth of the banking sector.

Prior to the mid 1990's, the Indian automobile sector comprised of indigenous
companies. The automobile market in India was however, opened upto foreign investors in 1996.
International names like Ford, Hyundai, Toyota, Volvo, Daimler Chrysler and GM Honda were
thus, able to make their foray into the Indian automobile sector. Furthermore, the auto emission
rules issued by the government in recent years ensured that the vehicles manufactured in India,
catered to international standards. At present, the automobiles sector contributes 4 % to the GDP.
About 9.7 million automobiles were manufactured in 2005-2006. Export figures had crossed the
magic figure of one billion during 2003-2004.

A reduction in the tariff imposed on car exports has been effected by the Indian
government. There has also been a removal of the minimum capital investment required from new
investors. Maruti will invest in a new plant in Gujarat which will produce 6 million units a year
which is being done in an effort to make the company the leader in the car market. The company
is having a look at different plants as shown by the Government of India. In another effort, Maruti
will introduce four new cars in the Indian market: The mass-market hatchback, a utility vehicle, a
new and improved Swift, and a unique SX4.

The company plans to release the design of the YE3, the hatchback by June-July 2011
while the car will actually be shown in the Auto Expo 2012. The company plans to design the YE3
without any involvement of Suzuki which is a major feat since most of its cars have been designed
in collaboration with Suzuki in the past The YE3 will be a four-door, four seat hatchback and will
be available in a 600-800cc engine and a five speed manual transmission.

93
 The company also plans to launch the Maruti R3 under a different name. The Maruti R3 is
a Multi-Utility Vehicle that will come in a Rs.7 lakhs - Rs.9 lakhs ex-showroom price and is a
sixseater compact van strapped with three rows of seats and rear-hinged rear doors. The car will
come in both 1.2 litre K Series engines and a 1.6 litre Variable Valve Timing engine, each of
which have been present in the popular models of Swift and SSX$. The R3 will compare to an

Innova. The company plans to sell it in emerging markets. It will be showcased in the Auto Expo
2012. The company plans to get a diesel engine for the car from Volkswagen.

Maruti will invest in a new plant in Gujarat which will produce 6 million units a year
which is being done in an effort to make the company the leader in the car market. The company
is having a look at different plants as shown by the Government of India.

In another effort, Maruti will introduce four new cars in the Indian market: The
massmarket hatchback, a utility vehicle, a new and improved Swift, and a unique SX4.

The company plans to release the design of the YE3, the hatchback by June-July
2011 while the car will actually be shown in the Auto Expo 2012. The company plans to design
the YE3 without any involvement of Suzuki which is a major feat since most of its cars have been
designed in collaboration with Suzuki in the past The YE3 will be a four-door, four seat hatchback
and will be available in a 600-800cc engine and a five speed manual transmission.

The company also plans to launch the Maruti R3 under a different name. The
Maruti R3 is a Multi-Utility Vehicle that will come in a Rs.7 lakhs - Rs.9 lakhs ex-showroom
price and is a sixseater compact van strapped with three rows of seats and rear-hinged rear doors.
The car will come in both 1.2 litre K Series engines and a 1.6 litre Variable Valve Timing engine,
each of which have been present in the popular models of Swift and SSX$. The R3 will compare
to an Innova. The company plans to sell it in emerging markets. It will be showcased in the Auto
Expo 2012. The company plans to get a diesel engine for the car from Volkswagen.

94
 FINDINGS

 Varun motors established in 1992 with Bajaj Auto Dealership at Visakhapatnam in 1992.
 The sales turnover is 168.03 cr in the year 2017-2018.
 Working capital position has been gradually decreased but though the total current assets
can observed a little increment compared to total current liabilities due to which we can
identify the decrease in working capital.
 The profitability of the varun motors company is 88.37cr(Book Value) in the year 2017-
2018
 Through the Current ratio and Quick ratio it is found that company has a satisfactory
liquidity position in the year 2017-2018 than the previous years.
 It is found that the cash ratio of the firm isless than 0.5:1 during the entire period of study.
 Debtors turnover ratio: It is found that during the current year the debt turnover ratio is at
least (or) we can say that there is lots of lapse in recovery of money from debtors.

95
 SUGGESTIONS

 There is a great need for effective management of working capital in this firm.
 There is no precise way to determine the exact amount of gross or net working capital for
the firm.
 There is a fluctuation in liquidity position of than firm which has be corrected to stablise
this liquidity position.
 The collection from debtors has to be improved or it has to be speeded up in collection.
 There is no specific rule as to how current assets should be financed.
 It is not feasible in practice to finance current assets by short-term sources only.
 Keeping in view the constraints of the company, a judicious mix of short and long term
finances should be invested in current assets. Since current assets involve cost of funds,
they should be put to productive use.

96