CHAPTER – I PROFILE OF THE INDUSTRY
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HISTORY OF TYRES The most important application of rubber relates to the transport sector, of which the tyre Industry consumes over 60% of the total rubber produced. After the invention of the wheel by the Sumerians 5000 years ago it was refined over the ages. In the year 1846, R.W. Thomson invented the predecessor of the pneumatic tyres of the modern age. From there, the tyre industry has grown to be one of the largest industries of today. During the last 20 years tyre has been virtually reinvented with most modern technologies like steel radial tyres, a milestone in the tyre technology. Tyre sector is experiencing a rapid improvement with the advent of newer technologies. A tyre is an annular round shaped container made of elastic material, reinforced by textile materials and tightened by metal rings. Geometrically it is a torus, mechanically it is a pressure container, and chemically a tyre consists of materials from long chain macromolecules usually different types of rubber. A pneumatic tyre is a fabricated structure, which holds air that carries the load of the vehicle with which it is attached to.
INDIAN TYRE INDUSTRY Indian tyre industry is two tier. The Tier-I players (top six tyre companies) account for over 85% of industry turnover containing a well diversified product-mix and presence in all three major segments i.e. replacement market, original equipment manufacturers (OEM’s) and exports. Tier-II companies are small in size, mainly concentrating on production of small tyres (for two/three-wheelers etc.), tubes and flaps and the replacement market. The demand and growth for the industry depends on primary factors like the overall GDP growth, agricultural & industrial production, growth in vehicle demand and secondary factors like the infrastructure development, prevailing interest rates and financing options etc. The truck and bus market is the largest segment of the industry accounting for approx. 70% of industry turnover in terms of value and tonnage - a segment in which Apollo Tyres has maintained the leadership position amongst the industry players for quite a few years. Page | 2
In the year 2005-06, the truck and bus tyres segment volumes witnessed a healthy growth of approx. 8%. Passenger car segment tyres volumes grew by approx. 13% in the year under review. Steep rise in raw material prices with limited pricing flexibility impacted the profit margins of all the players. Consistent rise in major raw materials costs (natural rubber, nylon tyre cord, carbon black, synthetic rubber) have resulted in pressure on the margins of the tyre companies despite good top line growth. In fact some of the major tyre companies are operating at break even situation. Tyre exports are increasing consistently and the industry saw a growth of approx. 9 % in this area in the year under review. The radialisation in the important commercial vehicle segment is still at a mere 2%. This has not really picked up pace. Going forward, we expect it to gather some momentum but still levels of radialisation in this segment are predicted to be around 10% in five years time. The year ahead still looks tough with no respite in the raw material prices. The cost- push continues unabated and with the industry players reluctant to take large price increases, the challenge on profit margins will stay. The story on the demand front though looks good in medium term with the economy continuing to do well.
HIGHLIGHTS The fortune of this industry depends on the agricultural and industrial performance of the economy, the transportation needs and the production of vehicles. While the tyre industry is mainly dominated by the organized sector, the unorganized sector holds sway in bicycle tyres. In the last five years, the industry managed to achieve a compounded annual growth of only 4.40 per cent. However in the last fiscal the industry registered a growth of 7 per cent. Natural rubber constitutes 25 per cent of the total raw material cost of the tyres. The ratio of natural rubber content to synthetic rubber content is 80:20 in Indian tyres, whereas worldwide, the ratio of natural rubber to synthetic rubber is 30:70. Page | 3
KEY INDUSTRY DATA
Industry Turnover: Rs. 20,000 Crores Total No. of Tyre Companies: 43 Industry Capacity Utilization: Estimate: 89% Major Players: Apollo Tyres, Ceat, JK, MRF Commercial Vehicles: approx. 67% by Revenue
GOVERNMENT POLICY Tyre Industry Relicensed since 1987 Export (of tyres and tubes) freely allowed Import (of new tyres and tubes) freely allowed since 2001 except
(Radial Tyres), which is in the Restricted List from 24th Nov. 2008 onwards. Import Policy for Used / Retreaded tyres: Restricted Since April, 2008
FUTURE OUTLOOK The tyre industry in India is truly globalised with imports and exports showing rapid increase. On the raw material front too, imports and domestic sourcing are at comparable levels. Global players have started setting up manufacturing base in India to take advantage of the growing opportunities in the domestic market both in terms of sales as well as costs. Noticeably higher spending on infrastructure is likely to continue to have a direct consequence on tyre demand in the country for commercial applications. For the passenger car segment too, higher disposable incomes and more motorable roads will lead to higher levels of personal transportation.
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INTERNATIONAL MARKET The industry, already bogged by over capacity, is facing a severe threat of dumping of cheap tyres by South Korea. Under the Bangkok agreement, signed between India and South Korea in 1976, import of tyres from the latter into India would attract a concessional duty of 33 per cent as against the normal tariff of 40 per cent. Two years ago, the industry estimated the growth in the passenger car radial demand at 20 per cent per annum. However, the auto recession has hit them badly. But South Korea made a killing by dumping cheap car radial tyres and walked away with 11 per cent of the tyre market. Another threat to the industry is the price of its raw materials, most of which are petroleum by-products. Carbon, synthetic rubber and nylon tyre cord are offshoots of petrochemicals. Thus, the future of the industry will swing with the supply of crude oil. The biggest threat, however, is yet to fully materialize. It will be from global majors like Bridgestone and Michelin, which control 36 per cent of the global tyre market. These players have set up their bases in Southeast Asia and the slump of the markets in this region, coupled with the vast growth potential of the Indian market, is beckoning them towards India. Bridgestone has tied up with ACC for a 100 per cent radial tyre unit and Michelin is also marketing its products through retail outlets. The industry is driven more by volumes than by margins and each of the big five in the global tyre industry Continental, Michelin, Goodyear, Pirelli and Bridgestone generate an annual tyre production equivalent to the total demand of the Indian market. These MNCs have deep pockets and can easily withstand losses for 2-3 years. Their financial muscles also permit them to invest in R&D, which is beyond the reach of the average Indian tyre manufacturer. The Indian manufacturers are looking at increasing their global footprints. Apollo is undertaking an expansion plan at its Dunlop plant in South Africa. Similarly, JK Tyres & Industries has acquired a Mexican company Tornel. It has also entered into a manufacturing agreement with Chinese manufacturers to sell JK-branded tyres in the export markets.
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CHAPTER – II COMPANY PROFILE
• MRF Tyres • Apollo Tyres Ltd • CEAT Tyres Ltd
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MADRAS RUBBER FACTORY
COMPANY PROFILE MISSION • To be the largest most profitable Tyre company in India. • To retain # 1 Position in Truck and Bus segment and to be amongst Top 2 in all 4 wheelers Tyre segment. • To make Truck/Bus Radial operations Profitable and Retain Leadership in the passenger Radial Market. • To be the largest Indian Tyre exporter continues to be a significant player in the world in the truck Bias segment. • To be a customer obsessed company. • To excel as a value driven organization. • To be the most preferred Tyre Brand in India.
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THE TIMELINE (1946-2008) 1946 - A young entrepreneur, K. M. Mammen Mappillai, opened a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai). 1949 - Although the factory was just a small shed without any machines, a variety of products, ranging from balloons and latex-cast squeaking toys to industrial gloves and contraceptives, were produced. During this time, MRF established its first office at 334, Thambu Chetty Street, Madras (now Chennai), Tamil Nadu, India. 1952 - MRF ventured into the manufacture of tread rubber. And with that, the first machine, a rubber mill, was installed at the factory. This step into tread-rubber manufacture, was later to catapult MRF into a league that few had imagined possible. 1955 - MRF soon became the only Indian-owned unit to manufacture the superior extruded, non-blooming and cushion-backed tread-rubber, enabling it to compete with the MNC's operating in India at that time. 1956 -The quality of the product manufactured was of such a high standard that by the close of 1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So effective was MRF's hold on the market, that the large multinationals had no other option but to withdraw from the tread rubber business in India.
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1960 - The Company was incorporated as a private limited company on 5th November. The Company Manufacture automobile, aircraft, cycle tyres and tubes in collaboration with the Mansfield Tire & Rubber Co., Mansfield, Ohio, U.S.A. The tyres are sold under the trade name Masnfield Tyres (MRF). The Company also produces other industrial products made of rubber like conveyer belt, hoses etc. It took over the entire business of the Madras Rubber Factory as a going concern as from 16th November, for a consideration of Rs 25 lakhs. 1961 - The Madras Rubber Factory Private Limited was converted into a public company on 1st April, and additional capital was issued in order to start the manufacture of automobile tyres and tubes in collaboration with the Mansfield Tire & Rubber Co., Mansfield, Ohio, U.S.A. The Company was given permission to export tyres having Mansfield trade-mark to all world markets except U.S.A. and Canada. - 2,49,650 shares allotted without payment in cash. 350 shares subscribed for by the signatories to the Memorandum of Association. 2,50,000 shares reserved and allotted directors, etc. 5,00,000 shares issued to public in April 1961. The balance 2,50,000 shares allotted to collaborators as payment for machinery. 1962 - The main plant for production of tyres and tubes were commissioned on 4th December. 1963 - Nylon Hot-Stretch Unit of the latest design was commissioned in November. - 6,25,000 Right Equity shares offered at par in the proportion 1:2.
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1964 - With the commissioning of the main plant in 1964, MRF also made progress in the export of tyres. An overseas office at Beirut (Lebanon) was established to develop the export market, and it was amongst India's very first efforts. This year also marked the birth of the now famous MRF Muscleman. 1967 - MRF became the first Indian company to export tyres to USA - the very birthplace of tyre technology. 1970 - In March, 5,62,500 bonus equity shares issued in the proportion 3:10. 1973 - MRF scored a major breakthrough by being among the very first in India to manufacture and market Nylon tyres. 1975 - During September, 12,18,714 bonus shares issued in proportion 1:2. (Only 12,18,689 shares were taken up). 1978 - The Company finalised a technical know-how collaboration with B.F. Goodrich Co., U.S.A., which became fully operative in early 1980-81. This agreement was revalidated for further five years. 1979 - The Masfield Tire & Rubber Co., U.S.A. offered for sale out of its holding 3,74,250 No. of Equity shares of Rs 10 each of the Company at a premium of Rs 4 each as follows: 3,63,786 shares as rights to the existing shareholders in the proportion 1:8 and 10,464 shares to the employees of the Company. Page | 10
1980 - The Company crossed several milestones in its history. It went into technical collaboration with BF Goodrich Tire Co., USA in the year. The name of the Company, Madras Rubber Factory Ltd.was changed to MRF Ltd in the year. 1981 - Mansfield Tire & Rubber Co. of U.S.A., offered for the their Balance shareholding of 3,55,537 No. of Equity shares of Rs 10 each in the Company at a premium of Rs 4 per share as follows: 3,29,587 shares to the existing resident Indian shareholders and non-resident Indian shareholders (on non-repatriation basis) in proportion 1:10 and 25,950 shares to the Indian employees, business associates and dealers of the Company. - 2,00,000 No. of Equity shares allotted in Feb. 1982 to IFCI at a premium of Rs 5 per shares on conversion of loans. 1983 - The Company finalised a technical collaboration agreement with M/s. Marangoni TRS SPA, Italy for the supply of know-how for the manufacture pre-cured tread rubber for retreading industry. 1984 - Sales crossed INR two billion. MRF tyres were the first tyres selected for fitment onto the Maruti Suzuki 800 - India's first small, modern car. 1985 - A letter of intent was obtained for the manufacture of conveyor beltings and hoses in collaboration with Industiral Pirelli SPA, Italy. Plans were also on hand to go in for a joint venture with the aero tyre division of B.F. Goodrich & Co.,for retreading and subsequently for manufacturing aircraft tyres.
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1986 - The Company issued 15% non-convertible debentures of Rs 100 each (II Series) for Rs 8 croes as rights to the existing shareholders to Raise finances for modernisation of the Company. Under Cumulative Interest payment scheme, these debentures are redeemable in 3 annual Instalments of Rs 35 each commencing on 8th May, 1993 at a premium of 5% in the first instalment. Under the non-cumulative interest payment scheme,the debentures are redeemable in five equal annual instalments of Rs 20 each comencing from 8th May 1991 at a premium of 5% which will be paid on 8th May, 1993. 1987 - (18 months), The Company obtained MRTP clearance and a letter of intent for the manufacture of pre-cured tread rubber upto 6,000 tonnes per annum by using indigenous technology developed by the Company.MRTP clearance was also obtained for setting up a new plant at Tada in Andhra Pradesh for manufacrure of 1.5 million number of tyres and tubes per annum. - The Company entered into a collaboration agreement with Vapocure Of Austraia to manufacture polyurethane paint formulations that can be rapidly cured at room temperature and would also help in the manufacture of shatterproof glass. The plant with an installed capacity of 10,000 tonnes per annum was being set up at Gummidipoondi in Tamil Nadu. - `Funskool (India), Ltd. and `Crystal Investment and Finance Co. Ltd.' became subsidiaries of the Company. Funskool (India), Ltd. Was promoted in collaboration with Hasbro International, U.S.A., the World's largest toy makers. 1988 - The MRF Pace Foundation was set up, with international pace bowler,Dennis Lillee as its Director. Not long thereafter, pace bowlers rained at the Foundation were selected for the Indian Cricket Team.
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1989 - The Company was identified as `Star Exporter', a status that enables the company to get priority treatment in several areas concerned with customs, RBI, etc. - Aero tyre division of B.F. Goodrich Co., USA was taken over by Michelin Cie of France. - Government approved the technical collaboration with Uniroyal Goodrich Tire Co., U.S.A., a subsidiary of Michelin Cie., France, For imparting latest technology for bias ply/radial aircraft tyres for a period of 5 years. 1990 - The Aruna Leathers & Exports Ltd. was amalgamated with the Company.As per the scheme one equity share of Rs 10 each of MRF Ltd. was allotted for every 10,000 shares of Rs 10 each fully paid-up held in ALEL. Accordingly, 25 equity shares were allotted to the erstwhile shareholders of ALEL. - The Company introduced `Vapocure' colours in the market. - (6 months), the Company privately placed 15,00,000 - 14% non-convertible debentures of Rs 100 each (III Series). The debentures are redeemable - at a premium of 5% in three annual instalments of Rs 35 each commencing from 31st July, 1997. - The Company privately placed with SBI Mutual Fund 10,00,000 14% debentures (IVth Series) which are redeemable at a premium of 5% on 26th June, 1998. - During the year 5,00,000 - 14% debentures were also privately placed with Infrastructure Leasing & Financial Services, Ltd. These debentures are redeemable in three annual instalments at a premium of 5% commencing from 23rd July, 1997.
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1991 - The Company promoted a new Company viz. MRF International, Ltd., in view of the tremendous growth potential in the export market. - 3,85,000 No. of equity shares issued to (prem. Rs 242 per share) to the foreign collaborators M/s. Asia Trading Services, Hongkong. 1992 - The Company has formed a new Company, viz., MRF INTERNATIONAL LIMITED and the Company has received the certificate of commencement of business. 1993 - K. M. Mammen Mappillai was awarded the Padmashri Award of National Recognition for his contribution to industry - the only industrialist from South India to be accorded this honour. MRF also became the first tyre company in India to cross the INR 10 billion mark. In addition, the company was voted by the Far Eastern Economic Review, as one of the ten leading Corporate Groups in India and a Leader in Asia, and by readers of the A & M magazine, as one of India's most admired Marketing Companies. 1995 - The Company has received the Top Export Award for the year from All India Rubber Industries Association. 1996 - The Company has received an award from CAPEXIL - Certificate of Merit based on the export performance for the year. - The Far Eastern Economic Review Award was presented to MRF for the fourth year in succession in recognition of excellence.
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1997 - MRF Ltd has been assigned a credit rating of `PR1+' (superior) for its proposed Rs 100 crore commercial paper (CP) programme by Credit Analysis and Research Ltd (CARE). - MRF is setting up a new plant in Pondicherry for the production of radial tyres. - The company set up the Arakonam plant in Chennai to produce bicycle tyres and tubes. - MRF began manufacturing tyres and tubes in technical collaboration with Mansfield Tire and Rubber Company, USA. MRF has launched Nylogrip Zapper, a high performance tyre for new generation bikes. - The company tied up with Uniroyal Goodrich Tire Co. of USA, a subsidiary of the French Tyre giant Michelin, which held 9.8 per cent stake in the company. 1998 - MRF Tyres has signed an OEM (original equipment manufacturer) alliance with Siel Honda Motors and Hindustan Motors. - MRF has launched a market sampling operation for the MRF Zigma. 1999 - MRF Ltd has decided to set up more such clinics in Northern and Western cities. - The Company has entered into agreements with the Depositories viz., National Securities Depository Ltd. [NSDL] & Central Depository Services (India) Ltd. - AIRIA Highest Export Award was given in recognition of our outstanding export performance in respect of Auto Tyres & Tubes during the year. Page | 15
2000 - The Company has set up shop in Dubai to target markets in the UAE as part of its export thrust. - MRF has launched a steel-belted premium radial tyre variant called `MRF ZVTS'. 2002 -MRF Tyres Ltd sees slump in commercial vehicle tyre market and passenger car growth has also declined. -High court dismisses the writ petition filed by MRF Employees Union challenging the order of dismissal of a worker, who was the secretary of the union. -Advertising Standard Council of India Quashed the objection raised by MRF by upholding J K Industries claim of being India's Number one tyre maker in the four wheeler segment. -MRF Ltd has obtained the 'Outstanding Corporate Sports Initiative' award from the Federation of Indian Chamber of Commerce and Industry. 2003 -MRF and Bridgestone are ranked highest in a tie for the second year in a row in customer satisfaction with original tries according to JD Power Asia Pacific. -Shri K.M. Mammen Mappillai, Chairman and Managing Director expired on march 2nd. -Mr.C.D Khanna has ceased to be the Director of the company. And Mr. K S Narayanan has resigned from the board of MRF. -Mr.N Kumar and Mr Ranjit Issac Jesudasen have been appointed as the directors of the company. - Mr K S Narayanan ceased to be director of the Company with effect Page | 16
from April 17, 2003, consequent to his resignation from the Board of Directors. -Mrf Ltd. has informed the Exchange that at its meeting held on December 19, 2003 the BOD have re-designated Jt. Managing Director Mr. Arun Mammen as Managing Director of the Company w.e.f April 01, 2004. 2004 -MRF Ltd. has informed that Mr Ravi Mannath has been appointed as Additional Company Secretary of the Company w.e.f. January 05, 2004. -MRF received the highest rankings in the study in four of the five factors determining overall satisfaction with tyres appearance, durability, traction and handling. - MRF Tyres is the biggest consumer of natural rubber in India during 2002-03 -Ties up with Maruti Udyog to boost motorsports in India 2007 -MRF Ltd launches premium truck tyre Super Lug 50-FS.
The important raw materials of mrf tyres are:• • • • • • •
Natural Rubber Synthetic Rubbers. Carbon Blacks Process Oils Chemicals Nylon and Steel Tyre Cords. Copper coated Steel Wires etc.
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HUMAN RESOURCE MANAGEMENT The main functions of HR Dept- of MRF are • • • • • •
Recruitment and Selection Training & Development Performance Appraisal Implementing Incentive Schemes Co-Ordinating among different departments. Maintenance of Industrial Relationship.
PRESENT BOARD OF MANAGEMENT Name K M Mammen K M Philip Ashok Jacob Vijay R Kirloskar Ranjit I Jesudasen Salim Joseph Thomas
Designation Chairman and Managing director Whole Time Director Director Director Director Director
Name Arun Mammen K C Mammen V Sridhar N Kumar Sanjay Sharad Vaidya
Designation Managing Director Director Director Director Director
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WORKING OF THE COMPANY During the year under review, the company achieved the following financial results: (Rs.Crore) 2007-2008 Total Income Profit before tax Provision for taxation Net Profit
(Rs. Crore) 2006-2007
5756.35
5060.92
211.39
260.96
66.83
89.18
144.56
171.78
INDUSTRIAL RELATIONS Overall, the industrial relations in all our manufacturing units have been harmonious as well as cordial. Both production and productivity were improved and maintained at desired levels. The Management Discussion and Analysis Report gives an overview of the developments in human resources/industrial relations during the year.
EXPORTS Over the years, export sales and marketing activities were primarily focused in a few core markets identified with potential to grow. This has greatly helped in a better understanding of market specific requirements, changes taking place in demand patterns and therefore helped in offering solutions and innovative products tailor-made for specific market segments. The year 2007-08 surely saw some very volatile raw material prices due to steep crude oil price hikes. This has definitely forced the need Page | 19
for frequent price corrections in the market which was unusual. It will also be prudent to note that competition has been continually getting stiffer from China, especially in truck radials. The MRF Ltd India has a distribution network of more than 2,500 distributors throughout India as well as having offices in Bangladesh, the United Arab Emirates, and Vietnam. Exports, however have been able to maintain the support of its strong worldwide distribution network and maintain its share of volumes and revenues in most product segments and markets. During the last year, the company achieved an export turnover of Rs. 497.22 Crore for the year ended 30th September, 2008 as against Rs. 492.34 Crore for the previous year.
PROSPECTS FOR THE CURRENT YEAR Towards the end of accounting year 2007-08, we saw the beginning of an unprecedented global financial crisis. The impact has been so vast that normalcy may be restored only after a significant period of time. This global crisis has caused a temporary recession in the automobile industry but in the long run the automobile industry growth is predicted to continue. While the global markets are facing a recession, your company still expects a nominal growth in the domestic market. High prices of natural rubber as well as crude continues to be a matter of concern and needs to be watched closely. The profitability of tyre companies has a correlation to key raw materials like rubber and crude which account for approximately 70% of costs. There is a respite in prices of key raw materials. However, the future remains uncertain. Liquidity and high interest costs is another area of concern and we hope that necessary steps will be taken by the government and Reserve Bank of India to increase liquidity in the system. The steep increase in the inflow of imported tyres, especially from China, is a matter of concern and we hope that the government would take adequate measures to ensure a level playing field In order to remain competitive, the company is focusing on cost reduction and cost optimization process across the plants.
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DIRECTOR’S RESPONSIBILITY STATEMENT In compliance with the provisions of Section 217 (2AA) of the Companies Act, 1956, your Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; (ii) They have, in selection of the accounting policies, consulted the statutory auditors and applied them consistently making judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period; (iii) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (iv) the annual accounts have been prepared on a going concern basis.
SUBSIDIARIES The Ministry of Company Affairs, Government of India, vide its letter NO.47/540/2008-CL-III dated 05-09-2008, in exercise of its powers under Section 212(8) of the Companies Act, 1956, granted an exemption to the company from the provisions of Section 212(1) of the Companies Act, 1956, with regard to attaching the balance sheet, profit & loss account etc., of the subsidiaries for the year ended 30th September, 2008, since the consolidated financial statement presented by the company includes the financial information of the subsidiaries. In view of this, the annual reports of the subsidiary companies have not been annexed. The annual accounts of the subsidiary companies along with the report of the directors and auditors thereon and all related detailed information will be made available to investors of the company on request and will also be kept open for inspection at the registered office of the company Page | 21
RECENT AWARDS -During the year, we have received AIRIAs Top Export Awards (Auto tyre sector) for 2007-2008. - The Company has received an award from CAPEXIL - Certificate of Merit based on the export performance for the year 1996. -AIRIA Highest Export Award was given in recognition of our outstanding export performance in respect of Auto Tyres & Tubes during the year 1999. -MRF was ranked highest in customer satisfaction along with multinational Bridgestone in a study conducted by JD Power Asia pacific for two consecutive years 220 and 2003. -The Company has received the Top Export Award for the year from All India Rubber Industries Association for the year 1996.
COMPETITORS • • • • • • •
Apollo Tyres MRF3 krishna Ind Ceat JK Tyre & Ind PTL Enterprises TVS
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SWOT ANALYSIS STRENGTHS: It has been six decades since it has been in the market. It is one of the strongest and the oldest tyres company in India. It has an edge over most of the another companies as it also
deals with airplanes tyres. Being the star exporter since 1989, it enjoys a lot number of
benefits in exports. Mrf tyres provides overall satisfaction for tyres appearance,
durability, traction and handling. Its constant new innovations to rule the market.examples are nylogrip zapper for bikes,zigma , steel belts,premium radial tyre variantmrf-zvts. Its tie ups are its another advantage to have a strong hold in the market.some of them are uniroyal good rich(U.S),siel Honda,Hindustan motors , Mansfield,Ohio,U.S(one of the oldest tie ups. The company’s marketing is good. It has reached all the places
nation wide and a lot number of the places abroad..( The Company has set up shop in Dubai to target markets in the UAE as part of its export thrust.) It’s famous brand ambassadors are surely its assets and one of
the biggest strength in the marketing field. (Sachin Tendulkar, Brian Lara, Steve Waugh)
WEAKNESS It’s been a common notion amongst the customers that the
quality has been degrading. Employee unions.
Lower productivity of labor in comparison to world standards. High cost of raw materials. Page | 23
OPPORTUNITY MRF Tyres to manufacture components for aircrafts
Robust economic growth, particularly vehicle production growth resulting in health demand growth for tyre in the feature. Improved road infrastructure especially on the golden quadrilateral & north-south, cast-west national highway project will result in significant increase in movement of goods & passenger traffic through roads with resultant growth in demand for tyres. Emergence of Indian as a hub for production of small car is expected to give a thrust to auto component & tyre segment.
THREATS Ceat, Apollo Tyres and MRF at 76.71 per cent, 66.96 per cent
and 64.84 per cent, respectively. Faster pace of opening up of the economy will increase import of tyre. Reduction in important duties will lead to high volume of type imports. Multinationals with financial muscle setting do manufacturing facilities in the country. Concessional import tariffs for countries like china & South Korea under regional trade agreements will lead to additional imports.
THE 7-S MODEL FOR ORGANISATIONAL CHANGE Page | 24
This is a management tool designed to analyse and understand the key organisational structures within a company in order to assess its potential for effective change. The model examines seven key areas of the company and the relationships of each of these elements to each other. The elements are grouped into two sub-categories of 'hard elements' and 'soft elements': The hard elements represent un-shifting company traits, those which are relatively stable and simple to define such as company strategy, structure and systems.The soft elements, on the other hand, represent more complex traits of the company which are influenced by culture, environment and individuals. These could be shared values, skills, style and staff. STRATEGY: The company advantage
plan
or
route-map
to
maintain
competitive
Strategies are the actions a company plans in response to or anticipation of changes in its external environment. It also includes purposes, Mission, Objectives, Goals and major action plans and policies. STRUCTURE: Company’s hierarchy. Organizational structure refers to the relatively more durable organizational arrangements and relationships. It prescribes the formal relationship among various positions and activities. Arrangements about reporting relationship how an organizational member is to communicate with other members. What roles he is to perform and what rules and procedures exist to guide the various activities performed by members are all part of the organizational structure.
SYSTEMS: Page | 25
The day-to-day processes and procedures throughout the company. Management information system at mrf as a well-defined information network. They have fully equipped technical information department, which is called as information system group. The most essential function of this department is to make the strategic & operational level information at all times. Every department in this organization has a net work of computerintegrated serves by which the day to day information and data storage is managed efficiently by this group. All the departments namely project and marketing, purchases, quality control stores, finance etc has computers programmed and are interlined via LAN. The information system group is responsible for smooth functioning of all the day-to-day activities, which are computerized in all the departments. These activities include equipment stock order generation, bill of material generation, indent generation, raising purchase orders. Stores management and other production related activities. SHARED VALUES: The core values of the company Values: • Customer driven, • Result oriented with professional work culture. • Growth balanced with environmental protection and enrichment. STYLE: The company leadership style The style if an organization, according to Mckinsey from work refers to the “reporting relationship” between the superiors and he subordinates. It also conveys the flow of communication between them. the company is following the type of “Line and staff” organization.
STAFF: Page | 26
The company's employees and their broad abilities Staffing is the process of acquiring human resources for the organization and assuring that they have the potential to contribute to the achievement of the organization’s goals. It includes selection, placement, training and development of appropriately qualified employees. At MRF for its staff all the facilities arte given. Up gradation work, process, technology etc are doing day by day. Recently all departments are computerized at all levels, so company is giving computer training to all its employees and staff, There is lot of scope and career opportunities in the firm for the staff. SKILLS: The skills and competencies of employees Technical Skills:A technical skill refers to the ability and knowledge in using the equipment, technique and procedures involved in performing specific tasks. At MRF employees, both supervisors and workers, working in all the production related department posses the technical skill such as engineering skills, computer skills, etc. which are needed to handle work related tools, machines and equipments. Human skills consists of the ability to work effectively with other people both as individual and as member of a group, At mrf. employees and staff are expected to have human skills so that they can work cooperatively with one other and build effective teams spirit, which in turn helps in achieving the organization goals.
REGISTERED ADDRESS Page | 27
124, Greams Road ,Chennai (Madras) Tamil Nadu-600006 Tel: 044-28292777 Fax: 044-28295087 Email:
[email protected] Website: http://www.mrftyres.com Explore MRF connections Registrars MRF Ltd. 124, Greams Road Tel: 044-28292777 Fax: 044-28295087 Email:
[email protected] Website: http://www.mrftyres.com
APOLLO TYRES LTD. (ATL) Page | 28
APOLLO TYRES LTD. is currently the 16 largest tyre manufacturer in the world and the second largest in India. It is also one of the fastest growing tyre companies in the world. Apollo currently enjoys the largest market share in heavy commercial vehicle and light truck tyres. For the past few years, Apollo has registered not only the highest sales and turnover growth in the industry but is also by far the most profitable. Innovative marketing practices and cost control at every level have made a considerable difference to the company's bottom line. Apollo Tyres is also the first tyre manufacturer to have obtained an ISO 9001 certification for all its facilities in October 1994. The company believes in maintaining strict quality control standards to enhance customer satisfaction at all times. These have resulted in recognition in terms of awards and certifications for introducing some of the best quality management systems in the industry. Apollo was also one of the few tyre manufacturers to obtain the QS 9000 certification in March 2001.All Apollo products conform to the standards prescribed by the Government of India (DGS&D) and to at least one or more of the following standards: the Indian Defence Ministry (CQAV), the Department of Transport, USA (DOT), the European Economic Commission (ECE), the Saudi Arabian Standards Organization (SASO) and Co venin of Venezuela. BUSINESS ACTIVITY: Manufacture and sale of tyres ALLIED BUSINESSES: Tread rubber for commercial vehicle tyres and distribution of alloy wheels for passenger cars FINANCIAL YEAR: April 1 to March 31 NET SALES TURNOVER : Rs.3002.12 Crores as on March 31, 2006 NO OF EMPLOYEES: Approximately 7,000 PRODUCT RANGE: Truck and Bus Bias, Light Truck Bias and Radial, Passenger Car Radial, Farm Bias and Radial
VISION: “A leader in the Indian tyre industry And a significant global player, Page | 29
Providing customer delight And enhancing shareholder value.” Though Apollo is presently one of the leading tyre companies, the continued success will depend on its future plants. The company is laying steps for increasing production capacity. In the future there is a plan to manufacture tyres with matching colors to the vehicles according to the needs of the customers. CORE VALUES CREATE It means C- Care of Customers R- Respect for Associates E- Excellence through Teamwork A- Always Learning T- Trust Mutually E- Ethical Practices
OBJECTIVES OF APOLLO TYRES LTD The corporate objectives of Apollo Tyres Ltd are as follows.
Employee satisfaction. Customer delight. Revenue growth. Operating margin improvements.
CORPORATE SOCIAL RESPONSIBILITY AND COMMUNITY OUTREACH Page | 30
The War Wounded foundation Apollo Tyres assisted in the establishment of this independent foundation, whose aim is to enable soldiers injured during active duty to pursue an alternative career. The company is one of the key patrons of the WWF and actively encourages war wounded soldiers to become a part of its network of business partners. Apollo Tyres assists interested individuals with initial business training and knowledge of the tyre sector and absorbs them as part of the company's regular dealership network. Currently, over 50 former Indian armed force personnel are Apollo dealers. As part of its giving programme, every second year, Apollo donates light and effective, artificial limbs to worthy soldiers shortlisted by the Foundation in consultation with the Indian Army. These limbs allow former soldiers to be more productive and effective in their daily lives and businesses. Emergency Medical Service In association with the Lifeline Foundation based in Baroda city of Gujarat, Apollo Tyres set up the first Emergency Medical Service or EMS in the city of Baroda. A 24-hour emergency number can be used by any citizen to seek assistance in case of a medical need. The network is connected to all city hospitals with a fleet of ambulances and the facility is available to all residents or visitors to the city. The rescue and medical facilitation work is also carried out on the National Highways in the state. Education and Healthcare Infrastructure In the villages that surround Apollo Tyres' manufacturing facilities, health and education infrastructural support is provided to augment the existing facilities. Apollo plays a lead role in ensuring school buildings, study materials and hardware like computers are available. On a regular basis the company undertakes special activities for the learning and entertainment of the school children. To work towards a healthy community, Apollo Tyres' doctor from the manufacturing unit visits the village every week for consultations and basic medical care. For intensive check-ups referrals are made to the nearby medical facility. From time to time, special eye, cardiac and general health check-up camps are undertaken at these villages for all residents. Page | 31
With an eye on empowering more individuals to become entrepreneurs, regular adult literacy classes are held for the village women. Once this is completed they are encouraged to undergo a skill-based training which could enable them to work out of the home and still being in an income. HIV- AIDS AWARENESS As a corporate Apollo Tyres believes in investing in initiatives which have the ability to have a direct impact on the lives of its stakeholders, while strengthening the company's existence as a business entity. This ensures that all activities are sustainable, measurable and form a core part of its entire business plan. The largest area of work involves awareness and prevention of HIV-AIDS. Three key groups are addressed directly through this programme's on-ground activities. People in the Commercial Vehicle Segment like truck drivers, cleaners, loaders, etc. Apollo has established targeted intervention centres called Apollo Tyres Health Care Clinics outside the capital city of New Delhi, Kanpur in Uttar Pradesh, Coimbatore in Tamil Nadu, Vashi outside Mumbai city and Nagpur in Maharashtra, Udaipur and Jaipur in Rajasthan. Others large trucking centres are being considered for future Clinicsites. These Clinics are run by qualified doctors, counsellors, pharmacists and outreach workers who focus on: • Diagnosis and treatment of STD’s • Behavioral change communication • Condom promotion
Employees: A complete workplace programme caters to awareness creation among all white and blue-collar employees. At all locations, Master Trainers have been trained to facilitate continuous knowledge upgradation and implementation of all on-ground activities.
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Business partners: This is the key vehicle for taking the AIDS awareness and prevention programme to a larger mass of the active working population. Apollo Tyres works with its business partners to assist them in undertaking workplace programmes for their employees. “At Apollo Tyres we believe that our work in the community is an investment and an opportunity, to create a difference in the lives of our stakeholders and customers” – Onkar. S. Knawar (Chairman)
SHARE-HOLDING PATTERN OF ATL
ACQUISITIONS 1995 - Acquired Premier Tyres Ltd. in Kerala. 2006 - January 30, Dunlop South Africa is acquired.
FINANCIAL DATA TURNOVER AND NET PROFITS Page | 33
Apollo Tyres Ltd – Apollo Tyres Ltd- Net Turnover Profits Year Rs. in Crs Year Rs. in Crs 1998-99 19981154.02 31.08 99 1999-00 19991368.75 76.06 00 2000-01 20001458.70 25.42 01 2001-02 20011710.00 42.40 02 2002-03 20022025.10 120.02 03 2003-04 20032314.31 70.42 04 2004-05 20042656.8 67.63 05 2005-06 20053002.12 78.17 06
CURRENT FINANCIAL POSITION Sales from operations during the financial year ended March 31, 2006 amounted to an all time high of Rs. 3,002.12 crore as against Rs. 2,656.81 crore during the previous year, recording a growth of approx.13%. Operating profit, before interest and depreciation, amounted to Rs. 223.92 crore as against Rs. 184.64 crore during the previous year, registering an increase of approx. 21.27%. Net profit, after providing for interest, depreciation, tax and exceptional items amounted to Rs. 78.17 crore, as against Rs. 67.63 crore during the previous year. The strong performance of Apollo is a combination of high growth in sales alongwith enhanced operations management, better working capital management, aggressive marketing and overall cost reduction measures adopted by the Company. During the year, your Company realigned its relationship with Michelin and exited from the Joint Venture Company “Michelin Apollo Tyres (P) Ltd.”, as radialisation in commercial vehicle tyres segment in Indian markets had not reached anticipated levels. The Company Page | 34
recovered almost its entire investment in the JV through sale of its 49% stake back to Michelin. This re-alignment would enable the Company to utilise the available resources better towards other growth opportunities in short to medium term.
TRENDS IN SALES QUANTITY (PRODUCTS) Product/s manufactured/t raded Automobile Flaps
Mar 2001
Mar 2002
Mar 2003
Mar 2004
Mar 2005
16.33 Lakh nos
19.85 Lakh nos
24.35 Lakh nos
28.25 Lakh nos
29.19 Lakh nos
Automobile Tubes
30.68 Lakh nos
32.54 Lakh nos
36.67 Lakh nos
43.83 Lakh nos
53.81 Lakh nos
SWOT ANALYSIS OF APOLLO TYRES LTD. STRENGTHS Continued Market Leadership in the dominant industry segment i.e. Truck / Bus tyres. Global presence with acquisition of Dunlop Tyres International (Pty) Ltd in South Africa. Robust Operation Center for managing IT operations across 140 Locations supported by ERP / Dealer Portal / Information Systems Security Control etc. Presence in technology products in car radial segment. Dynamic & Progressive Leadership. Responsive to changes in market conditions and product profiles. Product innovation and technical superiority. Page | 35
Strong Brand recall in a price sensitive market. Economies of transportation cost on account of closeness to natural rubber growing belt. WEAKNESSES No presence in two/three wheeler segment. Declining profit margins due to raw material cost push. OPPORTUNITIES Continuous thrust in road infrastructure and construction of expressways & national highways. Creation of road infrastructure has given, and will increasingly give a tremendous fillip to road transportation in the coming years. Tyre industry will play an important role in this changing product mix of transport. Leadership position in the commercial vehicle segment will enable the Company to leverage new and related business opportunities. Access to global sources for raw materials at competitive prices due to economies of scale. Steady growth in vehicle production in the immediate future leading to growing demand. THREATS An increase in the flow of tyres from competitive sources like China. Cheaper imports on account of import from countries which are signatories to Regional Trading Agreements (RTA’s). With crude prices scaling upwards, pressure on raw material prices can be expected. Page | 36
Continuous increase in the prices of natural rubber, which accounts for nearly one third of total raw material cost.
MCKINSEY’S 7S MODEL OF APOLLO TYRES STRATEGY: Apollo Tyres Ltd. aims to be the ‘supplier of choice’ for its entire customer base. To achieve this we invest in Research & Development, Technology Enhancement and Quality to ensure the superiority of our offerings in all aspects. We have already commenced on the journey to going beyond being a mere tyre supplier to our consumers to becoming a complete solution provider for all their transportation needs. SHARED VALUES: Transparency by classifying and explaining the Company’s policies and actions to those towards whom it has responsibilities, i.e. maximum possible disclosures without hampering the Company’s and shareholders’ interests. Professionalisation ensures that the management teams at all levels are qualified for their positions, have a clear understanding of their roles and are capable of exercising their own judgement, keeping in view the Company’s interest, without being subject to undue influence from outsiders. Trusteeship brings into focus the fiduciary role of the management to align and direct the actions of the organization towards creating wealth and shareholder value. Corporate Social Responsibility ensures the promotion of ethical values and setting up exemplary standards of ethical behaviour in our conduct towards our business partners, colleagues, shareholders and general public, i.e. abiding by the laws, showing mutual respect and acting with honesty and responsibility. Corporate social responsibility ensures that the Company contributes to society’s overall welfare by Page | 37
undertaking not-for-profit activities, which could benefit all or any of its stakeholders in society. Safeguarding Integrity ensures independent verification and truthful presentation of the Company’s financial position. For this purpose, the Company has also constituted Audit Committee, which pays particular attention to the financial management process.
STYLE: At Apollo Tyres Ltd., corporate governance is all about the processes, which involve direction and control of affairs of the Company in a fashion that ensures optimum returns for the stakeholders. Corporate governance is a broad framework, which defines the way a corporate body functions and interacts with its environment. It is a combination of voluntary practices and compliance with laws and regulations leading to effective control and management of the organization. The company is open, accessible and consistent with communication and shares long-term perspective and firmly believes that good Corporate Governance practices underscore its drive towards competitive strength and sustained performance. Thus, basic Corporate Governance norms have been institutionalized as an enabling and facilitating business process at the Board, Management and operational levels. STAFF: Human resources play a crucial role in the development process of the present economy. Though the exploitation of natural resources, availability of physical and financial resources and international aid play prominent roles in the growth of modern economies, none of these factors is more significant than efficient and committed manpower. Recruitment is done through advertisement and employment exchange. Candidates are called for interview and final decision is with the chief executive. As of now there are no major constraints in attracting the right talent since the organisation is a reputed one and the compensation package is really attractive. Apollo provides training for both managers and workers. Training program for managers consists of both internal and external program. The workers undergo internal training programmes conducted by experts. External training is done by deputation to professional training centers. Page | 38
SYSTEM: The system department is responsible for computerisation of different departments of ATL. The main function of this department, operates and co ordinates all systems in the organization. The simple structure of department facilitates speedy communication flow with in the department.
CEAT Tyres Ltd . COMPANY OVERVIEW CEAT Limited is a tyre manufacturing company based in Mumbai, India. CEAT is an abbreviation for Cavi Electrici Affini Torino. Founded in Italy as CEAT Tyres by Virginio Bruni Tedeschi, the company established its manufacturing in India in 1958 and was sold to Pirelli by Virginio's heir Alberto Tedeschi in the 1970s. The company's Indian division was then taken over by RPG Enterprises in the year 1982 which also got the rights to the CEAT brand and renamed the company as CEAT Limited. Its tagline is "Born Tough". Let’s take a quick glance at the history of the company. • CEAT International was first established in 1924 at Turino in Italy and manufactured cables for telephones and railways. • In 1958, CEAT came to India, and CEAT Tyres of India Ltd was established in collaboration with the TATA Group. • In 1982, the RPG Group took over CEAT Tyres of India, and in 1990, renamed the company CEAT Ltd.
VISION “Ceat will at all times provide total customer satisfaction through products and services of highest quality and reliability.”
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MISSION “To nurture an exciting and challenging work environment with fairness and transparency.”
OPERATIONS CEAT produces over 6 million tyres a year and commands around 14% share of the Indian tyre market. The Company manufactures a wide range of tyres, catering to all user segments. This includes tyres for heavy-duty Trucks and Buses (T&B), Light Commercial Vehicles (LCV), Earthmovers and Forklifts (specialty segment), Tractors, Trailers, Passenger Cars (PC), Motorcycles, Scooters and Autorickshaws. CEAT earns around 65% of its revenue from the T&B segment. The Company currently operates 2 plants in Maharashtra, one in Bhandup and the other in Nasik. It has a robust national network consisting of 33 regional offices and over 3,500 dealers, among which ~75 are exclusive dealers running CEAT Shoppe outlets.
REACH CEAT's solid brand equity has helped it achieve a strong footprint in both the domestic and the international market. It has a presence in over 110 countries. In 2007-08, the Company also became the number one tyre exporter in the country with exports valued at Rs.505 crores.
QUALITY POLICY CEAT is the first tyre company in India to get the ISO/TS 16949 certification, which is a combination of ISO 9000 and QS 9000. It is a quality management system that promotes continuous improvement. It ensures: • The PDCA (Plan, Do, Check and Act) cycle of process approach. Page | 40
• Trim supply chain by preventing defects and reducing waste. • Export to almost all parts of the world. • Fundamental quality management system requirements. • No multiple certification audits. • Customer satisfaction.
HUMAN-RESOURCE MANAGEMENT BOARD OF DIRECTORS R. P. Goenka - Chairman H. V. Goenka - Vice Chairman Paras K. Chowdhary - Managing Director M. A. Bakre A. C. Choksey S. Doreswamy Mahesh S. Gupta H. Khaitan Bansi S. Mehta Hari L. Mundra K. R. Podar MANAGEMENT TEAM Paras Chowdhary Arnab Banerjee K. J. Rao Sunil Sapre Tom Thomas Hundal Singh Rahul Ghatak
-
MD VP - Sales & Marketing VP - Outsourcing CFO (Chief Financial Officer) Executive Director (Technology & Projects) VP-Manufacturing VP- Human Resources
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CORPORATE SOCIAL RESPONSIBILITY (CSR) CEAT's motto is "to positively impact the lives of employees and local communities directly affected by our business." It does this through a series of result-oriented initiatives like: • Providing opportunities for better education, health improvement and employment. • Socio-ecological projects to promote a healthy and safe environment. • Healthcare programmes and camps. • Adopted the Tirat Shate village close to the plant in Nasik, where the Company undertakes various development programmes.
SOCIAL CONTRIBUTION CEAT do this through a series of result-oriented initiatives like: Providing opportunities for better education, health improvement and employment Socio-ecological projects to promote a healthy and safe environment Healthcare programmes and camps
Free Eye Check-up Camp
Kirat Seth Village Page | 42
CEAT have also adopted the Kirat Seth village close to their plant in Nashik, where they have carried out various development programmes. They have also invested in providing basic necessities like fresh drinking water, proper sanitation, and medical facilities. Constant efforts are also toward enhancing income standards by imparting vocational guidance. Women of the village have been trained to make phenol and liquid soap, which is procured by the company’s plant. Other healthcare schemes for the village include regular free eye check-up camps and aids awareness drives.
ACHIEVEMENTS & AWARDS The 2007-08 Raid de Himalayas 2 wheeler Rally was won on CEAT Tyres CEAT was the No.1 in exports amongst all tyre companies in India. (Source ATMA Report 2007-08) CEAT Shoppe wins Best Innovation Award 2007-08. CEAT won the Employer Branding Award for "Excellence in
Training 2007-08" (Awards by the Asia Pacific HR congress) CEAT has adopted a village "Tirad Seth", near Nasik as part of its CSR activities. ICQCC Distinguish award for Quality Circle in 2002 at Lucknow, India NCQC Distinguish award for Quality circle in 2004 at Mumbai,
and in 2006 at Kanpur, India CCQC Mumbai Chapter Distinguish Award for Quality Circle in 2007 RPG Best TQ\M Team Award for CFT in 2005 and 2006 Recognized with RPG BTT Six Sigma Team Award in 2005-06 Winner of RPG Quality award in 2003, 2004 & 2006 Certificate of merit in RPGOE in 2005 Page | 43
100 percent vendors are ISO certified Rated amongst top four auto ancillaries National Exports Award (CAPEXIL) - 13 times Best Exports certificate of merit - 7 times in the last 20 years
PERFORMANCE During 2007-08, CEAT recorded sales of Rs.2603 crores, an increase of about 9% over the previous year. The Company's EBIDTA stood at Rs.288 crores against Rs.153 crores in 2006-07, an increase of about 89%. The Profit After Tax (PAT) of the Company increased from Rs.39 crores in 2006-07 to Rs.149 crores (including an exceptional income of Rs.80 crores) in 2007-08, an increase of about 279%. The Company recorded the highest profit in the last 50 years in 2007-08. At the same time, the Company recorded the highest ever growth in sales and also emerged as the number one tyre exporter in the country. The shares of the Company are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Manufacturing Facilities • 4 Manufacturing plants - 2 in India and 2 in Sri Lanka • 10 outsourcing units for tyres, tubes and flaps • 3 dedicated 2-3-wheeler plants controlled by CEAT
CEAT Bhandup Plant Page | 44
CEAT Nashik Plant
ALLIANCES 2 Wheelers
----------------------------------------------------------------------------------3 Wheelers
----------------------------------------------------------------------------------Passenger
----------------------------------------------------------------------------------Truck
----------------------------------------------------------------------------------LCV
----------------------------------------------------------------------------------Farm Tyres Page | 45
----------------------------------------------------------------------------------OTR Tyres
FINANCIAL DATA Balance Sheet of Ceat
------------------- in Rs. Cr. Mar '04 Mar '05 Mar '06 12 mths 12 mths 12 mths
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves
35 .09 35.09 0.00 0.00 299.34
35.10 35.10 0.00 0.00 261.81
Revaluation Reserves Networth
290.13 624.56
333.23 630.14
Secured Loans
319.52
338.85
Unsecured Loans
150.89
111.78
Total Debt
470.41
450.63
Total Liabilities
1,094.9 7
1,080.7 7
45.68 45.68 0.00 0.00 303.3 2 0.00 349.0 0 291.2 2 126.4 2 417.6 4 766.6 4
------------------Mar Mar '07 '08 12 12 mths mths 45.68 45.68 0.00 0.00 332.9 6 0.00 378.6 4 275.7 6 101.2 4 377.0 0 755.6 4
34.24 34.24 0.00 0.00 465.56 13.45 513.25 265.39 64.63 330.02 843.27
SHAREHOLDING PATTERN Page | 46
Particulars
No. of Holding shares (%) (in Lakhs)
Promoters
43.2
197.1
Corporate Holding
5.8
26.3
Institutions
24.6
112.3
Foreign
8.7
39.0
Public & Others
17.7
81.0
Non-promoter -
SWOT ANALYSIS STRENGTHS Market Leadership in the Truck/ Bus segment of the tyre industry .i.e., around 65% Global presence by exporting tyres in around 110 countries. Presence in technology products in car radial segment. Dynamic & Progressive Leadership. ISO/TS 16949 Certification, which is combination of ISO 9000 and QS 9000. Strong Brand equity in both domestic and international market. Economies of transportation cost on account of closeness to natural rubber growing belt. Robust Operation Center for maintaining operations consisting of 33 Regional Offices and over 3,500 dealers among which 75 Page | 47
are exclusive dealers running CEAT Shoppe Outlets with the help of Dealer Portal / Information Systems Security Control etc. WEAKNESSES Lower productivity standards.
of
labour
compared
to
international
Declining profit margins due to raw material cost push.
OPPORTUNITIES Continuous thrust in road infrastructure and construction of expressways & national highways. Creation of road infrastructure has given, and will increasingly give a tremendous fillip to road transportation in the coming years. Tyre industry will play an important role in this changing product mix of transport. Being number-1 exporter in the country can exploit the market. Leadership position in the commercial vehicle segment will enable the Company to leverage new and related business opportunities. Access to global sources for raw materials at competitive prices due to economies of scale. Steady growth in vehicle production in the immediate future leading to growing demand. THREATS Page | 48
An increase in the competitive at International level from sources like China and South Korea. Import of cheap truck radials in the Indian market from China and South-east Asian countries, With crude prices going high, raw material prices can be expected to increase at faster rate. Continuous increase in the prices of natural rubber, which accounts for nearly one third of total raw material cost.
MCKINSEY’S 7S MODEL ANALYSIS STYLE It conveys the flow of communication between the superiors and their subordinates. It is been said that Ceat Tyres ltd. follows “Line and Staff” organisation. Both downward and upward communication follows the path of formal channel. All the activities of the organisation is communicated from one department to another through formal channel. STAFF At Ceat Tyres ltd. up gradation work, process, technology etc are done by all its staff day by day. All departments are computerized at all levels, so company is giving aggresive training to all its employees and staff. There is lot of scope and career opportunities in the firm for the staff. SKILLS
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Employees and staff are expected to have human skills so that they can work cooperatively with one other and build effective team spirit, which in turn helps in achieving the organisational goals. Technical Skills such as engineering skills, computer skills, etc are needed to handle work related to tools, machines and equipments. SYSTEM Ceat tyres ltd. has fully equipped technical information department which makes the strategic and operational information for the organisation. All the departments such as marketing, purchases, quality control stores, finance, etc are computer programmed and are interlined via LAN. STRUCTURE Ceat Tyres ltd. Maintained decentralized form of organization. It is Being transaction-based, not personality driven. Focused on the long term in compensation and planning. No blurring of the boundary between corporate and personal resources STRATEGY Ceat will at all times provide total customer satisfaction through products and services of highest quality and reliability. To nurture an exciting and challenging work environment with fairness and transparency SHARED VALUES • Customer Sovereignty • People Orientation • Innovation and Entrepreneurship • Transparency and Integrity • Anticipation, speed and flexibility • Passion for superior performance
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CHAPTER III RESEARCH METHODOLOGY
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OBJECTIVE OF THE STUDY Objective includes primary and secondary dataPrimary data is facts and information collected specifically for the purpose of the investigation at hand. Secondary data is facts and information gathered not for the immediate study at hand but for some other purpose. Secondary data has been gathered by others for their own purposes, but the data could be useful in the analysis of a wide range of real property. In general, secondary data exists in published sources. The objective of the study is to: Understand the structure and functions of tyre industry • Understand how the different departments function and the internal activities between them. • To know the strength & weakness of the companies in the industry. • The origination and sustainability of tyre industry. •
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•
To know what it contributes to the country.
The study is to have an exposure into the functioning of the organization and its different departments.
SCOPE OF THE STUDY The study was done during the month of July 2009. The organization selected by me to conduct the study is Tyre Industry.
METHODOLOGY OF THE STUDY The methodology included quantitative and qualitative methodological studies. The study was undertaken by Aashish Jain, Arijeet Jaiswal, Kevin James.
LIMITATIONS OF THE STUDY The Major Limitations are The time constraint was the reason why we can’t do an in depth
study into the organization. The company was reluctant to reveal some official reports and documents as it is kept confidential. Data inconsistency is the reason which may lead to inaccurate information of the industry.
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CHAPTER IV
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COMPARATIVE SWOT ANALYSIS
STRENGTHS MRF Tyres
Apollo Tyres
CEAT Tyres
It has an edge over most of the another companies as it also deals with airplanes tyres
Continued-Market Leadership in the dominant industry segment i.e. Truck / Bus tyres.
Presence in technology products in car radial segment.
Being the star exporter since 1989,it enjoys a lot number of benefits in exports, exporting in more than 75 countries.
Global presence with acquisition of Dunlop Tyres International (Pty) Ltd in South Africa.
Global presence by exporting tyres in around 110 countries.
MRF TYRES, is India's number one tyre producing company in six manufacturing plant across India
Managing IT operations across 140 Locations supported by ERP / Dealer Portal / Information Systems
33Regional Offices and over 3,500 dealers among which 75 are exclusive dealers Page | 55
Security Control etc.
running CEAT Shoppe Outlets.
WEAKNESS MRF Tyres High cost materials.
Apollo Tyres of
CEAT Tyres
raw Less profits as Declining profit material cost is high. margins due to raw material cost push.
Its been a common No presence in notion amongst the two/three wheeler customers that the segment. quality has been degrading.
Lower productivity of labour compared to international standards.
OPPORTUNITIES MRF Tyres
Apollo Tyres
CEAT Tyres
MRF Tyres manufactures components for aircrafts and number of aircrafts are increasing. Emergence of Indian as a hub for production of small car is expected to give a thrust to auto component & tyre segment.
Continuous thrust in road infrastructure and construction of expressways & national highways.
Leadership position in the commercial vehicle segment.
Steady growth in vehicle production in the immediate future leading to growing demand
Being Bus/truck as specialization production exploits the market in great form.
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THREATS MRF Tyres
Apollo Tyres
CEAT Tyres
Concessional import tariffs for countries like china & South Korea under regional trade agreements will lead to additional imports.
Cheaper imports on account of import from countries which are signatories to Regional Trading Agreements (RTA’s).
Import of cheap truck radials in the Indian market from China and Southeast Asian countries, .
Multinationals with financial muscle setting do manufacturing facilities in the country.
An increase in the flow An increase in the of tyres from competitive at competitive sources International level like China. from sources like China and South Korea.
CHAPTER V Page | 57
FINDINGS
MRF Tyres MRF is the market leader among tyre manufacturers in India, with a 24% share in terms of revenues. Its leadership position, coupled with its strong brand recall and high quality, MRF commands the pricemaker status. MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands around 19% market share in the segment. It is the leader in the two/ three-wheeler segment (including motorcycles) and tractor front tyres, and holds second place in the passenger cars and tractor - rear tyres. Exports account for around 12% of the gross sales in MRF. The Company has a distribution network of 2,500outlets within India and exports to over 65 countries worldwide
Apollo Tyres (ATL)
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Apollo Tyres is the second largest player in the Indian tyre industry, with a market share of 22%, in terms of revenues, and the largest player in the T&B segment, with around 22% market share and 82% of its product mix coming from this segment. It also enjoys a strong brand recall. ATL derives 80% of its revenues from the replacement market, where the EBITDA margins are higher; hence, at operating levels, Apollo Tyres has better margins compared to those of its peers. ATL is a strong player in the domestic market, with just 2% of sales coming from exports. CEAT Tyres Ltd CEAT has a 14% market share, in terms of revenues, and is an average player across categories. 68% of its product mix comes from the MHCV segment. Its leading brands in the T&B segment are Lug XL, Mile XL and Rib XL, Secura in two-wheelers and Formula-1 in passenger radials. In terms of profitability, CEAT has lower margins compared to its peers, in spite of deriving 60% of its revenues from the replacement market.
CHAPTER VI Page | 59
CONCLUSION
The industry is definitely set to grow, with an estimated volume growth of 12-14% in 2006-07. Both, OEM and Replacement demand would drive growth, with exports also adding-in. The growing economy and the infrastructure sectors provide the much-needed impetus. However, tyre companies face immense competition, together with price and cost pressures. Pricing pressure, from OEMs because of their high bargaining power and in the replacement market due to huge competition, is a substantial dampener. Companies are now giving emphasis to innovation in product and process technology and to operational efficiencies. However, the continuously rising trend witnessed in the prices of raw materials remains an area of concern. Though the rubber prices have come down from their peaks of Rs 115, to Rs 82 currently, the trend is very volatile. Tyre companies would definitely show improvement in the margins, sequentially, and if prices remain at these levels, profitability would improve. But then, it is highly dependent on the prices of major raw materials like Rubber, Carbon Black, NTC Fabric, SBR and PBR, which are highly volatile. However, with surging automobile sales, if demand for tyres increases without the supply catching up with it, Page | 60
then, prices of tyres are likely to increase. This may provide some benefit to the tyre companies. If we view the financial performance of various tyre-manufacturing companies, most of them are operating at wafer-thin margins and any substantial increase in costs would hurt the business adversely. Also, reviewing the balance sheet, the ROCE and RONW are at very low levels. The industry leader, MRF, has an ROCE of 6.7% and an RONW of 5.5%. Apollo is a little better off, with ROCE and RONW at 12.8% and 14.8%, respectively. Hence, we do not find tyre stocks attractive, from an investment perspective. At current levels, all tyre stocks look fairly valued. One can invest at lower levels, keeping in mind the view on rubber prices. When rubber prices fell from their highs, all tyre stocks performed well on the bourses, giving good returns; nevertheless, they should be looked-at only from a trading perspective. The industry is definitely set to grow, but the huge competition, huge buyer power, pricing inflexibility and cost pressures prove as detriments. Tyre companies are operating at very thin margins and their return ratios are also not attractive. One can look at tyre stocks but only from a trading perspective
CHAPTER VII Page | 61
IMPLICATIONS
IMPLICATIONS A bit more promotional activities could enhance building brand image. Company should try to increase its market share in the radial tyre segment. More atomization should be done so as to reduce the number of workers. Their should be some classes or training arranged for better understanding of SAP. Reaching better horizons by fostering new partnerships. Increase production for increased profits. Initiate major strategies towards empowering dealers. Page | 62
Having strong position in truck and tractor segment, can explore passenger vehicle segment.
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Prasanna Chandra
Financial Management Theory and Practice Tata McGraw Hill publishers (2004)
C.R. Kothari
Research Methodology Methods and Techniques New Age Publishers (2004)
A Prism Solution
Printed at Thomas Press
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List of URL’s Referred •
http://www.ceatyres.com/knowus_com_corporate.html
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http://www.ceatyres.com/knowus_com_vision.html
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http://www.ceatyres.com/knowus_com_achvmts.html
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http://www.ceatyres.com/knowus_oems_alliances.html
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http://www.ceatyres.com/knowus_beyond_cares.html
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http://en.wikipedia.org/wiki/CEAT_Tyres
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http://www.moneycontrol.com/competition/mrf/comparison/MRF
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http://www.moneycontrol.com/competition/mrf/comparison/MRF
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http://docs.google.com/gview? a=v&q=cache:XrQ9hAGGaSwJ:www.pr sindia.org/docs/bills/1180001447/scr1187944991_Tyre_corp.pdf +swot+analysis+on+mrf&hl=en&gl=in
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http://www.mydigitalfc.com/industry/tyre-companies-get-stuck-arut-312
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http://www.mrftyres.com/mrf_exports.html
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http://www.moneycontrol.com/financials/mrf/balance-sheet/MRF
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www.apollotyres.com
• http://www.moneycontrol.com/financials/ceat/balance-sheet/C07
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ANNEXURE MRF Tyres INDIAN AUTOMOBILE component manufacturers and tyre makers are planning to venture into uncharted territory of aircraft components production. Indian-based MRF Tyres, Minda NTS and Sundram Fasteners are moving ahead with plans to supply components to aircraft manufacturers. India’s leading tyre manufacturers MRF, has taken an initiative in this regard. The company is also making tyres for helicopters fore defence services.
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