Indus Motor Co. Final Project-2

Final Project

“Read the name of Lord, Who created man from a clot of blood. Read! The Lord is most Bounteous who taught by pen.”(96:1-4) pen.”(96:1-4)

Indus Motor Company Limited

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Final Project

Final Project On INDUS MOTOR COMPANY LIMITED

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Submitted By M. HASEEB

1662-111001

M.Com (FINANCE) -------------------------------

Submitted To: Registrar

PIMSAT Institute of Higher Education


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Final Project

Final Project On INDUS MOTOR COMPANY LIMITED

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Submitted By M. HASEEB

1662-111001

M.Com (FINANCE) -------------------------------

Submitted To: Registrar

PIMSAT Institute of Higher Education


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INDUS MOTOR COMPANY THIS PROJECT IS SUBMITTED TO PIMSAT Institute of Higher Education FOR THE PARTIAL FULFILMENT OF THE REQUIREMENTS FOR AWARDING THE DEGREE OF M.Com (Finance)

Assigned by: ____________________ _____________________________ _________

Faculty Member’s Signature Internal Examiner Sign: ____________________ ____________________ Name: ___________________ External Examiner Sign: _____________________ _____________________ Name: ____________________


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Table of Contents Serial No.

Particular

Page No.

Dedication

6

1.

Acknowledgment

7

2.

Disclaimer

8

3.

Reason for Choosing the Organization

9

3.1

Aims and Objectives of the Project

9

4.

Executive Summary

10

5.

Vision

11

5.1

Mission

11

5.2

Core Values

12

6.

Corporate Information

13

7.

Automobile Industry in Pakistan

18

7.1

Current Situation of Car Industry

19

8.

History

20

9.

Product Line

21

10.

Strategic Objectives

23


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10.1 11. 11.1

Manufacturing Facilities Dealership of the Company Major Departments

24 25 25

12.

Awards Achievement

26

13.

SWOT Analysis

27

14.

PEST Analysis

30

15.

Boston Consulting Group Matrix

32

15.1 16.

Toyota Corolla BCG Matrix Financial Analysis of Indus Motor Company

34 35

16.1

Balance Sheet

36

16.2

Profit &Loss Account

38

17.1

Vertical Analysis of Balance Sheet

39

17.2

Vertical Analysis of Profit and Loss Account

41

18.1

Horizontal Analysis of Balance Sheet

42

18.2

Horizontal Analysis of Profit &Loss Account

44

19.

Ratio Analysis


45

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1.Acknowledgement I find no words at my command to express my deepest sense of gratitude to the Almighty ALLAH, the most Gracious, the most Merciful and the most Beneficent, who gives me the talent to complete this task successful, He is the one who gave me courage to do this. I am much obliged to my loving Parents whose prayers have enabled me to reach this stage. At this occasion, I can’t forget my parents for their guidance at the crucial moments of my life. Next, I owe my bottomless thanks to our esteemed resource person Mr. Syed Asad who directed me well and was always available to clear my doubts and misunderstandings throughout this project. It is also a matter of immense pleasure for me to express my gratitude to the Faculty of Preston Institute of Management Science and Technology for giving us their precious time and tried their best as helpful as possible. I wish to thanks all my Friends and Classmates who really helped me by giving suggestions and critical review of the manuscript. Obviously this achievement was not possible without all of you.


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2..Disclaimer The purpose of the project is to introduce the subject matters and provide a general idea and financial information about the Indus Motors Company Limited. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care, diligence and reasonable efforts has been taken to compile this project, the contained information may vary due to any change in any of concerned factors and the actual results may differ substantially from the presented information. Project does not assume any liability for any financial or other loss resulting from this document in consequence of undertaking this activity. Therefore the content of this document should not be relied upon for making any decision, investment or otherwise. The content of the information does not bind “PROJECT MAKER” in any legal or other form. Project does not also assume any rectifications, errors, omission and misprinting between the electronic and printed version of document. Financial Analysis of IMC does not accept any responsibility for the validity and correctness of the information published on its project.


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3..Reason for Choosing the Organization When I was informed that I would have to do the financial analysis of last three years of any listed company than the primary challenge for me was to choose the organization on which I can start my working. It was bit difficult and confusing for me to select the organization. I started brainstorming and came up with many well-known organizations having large operations, both in Pakistan and worldwide. After gathering data and relevant information, I ended with three business sectors, Automobile industry, Textile industry and Tobacco industry. I choose best companies in their respective class, but after applying hindsight, I decided to go with Automobile industry and the organization I selected was “Indus Motor Company Limited”

3.1 Aims and Objectives of the Project The main objectives and aims of this project are to analyze and evaluate the overall performance of the company by applying different conceptual models and discuss the liquidity, cash flow situation and produce informative report usable by the users of the statements assessing the financial position, performance and adaptability of the organization. The performance evaluation is based on historic and current available data about the operations of the company. Under the constantly increasing competition in the business market, these analyses portray a very clear and informative picture to the investors, shareholders, regulators and other players in the stock market. Finally, the project draws conclusions based on my analysis about the current situation and the prospects of the Indus Motor Company Limited.


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4..Executive Summary Indus Motor Company is one of the Automobile Companies, which formed with the help of house of Habib, Toyota Motor Corporation, Toyota Tsusho Corporation. It manufactures and imports cars and enjoys a healthy share in the market. It is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain strategic competitive advantage, which is its production strength, ability to produce quality cars with respect to low cost and research and development in hybrid and bio fuel cars. But recently company is in stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA. In my opinion, it is the best move made by IMC to survive the financial holocaust. Indus Motors is the country's second largest auto manufacturer, after the Pak Suzuki Motors, located near Bin Qasim Karachi, having an assembling capacity of 55,000 units per annum. Its core business is to manufacture and market cars. In addition, the company also sells auto parts and accessories. Its product line includes 9 variants of Toyota Corolla, 8 variants of Daihatsu Cuore and 2 variants of Toyota Hilux. The company also offers six different imported vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.

Company Profile: Name of the Company: Indus Motor Company Limited.

Industry Type: Automobile Industry (Cyclical)

Major Investors:

1. House of Habib. 2. Toyota Motor Corporation Japan (TMC). 3. Toyota Tsusho Corporation Japan.


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5..Vision "IMC’s Vision is to be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology". 

The most respected.

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The most successful.

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Delighting customers.

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Wide range of products.

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The best people.

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The best technology.

5.1 Mission Mission of Toyota is to provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world.

“Action Commitment Teamwork for becoming # 1 in Pakistan” Means a committed team to make Indus # 1 in: 

Respect and Corporate Image

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Customer Satisfaction

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Quantity in Production & Sales

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Quality

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Profitability

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Best Employer


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5.2 Core Values Customer Satisfaction Team Work. Ethics and Practices. Achieving market Leadership by Delivering Value to Customers by: 1.

Following our “Customer first” philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers.

2.

Enhancing the quality and reach of our 3S Dealership Network

3.

Employing customer insight and feedback for continuous corporate renewal, including producer development, improving service and customer care.

Bringing Toyota quality to Pakistan 1.

Maximizing QRD (Quality, Reliability and Durability) by built-in-engineering,

2.

Transferring Technology and promoting Indigenization at IMC and Vendor.

3.

Raising the bar I all corporate functions to meet Toyota Global Standards.

Optimizing Cost by Kaizen 1.

Fostering a Kaizen culture and mindset at IMC, its Dealers and Vendors.

2.

Implementing Toyota Production System.

3.

Removing waste in all areas and operating in the lowest cost quartile of the industry.


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6..Corporate Information Board of Directors Mr. Ali S. Habib

Chairman

Mr. Yutaka Arae

Vice Chairman

Mr. Farhad Zulficar

Chief Executive Officer

Mr. Mohamed Ali R. Habib

Director

Mr. Tokuichi Uranishi

Director

Mr. Masaru Kato

Director

Mr. Kersi Kapadia

Director

Company Secretary Mr. Shahid Mahmood Khan Bankers ABN Amro Bank American Express ANZ Grindlays Bank plc Askari Commercial Bank Bank of Tokyo-Mitsubishi,Ltd. Credit Agricole Indosuez Emirates Bank International Ltd. Faysal Bank Ltd. Habib Bank AG Zurich Habib Bank Limited Hong Kong & Shanghai Banking Corporation Metropolitan Bank Limited Muslim Commercial Bank Ltd. National Bank of Pakistan


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Final Project Societe Generale Standard Chartered Bank Union Bank Ltd.

Auditors M/s. Ford, Rhodes, Robson, Morrow Chartered Accountants 1st Floor, Finlay House, I. I. Chundrigar Road, Karachi

Legal Advisors M/s. A. K. Brohi& Co. M/s. Mansoor Ahmed Khan & Co. M/s. Mahmud & Co.

Registered Office 14, Bangalore Town Housing Society, Main Shahrah-e-Faisal, Karachi.

Registrar M/s. Noble Computer Services (Pvt) Ltd. 14, Bangalore Town Housing Society, Main Shahrah-e-Faisal, Karachi.

Factory Plot No. NWZ/1/P-1, Port Qasim Industrial Estate, Bin Qasim, Karachi.


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Company Registration Number 0020742

National Tax Number (NTN) 0676546-7

Status of the Company Listed on Karachi Stock Exchange (Guarantee) Ltd Lahore Stock Exchange (Guarantee) Ltd Islamabad Stock Exchange (Guarantee) Ltd

Symbol INDU

Details of Permissible Business Activities Manufacturers, assemblers, distributors and importers of Toyota and Daihatsu vehicles, spare parts and accessories in Pakistan.

Bankers Askari Bank Limited Bank Alfalah Limited Barclays Bank PLC Pakistan Bank Al-Habib Limited Citibank N.A. Habib Bank Limited Habib Metropolitan Bank Limited HSBC Bank Middle East Limited MCB Bank Limited National Bank of Pakistan NIB Bank Limited Soneri Bank Limited Standard Chartered Bank (Pakistan) Limited


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Final Project The Bank of Tokyo-Mitsubishi UFJ, Limited United Bank Limited

Share Registration Noble Computer Services (Pvt.) Ltd. First Floor, House of Habib Building (Siddiqsons Tower), 3 Jinnah Cooperative Housing Society Main Shahrah-e-Faisal Karachi-75350. PABX: (92-21) 34325482-87, Fax (92-21) 34325442 Email: [email protected]

Address of Head Office / Registered Office / Factory Plot No. N.W.Z/1/P-1, Port Qasim Authority, Bin Qasim, Karachi.

Phone: (PABX) (92-21) 34720041-48 (UAN) (92-21) 111-TOYOTA (869-682) Fax: (92-21) 34720056 Email: [email protected]

Memberships Pakistan Automotive Manufacturers Association (PAMA) The Overseas Investors Chamber of Commerce & Industry (OICCI) Karachi Chamber of Commerce & Industry (KCCI) Pakistan Business Council (PBC)

Associated Companies Toyota Motor Corporation, Japan Toyota Tsusho Corporation, Japan Thal Limited Habib Insurance Co. Limited


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Final Project Shabbir Tiles & Ceramics Ltd. Makro-Habib Pakistan Ltd. Habib Metropolitan Bank Limited

Collaboration EQUITY

Toyota Motor Corporation

Toyota Tsusho Corporation

House of Habib

BUSINESS TOYOTA GROUP

Technology & KD Parts

Materials, Parts & Logistics Support

Technology KD Parts

Hilux Frame & Deck


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7..Automobile Industry in Pakistan Auto market is one of the largest segments in world trade. Changing models, improving fuel efficiency, cutting costs and enhancing user comfort without compromising quality are the most important challenges of the auto industry in a fast globalizing world. The automotive assembling in Pakistan started in 1950 when National Motors Limited, a public limited company and the pioneer in the industry, came into existence, established by General Motors of USA. National Motors assembled passenger cars as well as commercial vehicles, which carried “General Motors” brands such as Bedford, Vauxhall, and Chevrolet. The indigenized parts in these vehicles did not exceed 20% with only exception of Bed Ford trucks with a deletion level of 80%. By the end of 70s, practically all-automobile assembling in Pakistan ceased. A regular car industry started in the country in 1983, when Suzuki commenced production eyeing the small and LCV car segment of 800cc-1000cc range, and introduced Suzuki car which targeted the middle-income group (constituting the larger segment of the market) by providing an affordable car. Then there was a long gap until the early 90’s when Indus Motor Company was established to manufacture Toyota vehicles in Pakistan. Soon after Honda Atlas came with the Civic and Gandhara Nissan entered the market with Sunny. In the late 90,s, Dewan Farooque Motors set up a plant to manufacture Hyundai and Kia vehicles in Pakistan. Since then the market has changed all together. After struggling through nineties, a decade full of uncertainties and frequent policy the Pakistani Auto Industry has been able to achieve double-digit growth consistently since the last 4 years. The industry operates under franchise and technical cooperation agreements with Japanese, European and Korean manufacturers. Lately Few new market players entered the market such as Gandhara Nissan again with now the imported Nissan range of vehicles, Dewan Mushtaq Motors with imported Mitsubishi range of vehicles, Nexus Automotive with Chevrolet imported vehicles and others imported Chinese


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Final Project vehicles such as Karakoram Motors, Roma Automobiles and Foton by Dewan Innovations Limited along with Pak Cherry Automobiles. Sigma Motors made its mark with Rover recently. Apart from these the big brands of the auto industry also entered the Pakistani market such as BMW, Mini & Rolls Royce by Dewan Motors, Porsche, Mercedes and Audi have also launched their brands in Pakistan catering to the very upper niche.

7.1 Current Situation of Car Industry Locally produced cars have taken an unexpected drastic downturn to the extent of frustrating all future growth prospects and projections. According to the current figures, in due comparison with the figures of year 2007 for September to December period, the sales of cars has gone down by 15 percent. As a result the production has also gone down culminating with its impact on supply schedule both import and local. This downturn has come at a crucial time as most of the manufacturing had just increased their investment in the expansion projects and vending industry had made equally huge investment to complement the capacity expansion exercise. The local vendors have now to face the curtailed orders, which may most hit the smaller ones with closures. All this obviously has also adversely affected the government revenues in substantial terms. The government has suffered a revenue loss of Rs. One billion (9%) when September to December data is compared with last year. IN the budget 2007-08, government announced a withholding @ 5 percent on purchase of cars, which was reduced to 2.5 percent and imposed from 1st September 2007. The intension was obviously to enhance government revenue. The current situation however, has proved a reversal in collection of the revenue. Last year, the ECC approved the five years policy (AIDP) for auto sector prior to announcement of budget. Levy of such tax is a deviation from the spirit of pre announced policy thus causing anxiety to the auto manufactures. The uplift in the car market is also suffering due to stringent regulations announced by State Bank of Pakistan recently for car financing. Moreover, the cost of financing has also increased interest rate.


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8..History Indus Motor Company (IMC) is a joint venture between the House of Habib, Toyota Motor Corporation Japan (TMC) and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990.IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. Vehicles in Pakistan through its dealership network. It manufactures and Imports Cars and enjoys a healthy share in the market. The company was incorporated in Pakistan as a public limited company in December 1989and started commercial production in May 1993. The shares of company are quoted on the stock exchanges of Pakistan. Toyota Motor Corporation and Toyota Tsusho Corporation have 25% stake in the company equity. The majority shareholder is the House of Habib. IMC is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain Strategic Competitive Advantage, which is its Production Strength, ability to produce quality cars with respect to low cost, Research, and Development in Hybrid and Bio Fuel Cars. But recently company is in stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA. Indus Motor is the country's second largest auto manufacturer, after the Pak Suzuki Motors. IMC's production facilities are located at Port Bin Qasim Industrial Zone near Karachi in an area measuring over 105 acres, having an assembling capacity of 55,000 units per annum. Indus Motor Company’s plant is the only manufacturing site in the world where b oth Toyota and Daihatsu brands are being manufactured. Its core business is to manufacture and market cars. In addition, the company also sells auto parts and accessories. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. Its product line includes 6 variants of newly introduced Toyota Corolla, Toyota Hilux and 3 variants of Daihatsu Cuore. The company also offers six different imported vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.


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9..Product Line COROLLA:

Corolla includes six variants of cars, which are 1) Xli 2) GLi 3) Corolla Altis M/T 4) Corolla Altis A/T 5)2.0D 6)2.0D Saloon


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CUORE

Cuore consist of 3 variants of cars that are as under: 1)CX 2)CX CNG 3)CX A/T HILUX

Hilux consist of following car. 4x 2 S/Cab


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10..Strategic Objectives Achieving Market Leadership by Delivering Value to Customers:

a) Following our “Customer First” philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers. b) Enhancing the quality and reach of our 3S Dealership Network. c) Employing customer insight and feedback for continuous corporate renewal, including product development, improving service and customer care. Bringing Toyota Quality to Pakistan

a) Maximizing QRD (Quality, Reliability and Durability) by built-in engineering. b) Transferring technology and promoting indigenization at IMC and Vendors. c) Raising the bar in all support functions to meet Toyota Global Standards. Optimizing Cost by Kaizen)

a) Fostering a Kaizen culture and mindset at IMC, its Dealers and Vendors. b) Implementing Toyota Production System. c) Removing waste in all areas and operating in the lowest cost quartile of the industry. Respecting our People

a) Treating employees as the most important sustainable competitive resource. b)

Providing a continuous learning environment that promotes individual creativity and teamwork.

c) Supporting equal employment opportunities, diversity and inclusion without discrimination. d) Building competitive value through mutual trust and mutual responsibility between the indus team and the company.


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Becoming a Good Corporate Citizen

a) Following ethical business practices and the laws of the land. b) Engaging in philanthropic and social activities that contribute to the enrichment of Pakistani society, especially in areas that are strategic to both societal and business needs e.g. Road Safety, Technical Education, Environment Protection, etc. c) Enhancing corporate value and respect while achieving a stable and long-term growth for the benefit of our shareholders.

10.1 M a n u f a c t u r i n g F a c i l i t i e s Just in Time spirit implies two opposing forces of providing fast and flexible response to customers, yet building efficient mechanisms and systems that are efficient and waste-free.

The concept is to provide the right product and information, at the right time, in the right amount, in the right manner, while maintaining high standards of efficiency and cost control. We have to practice this contradictory idea in our daily activities.


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11..Dealerships of the Company

1st dealership in Calicut – 1986 2nd in Kochi – 1991 3rd in Trivandrum – 1994 4th in Muvattupuzha – 2005 5th in Royapettah, Chennai – 2006 6th in Kattupakkam, Chennai – 2008

As on today, Indus has 6 Dealerships 40 Workshops 10 True Value Outlets 2 Maruti Driving Schools 18 E-Outlets 75 sales outlets

11.1 Major Departments

Sales Service True value Spares Accessories Insurance Sales support Institute Maruti Driving School


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12..Awards Achievements

Indus Motors Team receiving the Best Dealer Award from Maruti Suzuki Dealers Conference held at Thailand 2012

Indus Motors Team receiving the Best Dealer Award from Maruti Suzuki Dealers Conference held at Singapore – 2011

Indus Motors Team receiving the Best Dealer Award from Maruti Suzuki Dealers Conference held at Hongkong - 2010

Indus Motors Team receiving the Best Dealer Award from Maruti Suzuki Dealers Conference held at Thailand 2009

Indus Motors Team receiving Indus Motors Team receiving the Best Dealer Award from the Best Dealer Award from Maruti Suzuki Dealers Maruti Suzuki Dealers Conference held at Isthanbul – Conference held at Greece 2008 2007

Awards received by INDUS MOTORS in the MSDC held at Thailand – 2012

3 Most Prestigious Awards All India Best Dealer (Overall Excellence) - Indus Group All India Highest Car Sales - Indus Group BSC- Platinum dealer- Indus Group


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13..SWOT Analysis In formulating sound strategic plans, an organization must assess its internal strengths and weaknesses in relation to the external opportunities and threats it faces. An effective strategy will take advantage of an organizations strengths and opportunities at the same time it minimizes or overcomes weaknesses and threats. Regular assessment and SWOT analysis is thus given importance.

Strengths Strengths are the core competencies of any organization & as far as Indus Motor Company Limited is concerned, the core competencies of this organization are: Toyota has become the generic name in the Pakistan market. Whenever the company launches the new car in the market it has always the great support of the already market orientation so the car introduced by it easily covers the introduction stage. People have a lot of trust for their name and this is why Toyota is the leader in automobile industry. Toyota has a great strength for its 2.OD car, Toyota is the hot selling diesel engine car in Pakistan and is the only company offering the diesel engine in this category of cars. The important edge over the company editors are the ample availability of the spare parts in the markets. The price of spare parts is comparatively low and availability all over the country has proved to be beneficial for the company. Toyota is a financially strong company. This can be seen by analysis of the financial reports of the previous years. Toyota vehicles have got a much stronger resale value than other car in Pakistan. This is why people prefer to buy a Toyota. Toyota vehicles are made according to the Pakistani environment. No doubt the other cars are available but Toyota has an edge because it has learnt various conditions of the Pakistan environment and people. So new additions and changes are proving to be successful.


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Final Project Toyota is proud to have a successful team of competent managers and skilled workers. Extensive training has enabled the employees to perform outstandingly. Toyota is the only company having the most sophisticated network of dealerships where professional dealers treat customers. There are twenty-five dealers in Pakistan where sales, service and spare parts are offered, leading to convenience for the customers.

Weakness Weaknesses are the lacking points, which every organization must avoid in order to make its operational effectiveness. There is some weakness in the case of ergonomic interior of Toyota corolla as well. The power steering is not speed sensitive and the air conditioning system in severe heat is in effective. Interior dimensions are less and heavy body and small engine sometimes create problems in hilly areas. There are some weaknesses in the dealership network. The dealers sometimes tend to deviate from the recommended course of action and principles of Toyota. This results in customers complaints sometimes. The company is besieged with internal operating problems which are not very serious. Because of dependency on Toyota’s principles delivery of cars is done after 4-6 months. This is because CKD kits are ordered four months before and once they arrive from Japan, assembly and delivery takes some more time. A lot of effort is pulling into the sales forecasting because of the changing political and economic scenarios. For this reasons inventory has to be kept low. The company feels that one weakness is the changing policies of the government and the 30% cash L/C margin. This has lead to an adverse environment.

Opportunities In fact, when we study all our weaknesses critically & deeply than we come to know that we can convert our weaknesses into strengths. Therefore, these are our opportunities. The opportunities for IMC are:


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Final Project Export is a major opportunity for Toyota Indus Motors. Vehicles were exported to Bangladesh just once in order to prove the plant capacity and efficiency of the company. This should be started again. The contract with the government departments e.g. Motorway Police, Shaheen Force and the dignitaries where corolla has an opportunity to deal with the business markets along with dealing in consumer markets. Toyota can do better by focusing on segments much more than presently being done. Toyota should also try to lower its price of Corolla in the segment where Honda city has penetrated. It can offer discounts to Government departments and large organizations on purchase of its vehicles in more quantities. Success of the manufacturing of Daihatsu cuore is a major opportunity for Toyota to excel further careful planning and the right time to launch the new car can prove to be a success.

Threats Though Indus Motor Company Limited has a strong footing and maintain a good number of loyal customer, still company has threats in various sectors. When we see the possible threats for IMC, the threats are prevailing such as Even though Toyota enjoys the position of being the no.1 automobile company, still it faces some threat from competitors especially Honda. Honda has adopted aggressive strategies for capturing the market. Even though Toyota keeps a careful eye on the changing trends, still the changing customer needs and trends can prove to be a threat. A major threat is the changing political and economic scenarios of Pakistan. Changing government policies affect the company’s performance. Devaluation of rupee adverse shifts in foreign exchange rates, trade policies of government’s is a threat. Moreover, the company is threatened by the ongoing rate of 30% cash L/C margin.


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Final Project Import of re-conditioned cars is also considered as a threat for the company. The planned car manufacturing plants of Hyundai and Daewoo can prove to be tough competition for Toyota if they are successful.

14..PEST Analysis PEST analysis is the analysis, which we tend to perform in order to analyze the external as well as the internal environment in which organization is currently working. PEST analysis revolves around the four things.

Political Factors Government at all levels is an important component of the general environment. No organization or industry is immune from the various decisions made by the government. The Pakistan Government’s inconsistent policies, frequent change in duty tariff and smuggling are main reasons of unstable market conduction. Like other motor companies, Toyota is also affected by the current changing policies of the government. Previously the automobile industry had to cope with more than 77000 yellow cabs that were imported during the yellow cabs scheme and was later turned lose to the market after a change of government and the policy scrapped. IN 1995, all the previous taxes and duties were rolled into one import duty of 30percent on CKD kits as well as CBU vehicles. In 1996, the sales tax on CBU was increased cost to 18 percent. In 1997, the ministry of industries and production recommended that duty on CKD be reduced from 40 percent to 35 percent while the car sales should be exempted from CVT and the deletion program should be accelerated. Just a half-year back the general sales tax has been increased to 16 percent promoting more prices like. Therefore, there is going to be a Rs. 80,000 to Rs. 1, 00,000increases in vehicles.

Economical Factors Government economic policies at the federal level clearly influence the ability of the industries to survive and progress. Inflation is a major economic factor whi ch has affected the Pakistan’s automobile industry including Toyota. The current inflation rate is 21% to 23% annually prices in the auto market were deregulated in 2000 and grew almost 20 percent to 30 percent per annum to allow Toyota to bring their prices to profitable levels. Afte r three years of “Still Market” the


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Final Project market picked up. The recent increase of 16 percent sale tax is however, going to result in a price increase.

Social Factors Society holds a global or summary belief that an organization is proper and worthy of support. Toyota takes pride in being the most trusted name all over Pakistan. Its vehicles are regarded as a status symbol. It is the guiding principles of Toyota which has strongly developed trust in the people. Toyota respects the culture and customs of every nation and community and contributes to the economic and social development through corporate activities in the communities. Toyota believes in honoring the language and spirit of the law of every nation and undertakes open and fair corporate activities to be a good corporate citizen of the world. This is the reason that Toyota is proud of the fact that Pakistani society considers Toyota vehicles to be a symbol of reliability, comfort, luxury and a have to be trusted.

Technological Factors Technology is of particular importance because it has been and continues to be the main source of increases in productivity. Despite changes in the means used to motivate people and the variety of incentives that have been offered to stimulated production, the resulting increase has been negligible when compared to that of created by technology. The locally produced Toyota Corolla introduced in May 1993 is now in its 17th year. Its excellent quality, low maintenance cost and high resale value has won it the support and loyalty of its customers. Product diversification and a wide range of colors have allowed customers to exercise greater options and have sustained this threat. T he total company’s product range comprises of 8 variants of Corolla and5 variants of Hilux. As a result of the “Safety First” commitment; for the first time in Pakistan SRS “Secondary Restrain System” Airbags have been introduced in the GLI Automatic and GLI manual models, side impact bars which protect vehicles for side collisions have however been routinely fitted in all Corolla variants since inception. The process of making a car more durab le includes “Pitospaate Primer” total immersion in a catholic Electro-deposit primer, which assures long term anti corrosion and an extra thick color coat that is better than all others, ensuring that “New Car” look “New” for years to come.


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1 5 . .B o s t o n C o n s u l t i n g G r o u p M a t r i x The BCG matrix measures market attractiveness by market growth rate and it assesses the firm’s ability to compete by its relative market share. The BCG matrix assumes the causal relationship between market share and profitability. BCG matrix consists of four factors which are: Stars Question mark Cash cows Dogs

Stars Toyota Corolla of IMC falls into the category of Stars. It generates large amount of cash because of its strong relative market share, but also consume large amounts of cash because of its high growth rate, therefore the cash in each direction approximately nets out. However, companies usually invest in star units as they are feeling that the future of their company depends on the success or failure of that particular unit or product.


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Cash Cows If IMC’s Toyota Corolla could maintain its large market share, it will become a Cash Cow when the market growth rate would decline. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation. Typically needs this cash to support its rapid and significant growth. It generates large amounts of cash for the organization and usually segments in which management can make additional investments and earn attractive returns. In case of Indus Motor Company Limited, the Hilux is a cash cow for the company which earns a lot of cash for the company and company utilize this cash to run its future units like Toyota Corolla.

Question Mark According to Boston consulting group matrix, a question mark is such a business unit about which you are not about the success or failure. The unit can be very successful in the market or it can be simply being ruined of. In case of IMC, the question mark is actually the Cuore. It is due to the large competition of in this category of cars. As the Suzuki Aulto, Mehran, Santro and some imported vehicles like Vitz are already present in the market.

Dogs This category of BCG matrix includes the product that has no market share as well as consuming the large amount of cash instead of generating the cash. The company wants to dissolve that product.


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15.1 Toyota Corolla BCG Matrix If we analyze the position of Toyota Corolla by using the Boston consulting group matrix in a market than it will show the following result


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16..Financial Analysis of Indus Motor Company


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Final Project

Table 16.1 Balance Sheet For the Financial Year 2009, 2010 and 2011 NOTE

2011 (RUPEES IN *000)

2010 (RUPEES IN *000)

2009 (RUPEES IN *000)

FIXED ASSETS

3

4225710

3324333

3934473

LOGN TERM LOANS ANS ADVANCES

4

11949

15570

28509

LONG TERM DEPOSITS

5

9222

7122

7222

4246881

3347025

3970204

ASSETS NON-CURRENT ASSETS

CURRENT ASSETS STORES AND SPARES

6

189755

111567

128483

STOCK IN TRADE

7

5690052

5198367

4088358

TRADE DEBTS

8

1356068

1613171

1736631

LOANS AND ADVANCES

9

926174

839819

894459

SHORT TERM PREPAYMENTS

10

18900

18778

16876

52586

57254

50944

ACCRUED RETURN ON BANK DEPOSITS OTHER RECEIVEABLES

11

149533

196317

67902

INVESTMENT

12

4993464

---

---

TAXATION- PAYMENT LESS PROVISION

13

399006

---

---

CASH AND BANK BALANCES

14

8812199

15755980

9731166

22587737

23791253

16715319

26834618

27138278

20685523

1000000

1000000

1000000

15

786000

786000

786000

16

13333648

11801615

9510973

TOTAL ASSETS EQUITY

SHARE CAPITAL AUTHORISED CAPITAL 100000000(2009:100000000)ORDINARY SHARES OF RS 10 EACH ISSUED,SUBSCRIBED AND PAID-UP CAPITAL RESERVES


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Final Project

14119648

12587615

10296973

454012

325797

503700

454012

325797

503700

LIABILITIES NON-CURRENT LIABILITIES DEFFERED TAXATION

17

CURRENT LIABILITIES TRADE,OTHER PAYABLES AND PROVISIONS ADVANCES FROM CUSTOMERS AND DEALERS ACCRUED MARK-UP

18

5740869

5905062

3942988

19

6519669

8076281

5926529

420

944

673

SHORT-TERM RUNNING FINANCE

20

-

-

-

TAXATION-NET

21

-

242579

14660

12260958

14224866

9884850

26834618

27138278

20685523

CONTINGENCIES AND COMMITMENTS TOTAL EQUITY AND LIABILITIES


22

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Final Project

Table 16.2 Profit and Loss Account For the Financial Year 2009, 2010 and 2011 NOTE

Net sales

21

61702677

2010 (RUPEES IN *000) 60093139

Cost of sales

22

57613542

55382306

35540418

4089135

4710833

2324186

Gross profit

2011 (RUPEES IN *000)

2009 (RUPEES IN *000) 37864604

Distribution expenses

23

690130

468496

469985

Administrative expenses

24

462517

381575

352249

1152647

850071

822234

2936488

3860762

1501952

355796

416106

156479

2580692

3444656

1345473

1507878

1801459

727080

4088570

5246115

2072553

77115

3576

26540

4011455

5242539

2046013

1268071

1799136

660911

2743384

3443403

1385102

34.90

43.81

17.62

Other operating expenses

Other operating income

Finance costs

25

26

27

Profit before taxation Taxation

28

Profit after taxation

Earning per share


29

Page 38

Final Project

Financial Analysis Table 17.1 Vertical Analysis of Assets and Liabilities as Follows Description

Figures in % 2011

2010

2009

FIXED ASSETS

15.75

12.25

19.02

LOGN TERM LOANS ANS ADVANCES

0.045

0.057

0.138

LONG TERM DEPOSITS

0.034

0.026

0.035

15.83

12.33

19.19

0

0

0

STORES AND SPARES

0.71

0.411

0.621

STOCK IN TRADE

21.20

19.16

19.76

TRADE DEBTS

5.053

5.94

8.395

LOANS AND ADVANCES

3.451

3.095

4.324

SHORT TERM PREPAYMENTS

0.07

0.069

0.082

ACCRUED RETURN ON BANK DEPOSITS

0.196

0.211

0.246

OTHER RECEIVEABLES

0.557

0.723

0.328

INVESTMENT

18.61

0

0

TAXATION- PAYMENT LESS PROVISION

1.487

0

0

CASH AND BANK BALANCES

32.84

58.05

47.04

84.17

87.67

80.81

100

100

100

Years ASSETS NON-CURRENT ASSETS

CURRENT ASSETS

TOTAL ASSETS EQUITY


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Final Project

SHARE CAPITAL AUTHORISED CAPITAL 100000000(2009:100000000)ORDINARY SHARES OF RS 10 EACH ISSUED,SUBSCRIBED AND PAID-UP CAPITAL

3.727

3.685

4.834

2.929

2.896

3.799

49.688

43.487

45.98

52.617

46.38

49.78

1.692

1.2005

2.435

TRADE,OTHER PAYABLES AND PROVISIONS

21.394

21.76

19.062

ADVANCES FROM CUSTOMERS AND DEALERS

24.296

29.76

28.65

ACCRUED MARK-UP

0.00157

0.0035

0.0032


0

0

0

TAXATION-NET

0

0.894

0.071

45.691

52.416

47.786

0

0

0

100

100

100

RESERVES


CURRENT LIABILITIES



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Final Project

Table 17.2

Vertical Analysis of Profit and Loss Accounts are as Follows Description

Figures in % 2011

2010

2009

100

100

100

Cost of sales

93.37

92.16

93.86

Gross profit

6.627

7.839

6.138


1.118

0.779

1.241


0.749

0.635

0.930

1.868

1.415

2.172

4.759

6.425

3.967

0.577

0.692

0.413

4.182

5.732

3.553

2.444

2.997

1.920

6.626

8.729

5.474

Finance costs

0.125

0.0059

0.070

Profit before taxation

6.501

8.724

5.403

Taxation

2.055

2.994

1.745


4.446

5.730

3.658

0

0

0

5.66

7.29

4.65

Net sales



Earning per share


Page 41

Final Project

Table 18.1

Horizontal Analysis of Balance Sheet is as Follows Description Years

Figures in (%) 2011

2010

107.40

84.49

41.91

54.61

127.69

98.61

147.69

86.83

139.18

127.15

78.086

92.89

103.55

93.89

111.99

111.27

103.22

112.38

220.22

289.12

90.56

161.91

135.13

142.33

129.73

131.19

100

100

2009

ASSETS NON-CURRENT ASSETS FIXED ASSETS LOGN TERM LOANS ANS ADVANCES LONG TERM DEPOSITS

100 100 100

CURRENT ASSETS STORES AND SPARES STOCK IN TRADE TRADE DEBTS LOANS AND ADVANCES SHORT TERM PREPAYMENTS ACCRUED RETURN ON BANK DEPOSITS OTHER RECEIVEABLES

100 100 100 100 100 100 100

INVESTMENT TAXATION- PAYMENT LESS PROVISION CASH AND BANK BALANCES

TOTAL ASSETS

100 100 100

EQUITY

SHARE CAPITAL AUTHORISED CAPITAL 100000000(2009:100000000)ORDINARY SHARES OF RS 10 EACH


100

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Final Project

ISSUED,SUBSCRIBED AND PAID-UP CAPITAL

100

100

100

140.19

124.08

100

137.12

122.25

100

90.14

64.68

100

TRADE,OTHER PAYABLES AND PROVISIONS

145.59

149.76

100

ADVANCES FROM CUSTOMERS AND DEALERS

110.008

136.27

100

62.41

140.27

100


0

0

0

TAXATION-NET

0

1654.7

100

124.04

143.91

100

129.73

131.19

100

RESERVES


CURRENT LIABILITIES

ACCRUED MARK-UP



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Final Project

Table 18.2

Horizontal Analysis of Profit and Loss Account is as Follows Description

Figures in (%) 2011

2010

2009

Net sales

162.96

158.71

100

Cost of sales

162.11

155.83

Gross profit

175.94

202.69

100 100


146.84

99.68

100


131.30

108.33

140.18

103.39

100 100

195.51

257.05

100

227.38

265.92

100

191.80

256.02

100

207.39

247.77

100

197.27

253.12

100

Finance costs

290.56

13.47

Profit before taxation

196.062

256.23

100 100

Taxation

191.87

272.22


198.064

248.60

100 100

Earning per share

198.07

248.64

100




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Final Project

19..Ratio Analysis

Current Ratio Ratios

Formulas

Results

Current ratio 2009 2010 2011

Current Asset/Current liabilities 16715319/9884850 23791253/14224866 22587737/12260958

1.69 1.67 1.84

Current Ratio 1.9 1.85 1.8 1.75 1.7 1.65 1.6 1.55 2009

2010

2011

Comments. In Indus Motor Company, limited 2011s current ratio is stronger than other years. It shows that this year’s liabilities could be recovered with its assets. There is a significant decrease of current ratio from 2009 to 2010 but in 2011, company has maintained good current ratio which is very useful for the analyst aspect of creditors.


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Final Project

Quick Ratio Ratios

Formulas

Results

Quick ratio 2009 2010 2011

Quick assets/Current liabilities 12626461/9884850 18592886/14224866 16897685/12260958

1.27 1.30 1.38

Quick Ratio 1.4 1.38 1.36 1.34 1.32 1.3 1.28 1.26 1.24 1.22 1.2 2009

2010

2011

Comments. Prepaid expenses are considered as current assets so they are included in current ratio calculation. Prepaid expenses are less liquid. Normally it is not easily converted into cash on short notice. This ratio tells us to how much liquids assets in the company to meet an unconditional situation here in 2011quick ratio is better than other years it show that company can easily recover its liabilities on short notice.


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Final Project

Gross Profit Ratio Ratios

Formulas

Results

Gross profit ratio 2009 2010

Gross profit/sales*100 2324186/37864604*100 4710833/60093139*100

6.14% 7.83%

2011

4089135/61702677*100

6.63%

Gross Profit Ratio 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2009

2010

2011

Comments. The gross profit in 2009 is 6.14% while we see in 2010 it has been increased. it means company has shown good performance in 2010 but the company has loosed his position in 2011 which is not in favor of company . Reason is that because cost of goods sold has increased and the selling rate of the goods sold has decreased.


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Final Project

Net Profit Ratio After Tax Ratios

Formulas

Results

Net profit ratio 2009 2010 2011

Net profit after tax/sales*100 1385102/37864604*100 3443403/60093139*100 2743384/61702677*100

3.65% 5.73% 4.45%

Net Profit Ratio 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2009

2010

2011

Comments. Net profit is 3.65% in 2009 but it is increase in 2010 is 5.73% it is increase by in one year it’s better for the company to increase in net profit but in 2011 net profit of the company has decreased it is not in favor of company . Reason is that that total expenses are increases.


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Final Project

Net Profit Ratio Before Tax Ratios

Formulas

Results

Net profit ratio 2009 2010 2011

Net profit before tax/sales*100 2046013/37864604*100 5242539/60093139*100 4011455/61702677*100

5.40% 8.72% 6.50%

Net Profit Ratio 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 2009

2010

2011

Comments The ratio shows more profit in 2010 as compared to 2009 and 2011. According to average overall performance of the company has increased but in 2011 company is bearing more expenses than the previous year.


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Final Project

Inventory Turnover Ratio Ratios

Formulas

Results

Inventory turnover ratio

Cost of goods sold/ average inventory

2009 2010 2011

35540418/4088358 35540418/ 4088358 55382306/5198367 55382306/5198367 57613542/5690052 57613542/5690052

8.69 10.65 10.13

Inventory Turn Over Ratio 12

10

8

6

4

2

0 2009

2010

2011

Comments. Show the time, in which it will convert the current inventory in to sales, so 2010 is more beneficial for the company and favorable for the company.


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Final Project

Fixed Asset Turnover Ratios

Formulas

Results

Fixed asset turnover

Sales/fixed assets

2009 2010 2011

37864604/3934473 60093139/3324333 61702677/4225710

9.62 18.07 14.60

Fixed Asset Turnover Ratio 20 18 16 14 12 10 8 6 4 2 0 2009

2010

2011

Comments. In 2009 the fixed assets turnover is 9.62, in 2010-it is18.07 and in 2011 14.60 .In 2009 and 2011 fixed asset turnover ratio is decrease as compare to 2010 that shows Indus motors used his assets in 2010 effectively. Company used his fixed assets intensely that is why his production level increases in every year.


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Final Project

Asset Turnover Ratios

Formulas

Results

Total Asset turnover

Sales/Total Assets

2009 2010 2011

37864604/20685523 60093139/27138278 61702677/26834618

1.83 2.21 2.29

Asset Turn Over 2.5

2

1.5

1

0.5

0 2009

2010

2011

Comments. Ratio tells us how much time is requires to asset sale . In 2009 company asset turnover is 1.83, which is lower than other two years. From 2010 to 2011 it has been increasing in so it is not in favor of company.


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Final Project

Debt Ratio Ratios

Formulas

Results

Debt ratio

Total debts/total assets

2009 2010 2011

10388550/20685523 14550663/27138278 12714970/26834618

0.50 0.53 0.47

Debt Ratio 0.54 0.53 0.52 0.51 0.5 0.49 0.48 0.47 0.46 0.45 0.44 2009

2010

2011

Comments. In 2010 debt ratio is higher than other two years it means company is capable to meet outside obligation in full out of its own assets but in 2011 its worth is very low which is not favorable for the company.


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Final Project

Earning Per Shares Ratios

Formulas

Results

Earning per shares

PAT-performance dividend/No. of ordinary share 1385102-000/78600 3443403-000/78600 2743384-000/78600

17.62 43.81 34.90

2009 2010 2011

Earning Per Share 50 45 40 35 30 25 20 15 10 5 0 2009

2010

2011

Comments. Earning per share is increased in 2010 is due to increased in net profit of company it’s for better performance of company


Page 54

Final Project

Return on Capital Employed Ratios

Formulas

Results

Return on capital employed

Profit before interest tax/Capital employed*100 2046013/10800673*100 5242539/12913412*100 4011455/14573660*100

18.94% 40.59% 27.52%

2009 2010 2011

Return on Capital Employed 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2009

2010

2011

Comments. A measure of the returns that a company is realizing from its capital. This ratio tell us the investment of company in 2009 ROCE is 18.94% in 2010 it is 40.59% and in 2011 is 27.52.Comparatively 2010 and 2011 shows an increasing trend as compare to 2009 this means it is favorable for company because the high rate if ROCE is beneficial for company. The resulting ratio represents the efficiency with which capital is being utilized to generate revenue.


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Final Project

Time Interest Earned Ratios

Formulas

Results

Time interest earned

PBIT/interest

2009 2010 2011

2046013/26540 5242539/143873 4011455/77115

77.09 36.44 52.02

Time Interest Earned 90 80 70 60 50 40 30 20 10 0 2009

2010

2011

Comments. A measure of the creditworthiness of a company, equal to EBIT divided by interest Time interest earned in 2010 is 36.44and in 2009 it is 77.09. This ratio is increase in 2011 as compare to 2010 that show company’s EBIT is increased. It indicates that company is able to meet his interest cost for long period of time. Time interest ratio is very good for company satiability. However, according to average the ratio has decreased as compare to the previous years.


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Final Project

Return on Total Assets Ratios

Formulas

Results

Return on Total Assets 2009 2010 2011

Net Income / Total Assets*100 1385102/20685523*100 3443403/27138278*100 2743384/26834618*100

6.69% 12.68% 10.22%

Return on Total Assets 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2009

2010

2011

Comments. Return on asset in 2010 is 12.68%, which is higher than other two years but 2011shows a decreasing trend. . It means the assets of the business are not fully utilized in more and efficient way and shows an unfavorable trend of the business . It means that Indus motors basic earning power has decreased in 2011.


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Final Project

Return on Equity (ROE) Ratios

Formulas

Results

Return on Equity (ROE) 2009 2010 2011

Net Income / capital employed*100 1385102/10800673*100 3443403/129134128*100 2743384/14573660*100

12.8% 26.6% 18.82%

Return on Equity 30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00% 2009

2010

2011

Comments. Return on equity in 2010 is 26.6%which is highest than other two years. The graph shows a increasing trend as compare to 2009.It means this is a good sign for Indus motors if its return on equity remain positive than many shareholder will invest money in the Indus motors.


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Final Project

Net Working Capital Ratio Ratios

Formulas

Results

Net Working Capital 2009 2010 2011

Current Assets - Current Liabilities 16715319-9884850 23791253-14224866 22587737 -12260958

6830469 9566387 10326779

Working Capital Ratio 12000000

10000000

8000000

6000000

4000000

2000000

0 2009

2010

2011

Comments. Working capital is better in 2011, which are 10326779. It means that are assets utilized more economically in 2011 as compared to previous years.


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Final Project

Working Capital Turnover Ratios

Formulas

Results

2009 2010 2011

Sales/working capital 37864604/6830469 60093139/9566387 61702677/10326779

5.54 6.28 5.97

Working Capital Turn Over 6.4 6.2 6 5.8 5.6 5.4 5.2 5 2009

2010

2011

Comments. What this ratio tries to highlight is how effectively working capital is being used in terms of the turnover in 2010 is high from 2009 to 2010 we see that in 2010 it is effective as compare to 2009 and 2011.


Page 60

Final Project

Return on Investment Ratios

Formulas

Results

Return on investment

Net profit after tax/ capital employed*100

2009 2010 2011

1385102/10800673*100 3443403/12913412*100 2743384/14573660*100

12.82% 26.66% 18.82%

Return On Investment 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2009

2010

2011

Comments Return on investment ratio is used by financial analysts to ascertain the best investment plans. It is also an important tool used by investors and shareholders, while making investment decisions in which we see in 2011 is 18.82% is less favorable for the company than 2011.


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Final Project

Debt to Equity Ratio Ratios

Formulas

Results

Debt to asset ratio

Total debts/ Total equity

2009 2010 2011

10388550/10296973 14550663/12587615 12714970/14119648

1.00 1.15 0.90

Debt to Equity Ratio 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2009

2010

2011

Comments Debt to equity ratio shows how the firm’s stockholder bears the risk of the firm. Higher debts means higher financial risk involve. Therefore, Indus motor company is less risky as compared to 2009 and 2010 so it is favorable for the company .


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Final Project

Financial Leverage Ratios

Formulas

Results

2009 2010 2011

Total assets/total equity 20685523/10296973 27138278/12587615 26834618/14119648

2 2.15 1.90

Financial Leverage 2.2 2.15 2.1 2.05 2 1.95 1.9 1.85 1.8 1.75 2009

2010

2011

Comments The financial leverage ratio is a measure of how much assets a company holds relative to its equity. A high financial leverage ratio 2010 means that the company is using debt and other liabilities to finance its assets and, everything else being equal is more risky than a company with lower leverage.


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Final Project

Conclusion KARACHI: Indus Motor, the maker of Toyota Corolla, recorded a 34 per cent decline in net profit to Rs908 million in the first half of fiscal 2010-11 primarily due to higher cost pressures and lower other income.

Manufacturing operations were affected by rising input cost due to depreciation of the rupee against Japanese yen and other inflationary pressures, said the company in a press release. The result was accompanied by a dividend announcement of Rs5 for every Rs10 ordinary share, according to a communique sent to the Karachi Stock Exchange on Tuesday. The company’s gross margins declined by 250 basis points to 5.2 per cent in the period under review compared with 7.7 per cent in the first half of 2009-10, The impact of political uncertainty compounded with a general slowdown in the economic environment resulting from rising interest rates, limited credit availability for auto financing, depreciation of the Pak Rupee against major currencies, unprecedented rise in prices of oil, steel and other inputs, inflation, etc impacted the demand negatively. Indus Motor has requested the government to take note of the recommendations made by the Pakistan Automobile Manufacturers Association to accelerate growth of the local industry and withdraw the 5% Federal Excise Duty and increase of 1% Sales Tax, amongst other measures. The combined sale of Toyota and Daihatsu brands in the first half ended December 2010 grew by eight per cent to 22,903 units compared with 21,300 units sold in the same period last year. With the country’s macroeconomic indices showing some signs of modest recovery, the company expects the second half of fiscal 2011 to be better for the auto industry. However, the earnings will remain under pressure owing to continuous depreciation of the rupee and relaxation allowed by the government in used car imports. The government recently allowed imports of used cars up to five-year-old compared to the previous three- year benchmark, which may drive up competition. Financial ratios are a useful by product of financial statement and provide standardized measures of business financial position, profitability and riskiness. It is an important and powerful tool in the hands of financial analyst. By calculating one or other ratio or group of ratios he can analyze the performance of a business from the different point of view. The ratio analysis can help in understanding the liquidity and short-term solvency of the business, particularly for the trade creditors and banks. Long-term solvency position as measured by different debt ratios can help a debt investor or financial institutions to evaluate the degree of financial risk. The operational efficiency of the business in utilizing its assets to generate profits can be accessed on the basis of different turnover ratios. The profitability of the firm can be analyzed with the help of profitability ratios. However, the ratio analyses suffer from different limitations also. The ratios need not be taken for granted and accepted at face values. These ratios are numerous and there are wide spread variations in the same measure. Ratios generally do the work of diagnosing a problem only and failed to provide the solution to the problem.


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Indus Motor Co. Final Project-2

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