CHAPTER-I

INTRODUCTION

FUNDS FLOW STATEMENT

INTRODUCTION
The basic financial statements i.e., the Balance Sheet and Profit & Loss A/c or
Income Statement of business reveals the net effect of various transactions on operational
and financial position of the company. The balance sheet gives a summary of the assets &
liabilities of an undertaking at a particular point of time.

There are many transactions that take place in an undertaking and which do not
operate Profit & Loss A/c. Thus another statement has to be prepared to show the change in
Assets & Liabilities from the end of one period of time to the end of another period of time.
The statement is called a statement of changes in financial position or a Funds Flow
Statement.
The Funds Flow Statement is a statement which shown the movement of funds and is
a report of financial operations of business undertaking. In simple words it is a statement of
source and application of funds.

MEANING & CONCEPT OF FUNDS

The term Fund has been defined and interpreted differing by different experts.
Broadly the term fund refers to all the financial resource of the company on the other
extreme fund has been understood as cash only. The most acceptance meaning of the fund
is working capital.
Working Capital is excess of current assents over current liability. The term fund has a
variety of meaning.
A) CASH FUND OR NARROW SENSE
In a narrow sense, funds mean only cash. Cash flow statement portrays net effect of
various business transactions cash into account receipts & disbursement of cash.

The concept of preparing funds from statement is not accepted, as there are many
such transactions that do not affect cash but represent the flow of fund.
For Ex:
Purchase of furniture on credit does not affect cash but there is flow of fund.
B) CAPITAL FUND (or) BROADER SENSE
Here funds means all financial resources used in business, whether in the form of
men, money, material, machine & others.
C). NET WORKING CAPITAL (or) POPULAR SENSE
Networking capital means differences between current assets & liabilities. A fund
generally refers to cash or cash equipment or to working capital.
In any business we cannot under estimate the flow of funds from two operations.
The business runs with funds but the organization knows how to flow of funds.
The Funds Flow Statement is concerned with sources and applications of
organization.
Statement of changes in working capital shows the increase or decrease in the
working capital.
Funds from Operations statement shows how much funds from operations.

NEED AND IMPORTENCE OF STUDY

Many business owners disregard the importance of Funds flow statements because they
unwittingly believe that their current financial standing can be construed from other financial
reports and projections. Unfortunately, however, a Funds flow statement is necessary to
adequately assess the incoming and outgoing flow of Funds and other resources in a
business.
Not only will a business owner with a Funds flow system be more aware of his or her
financial standing, but it will also help investors to make educated decisions on future
investments. A business with regular and reliable Funds flow statements shows more
economic solvency, and is more attractive to investors.
A Funds flow statement documents the incoming and outgoing Funds in plain terms. Future
sales and sales made for credit (unless they have been paid off) are not included in the Funds
flow statement, and most of the data will come from core operations. Payables and
receivables should be expressly defined, as should depreciation of product value and
inventory that has not yet been moved.
This will allow a business owner to compare past periods with the current financial standing
and determine whether your receivables have increased or decreased.
This can also help to track your investments next to your receivables and payables. Are your
investments increasing or decreasing in value? And has your inventory moved at a steady
pace? New or expanding businesses can expect to see a decrease in Funds flow, but this
doesnt mean that the business is going under. More stables businesses should see a steadily
increase in Funds flow over a period of several months or years.
There are typically five different sections in a Funds flow statement, though large businesses
might have more complex Funds flow systems as required.

OBJECTIVES OF THE STUDY

To know the operational efficiency of PHOENIX MOTORS PVT LTD

To show the manner in which the operations have been financed , and how the
financial resources have been used.

To analyze the movement of funds between the dates of two balance sheets in period
of study.

To identify the changes in the working capital in between above mentioned year.

To improve the financial performance of the company.

It focuses attention on resources available for capital investment.

They provide usefull guide to creditors & lenders

SOURCES OF DATA
SECONDARY DATA
The secondary data was collected form already published sources such as annual
reports, returns and internal records.
THE DATA COLLECTION INCLUDES:
a. Data collected from annual reports of PHOENIX MOTORS PVT LTD).
b. Reference form JOURNALA AND PERIODICAL relating to financial management.
RESEARCH TOOLS:

Funds Flow Statement

Tools of Analysis

Various statistical tools such as percentages averages were used to process the date, of
effectiveness of funds flow in organization & management in Hero MotoCorp Ltd
(PHOENIX MOTORS PVT LTD).

Research Design:

Analytical Study

Data Sources

Secondary Data

SCOPE OF THE STUDY:

Financial analysis consists of ratio analysis and funds flow analysis. To know funds
flow from one to one, as the time available is very limited and the subjects are very vast, the
study is continued to overall financial condition of a firm. This study is to know working
capital increase or decrease funds from operation, sources and application of funds of M/S
PHOENIX MOTORS PVT LTD.
Financial analysis consists of funds flow analysis. To know funds flow from one to
one, as the time available is very limited and study is continued to over all financial
condition of a firm. The study to know working capital increase or decrease, funds from
operation, source and application of funds

LIMITATIONS OF THE STUDY:

The study is only pertaining to PHOENIX MOTORS PVT LTD.

The period of study is of 4 years and the performance evaluation is also
limited to 4 years.
The study is purely based on the data available the form of annual reports...
Analysis is only means and not an end itself; different people interpret the
same analysis in different ways.
The over all financial performance is taken into consideration with out taking
into account the minute values or individual values.
This study is conducted with in a short period. The time factor is also a limitation.

ORGANIZATION OF THE STUDY

Organization of the study deals with the arrangement of the entire study
Chapter-I:
It Deals with need and Importance, Object of the study and scope of the study and also the
methodology of the study and limitations of the study.
Chapter-II:REVIEW OF LITERATURE
Chapter-III:
The profile of the company:
It explains the total process of organization and also the history including the future in the
organization
Chapter-IV:
Data Analysis and Interpretation:
It explains the total Practical analysis of our raw data given by the organization with the help
of formulas and theorys.
Chapter-V:
Highlight summary of findings and conclusions
Offer suggestions and recommendations

CHAPTER-II
REVIEW OF LITERATURE

REVIEW OF LITERATURE
Ever since the evolution of the concept of working capital, several
authors have attempted to analyze the concept by defining it so that the
components of working capital are properly identified. In doing so,
quantitative and qualitative characteristics of working capital are also identified
to make working capital analysis for meeting specific needs. These efforts
have offered further scope to the authors to approach this topic in the
context of management of components of working capital in many ways.
Such approaches have also facilitated evolution of techniques to manage
working capital. Each of these approaches has their own basis and
justification. Views expressed by various authors suggest further need to
analyze working capital management issues. Review of some of the
studies carried out and suggestions offered by eminent authors on the
subject have helped in formulating the theme meaningfully and to carry
out the study in line with the objective and scope.
A sincere effort has been made for comprehensive review of literature on
working capital management in general and small enterprises in particular,
reveal the following:
Diversity in Approaches to Working Capital Concepts
Various authors have formulated working capital theories with
diverse perceptions, using both gross working capital concept and net
working capital concept. The theories that used gross working capital
concept were based on the patterns of utilization of funds, in terms of
investment in current assets. Thus by literal meaning, if investment in fixed
assets is to be regarded as fixed capital, investment in current assets
could be termed as working capital, since the current assets are considered as
means to utilize the fixed assets productively and profitably. Most of the
authors have supported this view and consider working capital as current
10

assets only, treating the sources of funds for investment in short term current
assets as a distinct aspect.
Quantitative Definition of Working Capital
Mead Edward Field KennethBaker and Mallot have suggested for the
quantitative approach to define working capital. They have suggested that
the whole of the current assets help to earn profits and prudent financial
management calls for efficient utilization of total current assets and their
contribution of fixed assets to device desired profits. They have suggested that
working capital should be considered as current assets only because,
a. Both fixed assets and current assets help an enterprise make profits.
While fixed assets are means to produce, current assets are means to
operate these fixed assets and thus generate profits. While theoretically
fixed assets are termed as fixed capital investment, current assets therefore
should be termed as working capital, and
b. The management is generally concerned with the total amount of finds
available in terms of current assets for meeting the operational
requirements. The sources of funds for such current assets are treated as a
different aspect.
Adam Smith has supported this view. According to him "the goods of a
merchant yield him no revenue of profit till he sells them for money and the
money yield him a little till it is again exchanged for good. His capital is
continuously going from him in one shape and returning to him in another,
and it is only by means of such circulation or successive exchanges, that
can yield him any profit. Such capital, therefore, may very appropriately
be called circulating capital (current assets)".4
William H. Husband and James C. Dockery have also supported the
quantitative definition of working capital on the grounds that "Despite the
11

uncertainty of quantitative concept of working capital, it provides more

objective basis of determining the type and the amount of financing".5
J. I. Bogen has considered that working capital is the total of current
assets of an
enterprise which circulates from one form to another, for instance, from
cash to inventories, from inventories to receivables and from receivables
to back into cash.
Thus, the capital that circulates, equal the total current assets of an
enterprise. Hence, working capital and current assets are interchangeable
terms.6 C. W. Gesten Berg has further supported the views of Professor
Bogen and considered working capital as the total of current assets of an
enterprise which circulates from one from to another.7 Some others,
however, have used the net working capital concept indicating that
working capital comprises the sum of current assets and correspondingly,
resources of the enterprise for investment in such current assets will have
to be necessarily considered while assessing working capital in an enterprise.
Qualitative Definition of Working Capital
In Accountants' Handbook it has been stated that a statement of working
capital (excess of current assets over current liabilities) is designed to
emphasize the current financial position.8
Authorities like Lincon, Saliers and Stevens have suggested that:9,10,11
a. What matters in the long run is the surplus of current assets over
current liabilities
and not the absolute quantum of current assets,
b. This concept of working capital helps the investors and creditors of an
enterprise to
judge its financial soundness and margin of safety.
12

c. It is a dependable source to meet the contingencies since the

enterprise has no
obligation to this amount, and
d. It is useful in assessing financial position of the enterprises possessing
the same amount of current assets.
According to Dr. Colin Park and Professor J. W. Gladson, working capital is
defined as the excess of current assets of business (cash, accounts
receivables, inventories) over current items owed to employees and others
(such as salaries, wages, and accounts payable, taxes owed to
government).12
As defined by the National Council of Applied Economic Research,
working capital is taken as the total current assets or as the excess of
current assets over current liabilities.13
7 Gestern Berg C.W., "Financial Organization and Management", New York,
Prentice Hall, 1959, p.282.
8 American Institute of Accountants, "Committee on Accounting Procedure",
New York, Restatement and
9 Revision Accounting Research Bulletin No.43, 1952.
10 Lincoln E.E., "Applied Business Finance", New York, McGraw Hill.
11 Saliers E.A., "Hand Book of Corpration Management and Procedure",
12 Stevens W.M., "Financial Organization and Administration", New York,
McGraw Hill, 1934, p.84.
13 Park C. and Gladson J.W., "Working Capital", New York, The Macmillan,
1963.
14 National Council of Applied Economic Reseach, "Structure of Working
Cpital", New Delhi, 1966.

13

According to Harry G. Guthman and Herbert E. Dougall, "working capital

is the excess of current assets over current liabilities".14William H. Husband
and James. Dockery have suggested that, "working capital comprises the
sum of current assets, and it takes into consideration all the current
resources of the enterprise, and their application to the current and future
activities".15
Some authors have, however, clarified that only that part of the long
term source of an enterprise which has been utilized for investment in
current assets should be termed as working capital. In the absence of any
universally accepted concept of working capital, earlier research studies
were based on both these concepts. The gross working capital concept
was considered for

studies

on management of working capital in an

enterprise while the net working capital concept was considered for studies on
financial position of an enterprise with specific reference to liquidity.A sincere
review of theoretical concepts and research studies on working capital
management has helped to adopt the "Gross Working Capital Concept".
Review of Earlier Studies in Working Capital Management in Enterprises
Considerable numbers of studies have been done in the area of working
capital management in enterprises. The studies have considered overall
management

of working capital as also the management of individual

component of working capital.This

chapter

highlights

the

review

of

previous literature and tries to provide necessaryinformation about what is

already known and what is unknown, also describe shortcoming and
strengths and in where they are agreed/disagreed. This study emphasizes
that prior to the initiation of this study other researchers in this areas have
been developed but this study will try to find out the new answers for
the new developed questions that have been described under the problem under
the study.
14

Working Capital Management

Research studies on working capital management pertaining to small scale
undertakings are found to be very limited which pinpoints the very cant
attention paid to this particular area of financial management.Sagan's theory
of working capital management has advocated that working capital
management should be linked with the objectives of liquidity and
profitability of the enterprise. He also has suggested that working capital
management should aim at stability and growth of the enterprise.However,
Sagan's theory has put emphasis on cash management, on the assumption
that in an enterprise, it is cash which is more liquid and difficult to
manage than other components of working capital i.e., inventories
and receivables. Sagan's theory also further stated that a high level of
sales in an enterprise calls for large cash balances.16 ABDE. L. Motall has
observed that the largest portion of a financial manager's time is
utilized in the management of working capital. He also has noticed that
shortage of working capital so often advocated as the main cause of
failure of an enterprise, is nothing but the evidence of mismanagement of
working capital, which is so common.17 Earnest W. Walker in his study of
nine enterprises has indicated that the level of working capital and rate
of return are not directly related. It was more a change in working
capital than its level that caused a gain or loss to an enterprise. The study
also has revealed that a decrease in working capital resulted in an
increase in the rate of return while an increase in working capital
generally has resulted in a decrease in the rate of return.18 Chadda (1964)
assessed inventory management practices of Indian companies. The

15

application of modern inventory control techniques like operations

research has been suggested for the advantage of companies. As far back as in
1966, the first and foremost study on working capital management in
relation to Indian industry was compiled and published under the caption
Structure of Working Capital by the National Council of Applied
Economic Research (NCAER,1966).The study was confined to the
analysis of the composition of working capital,19with special reference to
three types of industries viz., Fertilizers, Cement and Sugar.The principal
objective of this study was to examine as to what extent these three
industries controlled and utilized working capital components. The study
has revealed that there had been excessive working capital funds locked
up in most of these industries. It finally concluded that the need of the
hour was to establish good accounting and costing systems, including new
techniques of inventory management in each company of these three key
industries.
16 John Sagan, "Towards a Theory of Working Capital Management", The
Journal on Finance, 1955, pp.124-129.
17 ABD E.L. Motall M.H.B., "Working Capital:its role in the short run liquidity
policy of industrial
concern, Accounting Research", Vol. IX, 1958.
18 Walker E.W., "Towards the theory of working capital, The Engineering
Economist", 1964, pp.21-35.
19 National Council of Applied Economic Research, Structure of Working
Capital, NCAER, New Delhi,1966.
Jerome B. Cohen and Sydney M. Robbins have suggested that to assess an
ideal level,20
Operating cycle method has been considered as an effective tool, through
which the flow of cash invested is identified throughout, from the stage
16

of procurement of raw material to finished goods and flow of cash back

to business through cash sales or collections from debtors. In practice,
however, there may be subsidiary flows and circuits existing alongside the
mainstream of enterprise flows. Van Horne, in his study on working capital
during 1969, has observed that if the level of liquid assets in an enterprise
is reduced, its ability to meet the current obligations would also reduce.
Based on this, his study was an examination of liquid assets and the current
obligations of an enterprise as separate issues. The liquid assets considered
forthe study were only cash and marketable securities, for the purposes of
ascertaining the liquidity. On this basis Van Horne emphasized that the
risk of an enterprise in meeting the current obligations increases, when the
liquid asset's position decreased.21 The welter study on the other hand has
focused more on the profitability goal of working capital management. A
unique feature of this study was to identify 'delay centers' located
throughout the production and marketing function, and work out the
possibility of reducing delays occurring in various delay centers.
Reduction in delays would eventually reduce working capital investment by
the firm.22
Appavadhanulu in his study of working capital and choice of
techniques has stated that the period of production in an enterprise depends
on technical factors. In view of this, the techniques of production either
increase or decrease the length of production, which in turn, change the
amount of working capital.23
20 Jerome B. Cohen and Syndney M. Robbins, "The Financial Manager",
Harper and Row, New York,
1968, p.307.
21 James C. Van Horne, "A risk-return analysis of a firm's working capital
position, The Engineering
17

Economist", 1969, pp.71-88.

22 Paul Welter, "How to calculate taxing possible through reduction of working
capital, Financial
Executive", 1970, pp.50-58.
23 Appavadhanulu, "Working Capital and choice of techniques, The Indian
Economic Journal", July-

September,pp.34-41.

The study carried out by Chakraborthy has pointed out two issues, ViZ.,
the relationship of return on capital employed to excessive or insufficient
working capital and estimation of working capital through relating operating
cycle and operating expenses.24 Mishras (1975) work was based on the case
studies of working capital management in six central public sector
enterprises in India for the period 1960-61 to 1967-68. His study has
identified inventory, receivables, cash and working finance as the four
problem areas of working capital confronting public enterprises. The
study has also included large-scale units, promoted by the Central
Government such as Fertilizer Corporation of India Limited (FCI),
Hindustan Steel Limited (HSL), Heavy Electrical India Limited (HEI),
National Coal Development Corporation Limited (NCDC) and
Instrumentation Limited (INS). After a thorough probe into the problems
of working capital management in these enterprises, he has pointed out
the need for efficient and effective utilization of working capital, as it was a
neglected area hitherto affecting the profitability.
Smith has observed that working capital management is concerned
with the problems that arise in attempting to manage the current assets, the
current liabilities and the inter- relationship that exists between them.25
a basic study by Misra on problem of working capital in selected
enterprises has indicated that,
a. They have not been able to manage working capital efficiently,
18

b. Inventory constituted a major component in the current assets,

c. Inventory management and receivables management were inefficient, and
d. There were disproportionately high levels of cash due to improper
planning andcontrol.26
Weston and Brigham have stated that there are many aspects of
working capital management, which make it an important function of the
financial manager.27 Gitman has suggested that the goal of working capital
management is to manage each of the firm's current assets and current
liabilities in such a way that an acceptable level of net working capital is
maintained.28
24 Economic and Political Weekly", August 1973, pp.1769-2776.
25 Smith K.V., "Management of working capital", New York, West Publishing
Company, 1974, p.5.
26 Ram K. Misra, "Problems of working capital (with special reference to
selected public undertaking IN India)", Somaiya Publications (p) Ltd., Bombay,
1975.
27 Weston Fred j. and Eugene Brigham F. "Managerial Finance", New York,
Dryden Press, 1975, pp.123-124.
28 Lawrence J. Gitman, "Principles of Managerial Finance", Harper and Row
Publishers, 1976.

19

Salient Feature
1. The earlier studies on working capital management in small enterprises
have not been addressed to specific present issues but were related to
small enterprises in general.The present study has considered surveying the
extent of inventory level maintained by the sample units. The research has
also included the study of various inventory control technique used by
samples units. All these and other allied questions such as impact of
under-utilization of the available resources, unpredictable environmental
situations, lack of regular supply of materials, and lack of control on
investment in inventories form the subject matter of this study.
2. Working capital management in an enterprise depends upon a number
of variables like operating cycle, storage period of inventories, cash
holding, credit period to customers, credit period from suppliers etc. Only a
few studies with particular reference to small enterprises have highlighted
such dependency by working capital on the variables cited. Even those
studies neither consider all the dependent variables of working capital,
nor the impact of dependency by working capital on such variables
analyzed in depth. The present study highlights the requirement by making
quantitative analysis of dependency of working capital on selected variables.
Some variables are considered for such analysis to focus the finding on
more prominent variables.
Accordingly, the following variables are identified for statistical analysis:
Application of the managerial skills for holding cash,
Creation of the motivating behavior in manpower,
Application of the economic order quantity,
Use of the coordination on operations,
Application of the credit policy,
20

 Effect on the business cycle,

Effect on the assigned planning,
Effect on the current decision making,
Effect on the improper flows of operations,
Attempt to reduce uncertainty,
Delay in the product delivery,
Irregular flows of the work,
Reduction in the volume of output,
Effect on the opportunity cost,
Effect in the direct-indirect costs,
Effect on the activities of sales, operating and financial, and

21

CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE

22

HISTORY OF THE TWO WHEELERS:

The Britannica Encyclopedia a motorcycle as a bike or tricycle propelled by an
internal combustion engine (or, less often by an electric engine). The automobile was the
reply to the 19th century reams of self-propelling the horse-drawn bikeriage. Similarly, the
invention of the motorcycle created the self propelling bicycle. The first commercial
design was three-wheeler built by Edward Butler in Great Britain in 1884. This employed a
horizontal single-cylinder gasoline engine mounted between two steer able front wheels and
connected by a drive chain to the rear wheel. The 1900s saw the conversion of many
bicycles or pedal cycles by adding small, centrally mounted spark ignition engine engines.
There was then felt the need for reliable constructions. This led to road trial tests and
competition between manufacturers. Tourist Trophy (TT) races were held on the Isle of
main in 1907 as reliability or endurance races. Such were the proving ground for many new
ideas from early two-stroke-cycle designs to supercharged multivalent engines mounted on
aerodynamic, bikebon fiber reinforced bodywork.
INVENTION OF TWO WHEELERS:
The invention of two wheelers is a much-debated issue. Who invented the first
motorcycle? May seem like a simple question, safety, bicycle, i.e., bicycle with front
and rear wheels of the same size, with a pedal crank mechanism to drive the rear wheel.
Those bicycles in turn described from high-wheel bicycles. The high wheelers descended
from an early type of pushbike, without pedals, propelled by the riders feet pushing against
the ground. These appeared around 1800, used iron banded wagon wheels, and were called
bone-crushers, both for their jarring ride, and their tendency to toss their riders. Gottiieb
Daimler (who credited with the building the first motorcycle in 1885, one wheel in the front
and one in the back, although it had a smaller spring-loaded outrigger wheel on each side. It
was constructed mostly of wood, the wheels were of the iron-banded wooden-spooked
wagon-type and it definitely had a bone-crusher chassis!

23

FURTHER DEVELOPMENTS:
Most of the developments during the early phase concentrated on three and fourwheeled design since it was complex enough to get the machines running with out having to
worry about them falling over. The next notable two-wheeler though was the Hildebrand &
Wolf Mueller, patented in Munich in 1894. In 1895, the French firm of DeDion-button built
and engine that was to make the mass production and common use of motorcycle possible.
The first motorcycle with electric start and a fully modem electrical system; the Hence
special from the Indian Motorcycle Company astounded the industry in 1931. Before World
War 1, IMC was the largest motorcycle manufacturer in the world producing over 20000
bikes per year.
INCREASING POPULARITY:
The popularity of the vehicle grew especially after 1910, in 1916; the Indian
motorcycle company introduced the model H racer, and placed it on sale. During World War
1, all branches of the armed forces in Europe used motorcycles principally for dispatching.
After the war, it enjoyed a sport vogue until the Great Depression began in motorcycles
lasted into the late 20th century; weight the vehicle being used for high-speed touring and
sport competitions. The more sophisticated of a 125cc model. Since then, an increasing
number of powerful bikes have blazed the roads.
HISTORICAL INDUSTRY DEVELOPMENTS:
Indian is the second largest manufacturer and producer to two wheelers in the World.
It stands next only to Japan and China in terms of the number of V produced and domestic
sales respectively. This destination was achieved due to variety of reason like restrictive
policy followed by the government of India towards the passenger bike industry, rising
demand for personal transport, inefficiency in the public transportation system etc. The
Indian two-wheelers industry made a small beginning in the early 50s when Automobile
products of India (API) started manufacturing scooters in the country. Until 1958, API and
Enfield were the sole producers.
24

The two wheelers market was opened were opened to foreign competition in the
mid-80s. And the then market leaders-Escorts and Enfield were caught unaware by the
onslaught of the 100cc bikes of the four Indo- Japanese joint ventures. With the availability
of fuel-efficiency low power bikes, demand swelled, resulting in Hero Honda then the only
producer of four stroke bikes (100cc category), gaining a top slot.
The first Japanese motorcycles were introduced in the early eighties. TVS Suzuki
and Hero Honda brought in the first two-stroke and four-stroke engine motorcycles
respectively. These two players initially started with assembly of CKD Kits, and later on
progressed to indigenous manufacturing.
The industry had a smooth ride in the 50s, 60s and 70s when government prohibited
new entries and strictly controlled capacity expansion. The industry saw a sudden growth in
the 80s. The industry witnessed a steady of 14% leading to a peak volume of 1.9 mn
vehicles in 1990.
In 1990 the entire automobile industry saw a drastic fall in demand. This resulted in a
decline of 15% in 1991 and 8% in 1992, resulting in a production loss of 0.4mn vehicles.
Barring Hero Honda, all the major producers suffered from recession in FY93 and FY94.
Hero Honda showed a marginal decline in 1992.
The reason for recession in the sector were the incessant rise in fuel prices, high input
costs and reduced purchasing power due to significant like increased production in 1992, due
to new entrants coupled with recession in the industry resulted in companies either reporting
losses or a fall in profits.
CONCLUSION:
The two-wheelers market has had a perceptible shift from a buyers market to a sellers market
with a variety of choice, players will have compete on various fronts viz. pricing, technology
product design, productivity after sale service, marketing and distribution. In the short term,
market shares of individual manufacturers are going to be sensitive to capacity, product
acceptance, pricing and competitive pressures from other manufacturers.
25

As incomes grow and people grow and people feel the need to own a private means of
transport, sales of two-wheelers will rise.

Penetration is expected to increase to

approximately to more than 25% by 2005.

The motorcycle segment will continue to lead the demand for two-wheelers in the
coming years. Motorcycle sale is expected to increase by 20% yoy as compared to 1%
growth in the scooter market and 3% by moped sales respectively for the next two years.
The four-stroke scooters will add new dimension to the two-wheeler segment in the coming
future.
The Asian continent is that largest user of the two-wheelers in the world. This is due to poor
road infrastructure and low per capita income, restrictive policy on bike industry. This is due
to oligopoly between top five players in the segment, compared to thirsty manufacturers in
the bike industry.
Hero Honda motors LTd., is one of the leading companies in the two-wheeler
industry. At present it is the market leader in the motorcycle segment with around 47% the
market share during FY 2000 01. During the year, company posted a 41.15% yoy rise in
turnover to Rs.31, 686.5mn in motorcycles which driven by a 35.17% yoy rise in Motorcycle
sales volumes. The company has emerged as one of the most successful players, much ahead
of its competitions an account of its superior and reliable product quality complemented with
excellent marketing techniques. The company has been consistently addressing the growing
demand for motorcycles and has been cumulative customer base of over 4 million customers,
which is expected to reach 5min mark with rural and semi-urban segment being the new
class of consumers.

26

COMPANY PROFILE

27

CORPORATE PROFILE
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer
of two - wheelers, based in India.
In 2001, the company achieved the coveted position of being the largest two-wheeler
manufacturing company in India and also, the 'World No.1' two-wheeler company in terms
of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this
position till date.
Today, every second motorcycle sold in the country is a Hero Honda bike. Every 30 seconds,
someone in India buys Hero Honda's top-selling motorcycle Splendor.
Vision
The Hero Honda story began with a simple vision the vision of a mobile and an
empowered India, powered by Hero Honda. This vision was driven by Hero Hondas
commitment to customer, quality and excellence, and while doing so, maintaining the
highest standards of ethics and societal responsibilities. Hero Honda believes that the fastest
way to turn that dream into a reality is by remaining focused on that vision.
Strategy
Hero Hondas key strategy has been driven by innovation in every sphere of activity
building a robust product portfolio across categories, exploring new markets, aggressively
expanding the network and continuing to invest in brand building activities.
Manufacturing
Hero Honda bikes are manufactured across three globally benchmarked manufacturing
facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of
Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar,
in the hill state of Uttrakhand.
Technology
In the 1980s Hero Honda pioneered the introduction of fuel-efficient, environment friendly
four-stroke motorcycles in the country. Today, Hero Honda continues to be technology
28

pioneer. It became the first company to launch the Fuel Injection (FI) technology in Indian
motorcycles, with the launch of the Glamour FI in June 2006.
Products
Hero Honda's product range includes variety of motorcycles that have set the industry
standards across all the market segments. The company also started manufacturing scooter in
2006. Hero Honda offers large no. of products and caters to wide variety of requirements
across all the segments.
Distribution
The company's growth in the two wheeler market in India is the result of an intrinsic ability
to increase reach in new geographies and growth markets. Hero Honda's extensive sales and
service network now spans close to 4500 customer touch points. These comprise a mix of
authorized dealerships, Service & Spare Parts outlets, and dealer-appointed outlets across the
country.
Brand
The company has been continuously investing in brand building utilizing not only the new
product launch and new campaign launch opportunities but also through innovative
marketing initiatives revolving around cricket, entertainment and ground- level activation.
Hero Honda has been actively promoting various sports such as hockey, cricket and golf.
Hero Honda was the title sponsor of the Hero Honda FIH Hockey World Cup that was
played in Delhi during Feb-March 2010. Hero Honda also partners the Commonwealth
Games Delhi 2010.
2010-11 Performance
Total unit sales of 54,02,444 two-wheelers, growth of 17.44 per cent
Total net operating income of Rs. 19401.15 Crores, growth of 22.32 per cent
Net profit after tax at Rs. 1927.90 Crores
Total dividend of 5250% or Rs. 105 per share including Interin Dividend of Rs. 70 per share
on face value of each share of Rs. 2 each
29

EBIDTA margin for the year 13.49 per cent

EPS of Rs. 96.54
2009-10 Performance
Total unit sales of 46,00,130 two-wheelers, growth of 23.6 per cent
Total net operating income of Rs. 15860.51 Crores, growth of 28.1 per cent
Net profit after tax at Rs. 2231.83 Crores, growth of 74.1 per cent
Final dividend of 1500% or Rs. 30 per share on face value of each share of Rs. 2
EBIDTA margin for the year 17.4 per cent
EPS of Rs. 111.77, growth of 74.1 per cent
HERO HONDA'S MISSION
Hero Hondas mission is to strive for synergy between technology, systems and human
resources, to produce products and services that meet the quality, performance and price
aspirations of its customers. At the same time maintain the highest standards of ethics and
social responsibilities.
This mission is what drives Hero Honda to new heights in excellence and helps the
organization forge a unique and mutually beneficial relationship with all its stake holders.
HERO HONDA'S MANDATE
Hero Honda is a world leader because of its excellent manpower, proven management,
extensive dealer network, efficient supply chain and world-class products with cutting edge
technology from Honda Motor Company, Japan. The teamwork and commitment are
manifested in the highest level of customer satisfaction, and this goes a long way towards
reinforcing its leadership status

30

BOARD OF DIRECTORS
No.

Name of the Directors

Designation

Mr. Brijmohan Lall Munjal

Chairman & Whole-time Director

Mr. Pawan Munjal

Managing Director & C.E.O.

Mr. Toshiaki Nakagawa

Joint Managing Director

Mr. Sumihisa Fukuda

Technical Director

Mr. Sunil Kant Munjal

Non-Executive Director

Mr. Suman Kant Munjal

Non-Executive Director

Mr. Takashi Nagai

Non-Executive Director

Mr. Yuji Shiga

Non-Executive Director

Mr. Pradeep Dinodia

Non-executive & Independent Director

10

Gen. (Retd.) V. P. Malik

Non-executive & Independent Director

11

Mr. Analjit Singh

Non-executive & Independent Director

12

Dr. Pritam Singh

Non-executive & Independent Director

13

Ms. Shobhana Bhartia

Non-executive & Independent Director

14.

Mr. M. Damodaran

Non-executive & Independent Director

15.

Mr. Ravi Nath

Non-executive & Independent Director

16.

Dr. Anand C. Burman

Non-executive & Independent Director

BRIEF PROFILE OF DIRECTORS

MR. BRIJMOHAN LALL MUNJAL
Mr. Brijmohan Lall Munjal is the founder Director and Chairman of the Company and the $
3.2 billion Hero Group. He is the Past President of Confederation of Indian Industry (CII),
Society of Indian Automobile Manufacturers (SIAM) and was a Member of the Board of the
Country's Central Bank (Reserve Bank of India). In recognition of his contribution to
industry, Mr. Munjal was conferred the Padma Bhushan Award by the Union Government.
Mr. Brijmohan Lall Munjal is currently on the board of the following companies:
No. Name of Company

Nature of Office

Hero Honda Motors Limited

Chairman and Whole-time Director

Hero Honda Finlease Limited

Chairman and Director

Munjal Showa Limited

Chairman and Director

Easy Bill Limited

Director

Rockman Industries Limited

Director
31

Shivam Autotech Limited

Director

KEY MILESTONES OF HERO HONDA

Year

Event

1983 Joint Collaboration Agreement with Honda Motor Co. Ltd. Japan signed
Shareholders Agreement signed
1984
Hero Honda Motors Ltd. incorporated
1985 First motorcycle "CD 100" rolled out
1987 100,000th motorcycle produced
1989 New motorcycle model - "Sleek" introduced
1991 New motorcycle model - "CD 100 SS" introduced
500,000th motorcycle produced
1992 Raman Munjal Vidya Mandir inaugurated - A School in the memory of founder
Managing Director, Mr. Raman Kant Munjal
1994 New motorcycle model - "Splendor" introduced
1,000,000th motorcycle produced
1997 New motorcycle model - "Street" introduced
Hero Honda's 2nd manufacturing plant at Gurgaon inaugurated
1998 2,000,000th motorcycle produced
1999 New motorcycle model - "CBZ" introduced
Environment Management System of Dharuhera Plant certified with ISO-14001 by
DNV Holland
Raman Munjal Memorial Hospital inaugurated - A Hospital in the memory of founder
Managing Director, Mr. Raman Kant Munjal
2000 4,000,000th motorcycle produced
Environment Management System of Gurgaon Plant certified ISO-14001 by DNV
Holland
Splendor declared 'World No. 1' - largest selling single two-wheeler model
"Hero Honda Passport Programme" - CRM Programme launched
2001 New motorcycle model - "Passion" introduced
One million production in one single year
New motorcycle model - "Joy" introduced
32

5,000,000th motorcycle produced

2002 New motorcycle model - "Dawn" introduced
New motorcycle model - "Ambition" introduced
Appointed Virender Sehwag, Mohammad Kaif, Yuvraj Singh, Harbhajan Singh and
Zaheer Khan as Brand Ambassadors
2003 Becomes the first Indian Company to cross the cumulative 7 million sales mark
Splendor has emerged as the World's largest selling model for the third calendar year
in a row (2000, 2001, 2002)
New motorcycle model - "CD Dawn" introduced
New motorcycle model - "Splendor +" introduced
New motorcycle model - "Passion Plus" introduced
New motorcycle model - "Karizma" introduced
2004 New motorcycle model - "Ambition 135" introduced
Hero Honda became the World No. 1 Company for the third consecutive year.
Crossed sales of over 2 million units in a single year, a global record.
Splendor - World's largest selling motorcycle crossed the 5 million mark
New motorcycle model - "CBZ*" introduced
Joint Technical Agreement renewed
Total sales crossed a record of 10 million motorcycles
2005 Hero Honda is the World No. 1 for the 4th year in a row
New motorcycle model - "Super Splendor" introduced
New motorcycle model - "CD Deluxe" introduced
New motorcycle model - "Glamour" introduced
New motorcycle model - "Achiever" introduced
First Scooter model from Hero Honda - "Pleasure" introduced
2006 Hero Honda is the World No. 1 for the 5th year in a row
15 million production milestone achieved
2007 Hero Honda is the World No. 1 for the 6th year in a row
New 'Splendor NXG' launched
New 'CD Deluxe' launched
New 'Passion Plus' launched
New motorcycle model 'Hunk' launched
33

20 million production milestone achieved

2008 Hero Honda Haridwar Plant inauguration

New 'Pleasure' launched
Splendor NXG lauched with power start feature
New motorcycle model 'Passion Pro' launched
New 'CBZ Xtreme' launched
25 million production milestone achieved
CD Deluxe lauched with power start feature
New 'Glamour' launched
2009
Hunk' (Limited Edition) launched
Splendor completed 11 million production landmark
2010

New motorcycle model 'Karizma - ZMR' launched

Silver jubilee celebrations

2011

New model Splendor Pro launched

Launch of new Super Splendor and New Hunk
New licensing arrangement signed between Hero and Honda
Launch of new refreshed versions of Glamour, Glamour FI, CBZ Xtreme, Karizma
Crosses the landmark figure of 5 million cumulative sales in a single year

PROMINENT AWARDS TO THE COMPANY

Year Awards & Recognitions
2011

Two-wheeler Manufacturer of the Year award by Bike India magazine.

Adjudged the "Bike Manufacturer of the Year" at the Economic Times ZigWheels Car
and Bike Awards.
- CNBC Awaaz - Storyboard special commendation for "Effective rebranding of a
new corporate entity" by CNBC Awaaz Consumer Awards
- "Most Recommended Two-Wheeler Brand of the Year" award by CNBC Awaaz
Consumer Awards
34

- Colloquy Loyalty Awards "Innovation in Loyalty Marketing International

2011" for Hero GoodLife
- "Best Activity Generating Short or Long-Term Brand Loyalty" by the
Promotion Marketing Award of Asia Order of Merit for Hero GoodLife
- Ranked No 1 brand in the Auto (Two-Wheelers) category in the Brand Equity
2010
"Most Trusted Brand" 2011 survey
Company of the Year awarded by Economic Times Awards for Corporate Excellence
2008-09.
CNBC TV18 Overdrive Awards 2010 'Hall of Fame' to Splendor
NDTV Profit Car & Bike Awards 2010

Two-wheeler Manufacturer of the Year

CnB Viewers' Choice Two-wheeler of the Year (Karizma ZMR)

Bike Maker of the Year by ET-ZigWheels Car & Bike of the Year Awards 2009
2009 'Two-wheeler Manufacturer of the Year' by NDTV Profit Car & Bike Awards 2009
and Passion Pro adjudged as CNB Viewers' Choice two-wheeler
Top Indian Company under the 'Automobile - Two-wheelers' sector by the Dun &
Bradstreet-Rolta Corporate Awards
Won Gold in the Reader's Digest Trusted Brand 2009 in the 'Motorcycles' category
NDTV Profit Business Leadership Awards 2009 - two-wheeler category

35

2008 NDTV Profit Business Leadership Award 2008 - Hero Honda Wins the Coveted
"NDTV Profit Business Leadership Award 2008"
TopGear Design Awards 2008 - Hunk Bike of the Year Award
NDTV Profit Car India & Bike India Awards - NDTV Viewers Choice Award
to Hunk in Bike category
IndiaTimes Mindscape and Savile Row ( A Forbes Group Venture ) Loyalty
Awards - Customer and Brand Loyalty Award in Automobile (two-wheeler) sector
Asian Retail Congress Award for Retail Excellence (Strategies and Solutions of
business innovation and transformation) - Best Customer Loyalty Program in
Automobile category
NDTV Profit Car India & Bike India Awards - Bike Manufacturer of the year
Overdrive Magazine - Bike Manufacturer of the year
TNS Voice of the Customer Awards:

No.1 executive motorcycle Splendor NXG

No.1 standard motorcycle CD Deluxe

No. premium motorcycle CBZ Xtreme

2007 The NDTV Profit Car India & Bike India Awards 2007 in the following category:

Overall "Bike of the Year" - CBZ X-treme

"Bike of the Year" - CBZ X-treme (up to 150 cc category)

"Bike Technology of the Year" - Glamout PGM FI

"Auto Tech of the Year" - Glamout PGM FI by Overdrive Magazine.

"Bike of the Year" - CBZ X-treme by Overdrive Magazine.
Ranked CBZ X-treme "Bike of the Year" - by B S Motoring Magazine
Most Trusted Company , by TNS Voice of the Customer Awards 2006.

36

CD Deluxe rated as "No 1 standard motorcycle" by TNS Voice of the Customer

Awards 2006.
2006 Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two
Wheeler Company).
One of the 8 Indian companies to enter the Forbes top 200 list of worlds most reputed
companies.
No. 1 in automobile industry by TNS Corporate Social Responsibility Award.
Best in its class awards for each category by TNS Total Customer Satisfaction
Awards 2006:

Splendor Plus (Executive)

CD Deluxe (Entry)

Pleasure (Gearless Scooters)

Splendor & Passion - Top two models in two wheeler category by ET Brand Equity
Survey 2006.
Adjudged 7th Top Indian Company by Wallstreet Journal Asia (Top Indian Two
Wheeler Company).
Top Indian company in the Automobile - Two Wheeler sector by Dun & Bradstreet American Express Corporate Awards 2006.
Hero Honda Splendor rated as India's most preferred two-wheeler brand at the Awaaz
Consumer Awards 2006.
Certificate of Export Excellence for outstanding export performance during 2003-04
for two-wheeler & three- wheelers - Complete (Non SSI) by Engineering Export
Promotion Council.
37

The NDTV Profit Car India & Bike India Awards 2006 in the following category:

Bike Maker of the Year

Bike of the Year - Achiever

Bike of the Year - Achiever (up to 150 cc category)

Bike of the Year - Glamour (up to 125 cc category)

NDTV Viewers' Choice Award to Glamour in the bike category

CORPORATE SOCIAL RESPONSIBILITY (CSR)

STAKEHOLDER TIES AT THE GRASSROOTS
Hero Honda Motors takes considerable pride in its stakeholder relationships, especially
ones developed at the grassroots. The Company believes it has managed to bring an
economically and socially backward region in Dharuhera, Haryana, into the national
economic mainstream.
An Integrated Rural Development Centre has been set up on 40 acres of land along the
Delhi-Jaipur Highway. The Centre-complete with wide approach roads, clean water, and
education facilities for both adults and children-now nurtures a vibrant, educated and healthy
community.
The Foundation has adopted various villages located within vicinity of the Hero Honda
factory at Dharuhera for integrated rural development. This includes:

Installation of deep bore hand pumps to provide clean drinking water.

Constructing metalled roads and connecting these villages to the National Highway
(NH -8).

Renovating primary school buildings and providing hygienic water and toilet
facilities.
38

Ensuring a proper drainage system at each of these villages to prevent water-logging.

Promoting non-conventional sources of energy by providing a 50 per cent subsidy on

biogas plants.

The Raman Munjal Vidya Mandir began with three classes (up to class II) and 55 students
from nearby areas. It has now grown into a modern Senior Secondary, CBSE affiliated coeducational school with over 1200 students and 61 teachers. The school has a spacious
playground, an ultra-modern laboratory, a well-equipped audio visual room, an activity
room, a well-stocked library and a computer centre.
The Raman Munjal Sports Complex has basketball courts, volleyball courts, and hockey
and football grounds are used by the local villagers. In the near future, sports academies are
planned for volley ball and basket ball, in collaboration with National Sports Authority of
India.

Vocational Training Centre

In order to help local rural people, especially women, Hero Honda has set up a Vocational
Training Centre. So far 26 batches comprising of nearly 625 women have been trained in
tailoring, embroidery and knitting. The Company has helped women trained at this centre to
set up a production unit to stitch uniforms for Hero Honda employees. Interestingly, most of
the women are now self-employed.
Adult Literacy Mission
This Scheme was launched on 21st September, 1999, covering the nearby villages of
Malpura, Kapriwas and Sidhrawali. The project started with a modest enrolment of 36
adults. Hero Honda is now in the process of imparting Adult Literacy Capsules to another
100 adults by getting village heads and other prominent villagers to motivate illiterate adults.
Marriages of underprivileged girls
Marriages are organized from time to time, particularly for girls from backward classes, by
the Foundation by providing financial help and other support to the families.
39

Rural Health Care

Besides setting up a modern hospital, the Foundation also regularly provides doorstep health
care services to the local community. Free health care and medical camps are now a regular
feature in the Hero Group's community outreach program
KEY POLICIES

AN ENVIRONMENTALLY AND SOCIALLY, AWARE COMPANY

At Hero Honda, our goal is not only to sell you a bike, but also to help you every step of the
way in making your world a better place to live in. Besides its will to provide a high-quality
service to all of its customers, Hero Honda takes a stand as a socially responsible enterprise
respectful of its environment and respectful of the important issues.
Hero Honda has been strongly committed not only to environmental conservation
programmers but also expresses the increasingly inseparable balance between the economic
concerns and the environmental and social issues faced by a business. A business must not
grow at the expense of mankind and man's future but rather must serve mankind.
"We must do something for the community from whose land we generate our wealth."
A famous quote from our Worthy Chairman Mr.Brijmohan Lall Munjal.
Environment Policy
We at Hero Honda are committed to demonstrate excellence in our environmental
performance on a continual basis, as an intrinsic element of our corporate philosophy.
To achieve this we commit ourselves to:

Integrate environmental attributes and cleaner production in all our business

processes and practices with specific consideration to substitution of hazardous
chemicals, where viable and strengthen the greening of supply chain.

Continue product innovations to improve environmental compatibility.

Comply with all applicable environmental legislation and also controlling our
environmental discharges through the principles of "alara" (as low as reasonably
achievable).

40

Institutionalise resource conservation, in particular, in the areas of oil, water,

electrical energy, paints and chemicals.

Enhance environmental awareness of our employees and dealers / vendors, while

promoting their involvement in ensuring sound environmental management.

Quality Policy
Excellence in quality is the core value of Hero Honda's philosophy.
We are committed at all levels to achieve high quality in whatever we do, particularly in our
products and services which will meet and exceed customer's growing aspirations through:

Innovation in products, processes and services.

Continuous improvement in our total quality management systems.

Teamwork and responsibility.

Safety Policy
Hero Honda is committed to safety and health of its employees and other persons who
may be affected by its operations. We believe that the safe work practices lead to better
business performance, motivated workforce and higher productivity.
We shall create a safety culture in the organization by:

Integrating safety and health matters in all our activities.

Ensuring compliance with all applicable legislative requirements.

Empowering employees to ensure safety in their respective work places.

41

Promoting safety and health awareness amongst employees, suppliers and

contractors.

Continuous improvements in safety performance through precautions besides

participation and training of employees.

INTRODUCTION ABOUT PHOENIX DEALER PROFILE (PHOENIX MOTORS)

PHOENIX MOTORS PVT LTD is dealership type of business. PHOENIX MOTORS
PVT LTD. is established on 21st march 2003. The business is running by only one man.
The owner name is ch .madhu mathi the firm is located at habsiguda in Hyderabad.
Generally the sale will be either on cash basis or on institutional basis. Bank
like ICICI, HDFC and CENTURION are providing loans to customers.
Advertising strategy of phoenix motors:
They are giving the ads through newspapers, wall paintings, hoardings
and field staff. They are upgrading sales by introducing the schemes, group bookings,
institutional sales and customer door-to-door activities.
Categorization of Staff members:
Staff members are categorized for technicians, 25 members are allotted ,
for field staff, 5 members are recruited. for sales , 5 persons are placed. for stores & spare
parts, 5 members are allotted for managerial accounts and another 3 persons for cash
transaction and other members are allotted for remaining work.
42

Customer relationship:
They entertain the showroom providing a customers huge having pool
game, internet facility and television with home there system. They provide bile maintenance
programs on every week.
According to other dealers PHOENIX motors in first in sales and best in service. They treat
customer, is the very important person at PHOENIX motors customer satisfaction is their
motto, why because, they will satisfied customer is the best advertisement. They provide
better value for the customers and as well as employees also. At PHOENIX motors the
customer is the boss.

SALES STRATEGY OF PHOENIX MOTORS:

Average they are selling 25 vehicles per day. PHOENIX motors PVT L.T.D is
the A.P s NO.1 dealership in sales and other activities? It is a QLAD (qualify leader through
quality dealer). At PHOENIX motor they gave the quality service to the customers why
because the cost is long forgotten but the quality is remembered for ever. They treat quality
has a...
Q

Quest for excellence

Understanding customers needs

Action to achieve customers appreciation.

Leadership determined to be a leader

involving all the people

Team spirit to work for a common goal

Yard sticks to measure programs.

WARRANTY ON PROPRIETARY ITEMS:

43

Warranty on proprietary items like Tyros, Tubes and Battery etc, will be directly
handled by the respective original manufactures (OEMs) except AMCO for batteries and
Dunlop and Falcon tires and Tubes. In case of any defect in proprietary items, other than the
above two mentioned OEMS the dealers must approach the Brach office dealer of the
respective manufacture. For AMCO batteries and Dunlop and falcon tires, tubes claims will
be accepted at our authorized dealerships per the mutually agreed terms and conditions
between HERO HONDA and of these two OEMs in case the claim is not accepted for
invalid reasons. Then the claim along with the refusal note form the OEM can be sent to the
warranty section at gorgon plan after due to recommendation of the area service engineer. If
any other six services or subsequent paid services is not availed as per the recommended
schedule given in the owners manual. If HERO HONDA recommended engine oil is not
used. To normal wear & tear components like bulbs, electric wiring, filters, spark plug,
clutch plates, braded shoes, fasteners, shim washers, oil seals, gaskets, rubber parts (other
than tyre and tube) plastic components, chain$ sprockets and in case of wheel

rim

misalignment or bend.
If there is any damage due o modification or fittings of accessories other than ones
recommended by HERO HONDA. If the motor has been used in any competitive events like
tracking races or rallies. If there is any damage to the painted surface due to industrial
pollution or other extraneous factors. For clams made for any consequential damage due to
any previous malfunction. For normal phenomenon like noise, vibration, oil seepage, which
do not affect the performance of the motorcycles.
SOCIAL SERVICE ACTIVITIES
PHOENIX motors participate and conduct social service activities. Recently the
phoenix motors organized a BLOOD DONATION CAMP for the trust on 21 st January
44

2006.they motivated on the consumers to participated in this camp and also provide
certificate for the customers

THE MARKETED BIKES OF PHOENIX (All Hero Moto Corp.)

45

http://www.heromotocorp.com/cddeluxe
http://www.heromotocorp.com/pleasure
http:

//www.heromotocorp.com/splendorplus
http:/

/www.heromotocorp.com/splendornxg
http:

//www.heromotocorp.com/passionpro

46

http:/

/www.heromotocorp.com/supersplendor
http:/

/www.heromotocorp.com/glamour
http:/

/www.heromotocorp.com/splendorpro

47

http:/

/www.heromotocorp.com/glamourpgmfi
http:/

/www.heromotocorp.com/achiever
http:/

/www.heromotocorp.com/cbzxtreme

48

http:

//www.heromotocorp.com/hunk
http:

//www.heromotocorp.com/karizma
http:

//www.heromotocorp.com/karizmazmr

CUSTOMER RELATIONSHIP:
To entertain the customers the showroom providing a customers huge having pool game,
Internet facility and television with home theatre system. They provide bike maintenance
49

programs on every week. According to other dealers PHOENIX motors in first in sales and
best in service. They treat customer, is the very important person at PHOENIX motors
customer satisfaction is their motto, why because, the well satisfied customer is the best
advertisement. They provide better value for the customers and as well as employees also.
At PHONIX motors the customer is the boss.
SOCIAL SERVICE ACTIVITIES
PHOENIX Motors participates in social service activities. The Phoenix motors
organize a BLOOD DONATION CAMP for the trust in every year. They motivated on the
customers to participated in this camp and also provide Certificate for the customers.

50

CHAPTER-IV
DATA ANALYSIS
AND
INTERPRETATION

Composition of current Assets of phoenix motors

(all the amounts are in Cr)
Particulars

2007-08

2008-09

2009-10

2010-11

Avg.

Inventory

317.1

326.83

436.4

524.93

313.473333

Sundry
Debtors

297.44

149.94

108.39

130.59

170.268333

Cash and Bank

131.09

219.57

1907.21

71.52

394.195

Loans &
Advances

185.46

311.26

405.76

728.66

315.7

Other current
Assets

5.69

5.89

24.82

48.87

14.8116667

51

Total

936.78

1013.49

2882.58

1504.57

Composition of current Assets phoenix motors

(all the amounts are in Cr)

The income statement is considered to be the most useful of all financial statements.
It prepared by a business concern in order to know the profit earned and loss sustained
during a specified period. It explains what has happened to a business as a result of
operations between two balance sheet dates. For this purpose it matches the revenues and
cost incurred in the process of earning revenues and shows the net profit earned or loss
suffered during a particular period.
The nature of Income which is a focus of the income statement can be well
understood if business is taken as an organization that uses Input to produce Output. The
output of the goods and services that the business provides to its customers. The values of
these outputs are the goods and services that the business provides to its customers. The
52

values of these outputs art the amounts paid by the customers for them. These amounts are
called revenues in the accounting. The inputs are the economic resources used by the
business in providing these goods and services. These are termed expenses in accounting.

STATEMENT OF CHANGES IN WORKING CAPITAL OF PHOENEX MOTORS

Rs in Crors

Working capital turnover ratio 2011

Working capital turnover ratio

2010

2011

Inventories

436.4

524.93

Sundry Debtors

108.39

130.59

Cash and Bank Balances

1907.21

71.52

Other Current Assets

405.76

728.66

Loans and Advances

24.82

48.84

Total

2882.58

1504.54

Total current Assets

Total Current Liabilities

53

Current Liabilities

3805.06

5063.68

Provisions

1026.35

1081.07

Total

4831.41

6144.75

Net working capital

Increase\decrease in net working
capital

-1948.83

-4640.21

-2691.38

Interpretation:
The networking capital of PHOENEX MOTORS has been decreased to 2691 Cr the
financial position i.e. the performance of PHOENEX MOTORS has increased and the
current assets defects its current liability.

54

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2010-11)

of

phoenix motors

Rs in cr
Source
Issue of share capital
Raising of long term loans
Sale of non-current (fixed) assets
Non-trading receipts
Sale of investment
Decrease in working capital

Rs.
Application
39.94 Funds lost in operation
Repayment of long term loan
32.71
loans
Purchase of long term
424.87
investments
0.00
5128.75
-2691.38
2934.89
TABLE-2

55

Rs.
0.00
4699.94
-1765.05

2934.89

Analysis:
From the table it is observed that the working capital of company shows decreased trend. The
current Asset of the company has decreased Rs 2882.58 in 2010-2011 is 1504.54. But the item
cash balance showing increasing trend. The current liabilities of company are decreased in 2011
2011.In the net working capital of company stood -2691.38. It is decreased in 2010-11. The
decreasing net working capital is Rs 2691.38

Regarding the application of funds 33.71% used for investment in fixed assets and
funds used for working capital purpose. Constitute 30.77% respectively

INTERPRETATION
It is concluded that during the period 2010-11 Increasing gross block and net Decreasing in
working capital.

56

STATEMENT OF CHANGES IN WORKING CAPITAL PHOENIX MOTORS

Rs in crs

Working capital turnover ratio 2010

Working capital turnover ratio

2009

2010

Total current Assets

326.83

436.4

149.94

108.39

219.57

1907.21

311.26

405.76

5.89

24.85

Inventories
Sundry Debtors
Cash and Bank Balances
Other Current Assets
Loans and Advances
Total

1013.49

2882.61

1525.85

3805.06

Total Current Liabilities

Current Liabilities
57

Provisions

Total
Net working capital
Increase\decrease in net working capital

526.97

1026.35

2052.82

4831.4

-1039.33

-1948.79

-909.46

Graph showing STATEMENT OF CHANGES IN WORKING CAPITAL OF PHOENIX

MOTORS

Interpretation:
The networking capital of Hero MotoCorp Ltd has been decreased to 909 Cr the financial
position i.e. the performance of Hero MotoCorp Ltd has increased and the current assets
defects its current liability.

58

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2009-10) OF

PHOENIX MOTORS

Rs in lakhs
Source
Issue of share capital
Raising of long term loans
Sale of non-current (fixed) assets
Non-trading receipts
Decrease in working capital

Rs.
39.94
66.03
340.61
100.41
-909.46

Application
Funds lost in operation
Redemption of pre share capital
Repayment of long term loan
Purchase of long term investments
Dividend Paid

-362.47

Rs.
0.00
0.00
16098.79
-20675.43
4939.11
-362.47

TABLE 2

Analysis:
From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 7885.65 to Rs 1013.49 in 2009-10.
Regarding the application of funds 17.13% used for investment in fixed assets and
funds used for working capital purpose. Constitute 0.84% respectively

INTERPRETATION
The working capital of company shows decreased trend. The current Asset of the company
has decreased and current liabilities are increased in the year.
59

STATEMENT OF CHANGES IN WORKING CAPITAL OF PHOENEX MOTORS

Rs in lakhs

Working capital turnover ratio 2009

Working capital turnover ratio

2008

2009

Total current Assets

Inventories
Sundry Debtors
Cash and Bank Balances
Other Current Assets
Loans and Advances
Total

317.1

326.83

297.44

149.94

131.09

219.57

185.46

311.26

5.69

5.89
936.78

1013.49

1324.98

1525.85

499.76

526.97

1824.74

2052.82

Total Current Liabilities

Current Liabilities
Provisions
Total
60

Net working capital

-887.96

Increase\decrease in net working capital

-151.37

GRAPH SHOWING STATEMENT OF CHANGES IN WORKING CAPITAL OF

PHOENEX MOTORS

Interpretation:
The networking capital of PHOENEX MOTORS has been decreased to 151.37Cr the
financial position i.e. the performance of PHOENEX MOTORS has increased and the
current assets defects its current liability.

61

-1039.33

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2008-09) OF

PHOENIX MOTORS

Rs in lakhs
Source
Raising of long term loans
Sale of non current (fixed) assets
Non-trading receipts
Decrease in working capital

Rs.
Application
39.94 Funds lost in operation
246.09 Repayment of long term loans
109.09 Purchase of long term investments
-151.37
243.75

TABLE 3
GRAPH SHOWING STATEMENT OF SOURCES AND APPILICATION OF FUNDS
FOR THE PERIOD (2008-09) OF PHOENIX MOTORS

ANALYSIS:

62

Rs.
0.00
4032.32
-3788.57
243.75

From the table it is observed that the working capital of company shows decreased
trend. The current Asset of the company has decreased Rs 936.78 in 2008-2009 to Rs 1013.49 in
2007-08.
Regarding the application of funds 2.29% used for investment in fixed assets and funds
used for working capital purpose. Constitute 1.57% respectively.

INTERPRETATION
The working capital of company shows decreased trend. The current Asset of the company
has decreased and the current liabilities of company are increased.

STATEMENT OF CHANGES IN WORKING CAPITAL OF PHOENEX MOTORS

Rs in lakhs

Working capital turnover ratio 2008

Working capital turnover ratio

2007

2008

Total current Assets

Inventories
275.58

317.1

335.25

297.44

35.78

131.09

263.06

185.46

3.6

5.69

Sundry Debtors
Cash and Bank Balances
Other Current Assets
Loans and Advances

Total

909.67

Total Current Liabilities

63

931.09

Current Liabilities

1041.92

1324.98

437.24

499.76

Total

1479.16

1824.74

Net working capital

-569.49

-893.65

Provisions

Increase\decrease in net working capital

-324.16
GRAPH SHOWING STATEMENT OF CHANGES IN WORKING CAPITAL OF
PHOENEX MOTORS

Interpretation:
The networking capital of PHOENEX MOTORS has been decreased to 324 Cr the financial
position i.e. the performance of PHOENEX MOTORS has increased and the current assets
defects its current liability.
64

STATEMENT OF SOURCES AND APPILICATION OF FUNDS FOR THE PERIOD (2007-08) OF

PHOENIX MOTORS
Rs in lakhs

Source
Funds from operations
Raising of long term loans
Sale of non-current (fixed) assets
Non-trading receipts

Rs.
Application
2265.11 Repayment of long term loans
101.14 Purchase of long term investments
1944.29 Increase in Working Capital
102.00

Rs.
2100.56
166.03
2145.55

4412.54

4412.14

TABLE 4

From the table it is observed that the working capital of company shows increased
trend. The current Asset of the company has increased Rs 8167.50 to Rs 10725.94 in 2007-08.
Regarding the application of funds 9.44% used for investment in fixed assets and
funds used for working capital purpose. Constitute 9.84% respectively.

65

INTERPRETATION
The working capital of company shows increased trend. The current Asset of the company has
increased than current liabilities.

NET DECREASE IN WORKING CAPITAL

Rs in Lakhs
Year
2007-08
2008-09
2009-10
2010-11

Increase/Decrease
Decrease
Decrease
Decrease
Decrease

66

Amount
-887.96
-1039.3
-1945.8
-4640.2

INTERPRETATION
The above table we observed that 2007-08 would be decreased by Rs. 887.96 .In the
year 2008-09 the working capital has been decreased by Rs. 1039.3. In the year 2009-10 the
working capital is Rs. 1945.8. In 2010-11 Rs.4640.2 has increased the working capital.

CHAPTER-V
FINDINGS
CONCLUSION
SUGGESTIONS
BIBLIOGRAPHY

67

FINDINGS
1. The PHOENEX MOTORS net working capital is satisfactory between the years
2008-09 since it shows decreasing trend ; but after that it is in declining position.
2. The current ratio of PHOENEX MOTORS is satisfactory during the period of study
2006-07 to 2010-11. It is increased but after that it is declining.
3. The average quick ratio of PHOENEX MOTORS is not good though the quick ratio
is showing maximum value of 6.01 in the year 2007-08and then it is declining to be
deal.
4. Fixed assets turnover ratio of PHOENEX MOTORS increased. The company has to
maintain this.
5. Inventory turnover ratio of PHOENEX MOTORS is also increased gradually, without
any fit falls up to 2007-08. But in the year 2007-08it is declined, and again it has
increased in the year 2010-11. Good inventory management is good sign for efficient
management
6. Total Assets turnover ratio of PHOENEX MOTORS is not satisfactory because it is
always below one, except in the year 2010-11 having a value of 1.03
7. Return on investment is not satisfactory. This indicates that the companys funds are
not being utilized in a better way.

68

CONCLUSION
The PHOENEX MOTORS net working capital is satisfactory between the years since it
shows increasing trend; but after that it is in declining position Profit Margin of PHOENEX
MOTORS is decreasing and showing negative profit because there is increase in the price of
copper The PHOENEX MOTORS Net Working Capital Ratio is satisfactory.
The Operating Ratio of PHOENEX MOTORS isnt satisfactory. Due to increase in cost of
production, this ratio is decreasing. So the has to reduce its office administration expenses
Improve position funds should be utilized properly. Better Awareness to increase the sales is
suggested. Cost cut down mechanics can be employed. Better production technique can be
employed.

SUGGESTIONS
69

 Net working capital is very low; it is suggested to maintain sufficient net working
capital.
Effective inventory management is needed in the company
The firm should increase investment in current assets to create sufficient securities
for the current liabilities
For the improving the financial performance of the company the following
suggestions are made.
In order to reduce the outside borrowings in the company has to acquire. The capital
from equity sources. Keeping in view the debt equity the proportion as normal.
The liquidity of the company should be improved by maintaining the optimum
current assets and liquid assets according to standard norms.

The quantum of the sales generated should be improved impressively in order to

attain higher return on investment.

To improve the financial health of the company and maximizing the time between the
source mobilization and utilization the management must introduce the new cost
saving techniques.

70

BIBLIOGRAPHY
1. Khan, M Y and P K Jain, Financial Management, Tata McGraw-Hi Publishing Co., New Delhi, 2007.
2. I M Pandey, Essentials of Financial Management, Vikas Publishing House Pvt Ltd, New Delhi, 1995.
3. Prasanna Chandra, financial Management, Tata McGraw-Hill Publishing Co., New Delhi, 2007.
4. R.K.SHARMA ,Advanced management , Kalyani publishers (2008)

ANNUAL REPORTS OF PHOENEX MOTORS 2007-2011

www.hero.com
www.ponexherohonda.com
www.indianauto.com

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