Jbml- Ratio Analysis

8/14/2019 Jbml- Ratio Analysis

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PREFACE

As a new paradigm based on proper integration of formal teaching and actual practice,

this Summer Training has been introduced under the Degree of Master of Business

Administration (M.B.A) to get a feel of actual Business Environment.

To bridge the gap between theory & practice and to cultivate proper temperament and

generate much needed morale i.e. to help the students to identify their strong and

week points in the following and appreciating various organizational activities. So

that appropriate measures can be taken at an earliest time.

Finance is the heart of any organization. Proper utilization of financialFinance is the heart of any organization. Proper utilization of financial

resources is necessary for any organization to survive. With the purpose ofresources is necessary for any organization to survive. With the purpose of

getting myself well dressed with the atmosphere of Prevailing industry, I wentgetting myself well dressed with the atmosphere of Prevailing industry, I went

for eight week training at for eight week training at JAY BHARAT MARUTI LIMITEDJAY BHARAT MARUTI LIMITED..

This report presents the workings, findings and recommendations from the study of

Ratio Analysis at Jay Bharat Maruti Limited. It gives the better understanding of the

financial position of JAY BHARAT MARUTI LIMITED.

Finally I shall consider my hard work worthwhile if this endeavor is able to satisfy all

those concerned and proves useful to anyone or for any further study in future.

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ACKNOWLEDGEMENT

This book is the product of many people, first & foremost is Mr. S.K. Arya,

Managing Director of JBML, for providing various facilities during the course of

training.

This project has been made possible through the direct and indirect corporation of

various people to whom I wish to express my appreciation and gratitude. My

intellectual debt is to Mr. N.K MAHEAHWARI (Finance) without whose help and

guidance; I could not have completed the project successfully. The training in a

reputed concern like JAY BHARAT MARUTI LTD was itself a great learning

experience.

Working with them was really a very good & learning experience. I would like to

thank all other staff members of finance department, without their help it would have

been very difficult for me to carry out any of my work successfully; who constantly

inspired me and solved the problems whenever the need arose.

Beside the mixed experience that I had during the course of my study and analysis;

also helped me to learn a lot regarding the actual working of Finance Department. It

also taught me how to take every experience in right spirit and earn from each ones.

Finally I also extend my heartiest thanks to all my friends and well wishers for being

with me and extending encouragement through out the project.

(AMIT BANSAL)

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CONTENTS

S. NO. TOPICS PAGE NO.

1. Maruti Udhyog Ltd. 05-09

(a) Company Background

(b) Joint Venture

2. Company Profile: JBML 10-20

(a)History of Company

(b)Guiding Principles

(c)JBML Product range

(d)MX Department

3. Financial Highlights 21-25

4. Product and Plant Shorts 26-28

5. Income Statement at JBML 29-30

6. Balance Sheet at JBML 31

7. Ratio Analysis 32-60

(a)Liquidity Ratios

(B)Assest management Ratios(c)Financial Leverage Ratios

(d)Profitability Ratios

(e)Market Value Ratios

8. Analysis of JBML 61-65

9. References 66

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MARUTI UDYOG LIMITED

Car market leader Maruti Udyog Limited sold 51,967 vehicles in the domestic market

in April 2007. The company had sold 41,574 vehicles in the domestic market in April

2006. In all, Maruti Udyog Limited sold 43,127 vehicles in April 2006. This includes

1,675 units of exports.

Maruti volume in the domestic A2 segment grew by 28.6 per cent and in the A3 and C

segments by 4.9 per cent during the month compared to sales in April 2006. Total

Income of Rs 134,914.3 million (Net of Excise) during fiscal 2006-07, a growth of

10% over the previous year. Profit before tax went up to Rs 27,499.9 million in 2006-07, a growth of 34.11% over the previous year. Net Profit stood at Rs 16,890.5

million, up 39.29% over fiscal 2006-07.

Total Income (Net of Excise) was Rs 41724.9 million during January-March 2007, a

growth of 19.8% compared to the same period of the previous year. Net Profit for

January-March 2006 stood at Rs 4,809.2 million, up 39.11% over January-March

2006.

New export model

The company also announced that a new export model would be launched during2008-09. This model, while serving the Indian market, would be for export mainly to

Europe. MUL will target to export 100,000 units of this model annually.

MSAIL to merge into MUL

Maruti Udyog Limited (MUL) today announced on April 13, 2006 that its subsidiary,

Maruti Suzuki Automobile India Limited (MSAIL), will merge into MUL.MUL holds

70 per cent stake in MSAIL while Suzuki Motor Corporation (SMC), Japan, holds the

remaining 30 per cent. MUL will buy out the entire 30 per cent stake held by SMC in

MSAIL. This merger will add value for shareholders and eliminate all potential issuesrelating to inter-company transactions.

Demand Drivers

The key factors that determine demand for cars are

Household Income LevelsProduct Availability and Access

Product AffordabilityAvailability of FinanceInfrastructure (Road) Development

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Company Background

Maruti Udyog Limited was incorporated on February 24, 1981, to meet the growing

demand for a personal mode of transport caused by the lack of an efficient public

transport system. Suzuki Motor Company was chosen from seven prospective

partners worldwide. A license and a Joint Venture agreement were signed with Suzuki

Motor Company (now Suzuki Motor Corporation of Japan) in October 1982, by

which Suzuki acquired 26% share of the equity.

MUL created history by going into production in a record 13 months. Maruti 800 was

the first car that was launched in 1984. The car had an engine capacity of 796 cc, high

fuel efficiency and the pricing was extremely competitive. Over the last 10 years,

MUL has launched various models such as Omni, 1000, Zen, Esteem, Wagon R,

Gypsy, Alto, Baleno and Vitara, targeting all segments of customers.

MULs plant is located at Gurgaon in Haryana. It has an installed capacity of 350,000

vehicles. However, the company, through productivity improvement initiatives, would

be easily able to produce 500,000 vehicles with its existing facilities.

Maruti Udyog Limited (MUL), the small car manufacturer, has maintained its market

leadership in the passenger car industry in India, despite the entry of multiple players.

A change in management control from Government to Suzuki and intensive cost

cutting and productivity improvement initiatives, are the two most important factors

that we believe will drive MULs profitability in the coming years. MUL has

completed its investment phase and is expected to move into a growth phase. The

Governments offer of its 25% stake in the company to institutional and retail

investors provides investors with a unique opportunity to invest in the only listed pure

passenger Car Company in India Valuation at the floor price of Rs115/- may appear

expensive on current earnings of Rs5.1/- per share. However, taking a futuristic view -

the benefits expected from reduction in costs and productivity improvement willresult in a sharp earnings jump over the next two years.

The Market Leade r

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MUL will be the only pure passenger car company to be listed on the

Indian Stock Exchanges. Being the dominant player in the industry, MULs market

share was bound to decline post entry of new players in the late 90s. The ongoing

imbroglio between Suzuki and the Government, during the same period, further

impacted MUL adversely as new launches got delayed. As a result MUL saw its

market share dwindle sharply between FY98 to FY00. However, MUL still remainsthe leader in the Indian car market with a market share of 57%.

Wide product portfolio

MUL with 10 models in the market has a car for almost every kind of customer. MUL

is the only player in the Indian industry with a presence in all the segments of the

market, thus enabling the company to cater to a wide range of customers, like :

Model Name Launched in

Maruti 800 Dec-83

Omni Nov-84

Alto Sep-00

Wagon R Dec-99

Zen May-93

Baleno Dec-99Esteem Nov-94

Versa Oct-01

Gypsy Dec-85

Vitara Apr-03

Maruti Udyog Limited. The Group's principal activity is to manufacture, purchase and

sale of Motor Vehicles and Spare parts. The Group is a subsidiary of Suzuki Motor

Corporation. The other activities of the Group comprises of facilitation of Pre-Owned

Car Sales, Fleet Management and Car Financing. The Group also provides services

like framing of customized car policies, economical leasing of cars, maintenancemanagement, registration and insurance management, emergency assistance and

accident management. The product range includes ten basic models with more than 50

variants. The Group has operations in over 100 cities with more than 150 outlets and

also exports cars to other countries.

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JOINT VENTURE

A joint venture is like a marriage, which establishes a bond between companies which

binds them together. There are different terms and conditions, agreeing upon which

they join hands.

There are a large number of old established companies mostly set up with foreign

collaboration initially, who are supplying components such as electricals, pistons,

rings, brakes, wheels, carburettors and shock absorbers. These have developed and

manufactured components for Maruti, Contessa and NE 118 mostly on their own but

in some cases with assistance from their previous collaborators.

In a few cases they needed fresh foreign technical know-how e.g. carburetors for

Maruti 800. These companies have benefitted from contact with Japanese vehicle

specifications in maintaining quality standards. Many of these companies are already

exporting their product. In some cases units have been set up specifically for

supplying to Maruti. Here joint venture companies have been set up with Maruti and

technical know-how is mostly on the basis of Maruti's collaboration with Suzuki, or

fresh collaboration with Suzuki's suppliers.

Some examples are:-

Jai Bharat Maruti for sheet metal component Machino Plastic for plastic items

Bharat Seats for seats

Sona Steering for steering gears

Sona steering has collaboration with Koyo of Japan, and Bharat seats with Howa

Kagis of Japan.

Though initially there had been some problems with indigenizing of imported items

because of time taken by component manufacturers to develop components of

acceptable quality, the component manufacturers have by now developed most of the

items. One problem faced by component manufacturers was that in many cases

materials to the required specification were not available and had to be imported.

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0.3.4 Most component manufacturers state that they are conversant with

the latest developments in the world for their products and would be in a position to

develop these when required by vehicle manufacturers.

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HISTORY OF THE COMPANY

Jay Bharat Maruti Limited set up in 1987 is one of the largest joint ventures of Maruti

Udyog Limited. This is a unique combination of modern Press Shop and Weld Shop

capable of supplying components in Just in Sequence (JIS) meeting customersquality and quantity requirements. Manufacturing facilities at JBML also include die

maintenance, dedicated facilities for manufacturing exhaust systems and in house

modern tool room. JBML is rising to meet new challenges with modern equipment

and higher goals of manufacturing and quality control.

JBM group began its engineering activity in 1983 with the establishment ofGurera

gas cylinder limited and entered the auto component industries in 1985 with the

inception of SUZUKI AUTO INDIA. JBML is a multi- unit, multi-product group

with extensive and diversified interest in engineering and precision tooling, dies and

facilities spread over different parts of the country. The JBML engineering groups

deals in brand range of sheet metal assemblies, die casting components and forgingfor the domestic and export markets.

The period from 1988 to 1995 was a steep rise in the demand of passenger car in

India. To meet this rising demand, JBML had to continually expand its manufacturing

facilities. Because of space constraints a new plant (Plant-2) was set us for the

manufacturing of sheet Metal parts with latest technologies like fully automatic

tandem line from Rovetta of Italy, 5-axis laser cutting machine from Prima of Italy.

This new plant is located approximately 14 kms from Plant-1. Space crated extra

because of this new plant was being utilized by additional business of weld

assemblies like front under body, rear under body for car & exhaust systems for

various models of Maruti. Now this year-2006, company is going to start a new plant,

plant-3 to meet increasing market demand.

Driven by a commitment to customer satisfaction and international standards of

quality, JBML has not only won customer confidence but also industry recognition

through several awards and accolades viz. National Productivity Award Best

Performing Vendor Award, Quality Trophy etc.

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JBM MILESTONE BRICK BY BRICK

COMPANY INCORPORATED 19-03-87

COMMERCIAL PRODUCTION COMMENCED

01-03-89 EQUITY HOLDING

MUL 29.30%

S.K. ARYA & ASSOCIATES 29.30%

PUBLIC 41.40%

PLANT 2 COMMISSIONED WITH 95-96

UPGRATION OF PRODUTION TECHNOLOGY

FORAY INTO EXHAUST SYSTEM SUPPLIES 96-97

FOR MUL VEHICLES

SYSTEM SUPPLIER CONCEPT STARTED 97-98

FOR MUL FENDER ASSEMBLY

BAAN IV SOFTWARE SYSTEM 98-99

IMPLIMENTED

EXHAUST SYSTEM OF ALTO AND 99-00

WAGON-R WITH EMMISSION NORMS

COMPLIANCE COMMENCED

SYSTEM SUPPLIES FOR CAR UNDER 00-01

BODIES STARTED

VERSA LINE COMMISSIONED 01-02

5-AXIS LASER CUTTING MACHINE 03-04

COMMISIONED

REAR AXLE LINE COMMISIONED 04-05

PROPOSED PT-CED PAINT SHOP 04-05

AXLE LINE OF MODEL YN4 COMMISSIONED 04-05

COMMENCEMENT OF COMMERCIAL

PRODUCTION OF MODEL YN4 05-06

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GUIDING PRINCIPLES AT JBML

MISSION

To make JBML a synonym for world class organization excelling in sheet metal

technologies.

VISION

Expanding leadership in our business through people, keeping pace with market

trends and technology.

HR POLICY

JBML will always keep on striving for the deployment of competent and efficient

employees at all levels to create inculcate and foster excellent. Working and learning

environment; because it believes in nurturing strength of individuals for developing

mutual trust, support and positive attitude for achieving organization goals to create aworld class manufacturing organization and to remain the market leader in sheet metal

components not only today but for all the tomorrows to come.

QUALITY POLICY

The policy of JBML is to achieve total customer satisfaction by delivering products

and providing services that meet or exceed their exacting requirements and

expectations and to do so on time and at most competitive prices in domestic and

export market for our entire product range.

More than anything else, the driving force at JBML is Quality. Stringent qualitycontrol maintained at every stage of the designing and manufacturing processes

translates into zero-defects, international standard products. Rooted on the policy to

achieve total customer satisfaction by delivering products and services that meet and

exceed their expectations, on time and at competitive cost, JBML has developed a

tradition of quality. Every personnel is positively attuned and committed to

excellence. It is a corporate motto at JBM to accomplish tasks right the first time,

every time. And ongoing improvement on manufacturing processes and advanced

quality planning play a critical role in ensuring high standards. No wonder, globally

JBML became the first company to achieve ISO/TS-16949-2002 certification. Also,

concern for environment protection has brought JBML ISO 14000 certification.

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Customer Management

Customer focus is one of the basic values adopted by the company. Quality policy

revolves around the customer satisfaction. There is emphasis on understanding the

unspoken and meeting the implied needs expectations of the customer also. Customersatisfaction has been identified as one of the CSF. It is one of the business

performance measures of long term plan and its improvement. Over the years based

on periodic reviews various forms have been established for regular interaction with

customer. Top management apart from personal meetings of middle managers

regularly visits customers. The process of satisfaction surveys also provides the voice

of customer for policy and strategy making. All customer complaints, customer ends

non-conformances, performance of delivery, result of customer satisfaction surveys

and any other need and expectation of customer is reviewed on weekly basis. Major

customers are Maruti Udyog Limited, Eicher Motors Ltd. M&M Ltd., and HMSI.

Supplier Management

The definition of customer in the company is not limited to buyers of the product. The

company treats all its associates as customers in one way or the other way. Various

form set-ups for regular meeting, understanding, and responding to the suppliers need

are maintained. Major vendors are connected through emails. The information on

vendors and suppliers expectations and needs gathered through these forms are

analyzed and considered by formulating policies and strategies. Day to day

expectations and needs are responded through the normal communication channel of

materials division, purchase department, supply chain cell as part of MX dept.Vendors and suppliers are rated and communicated the performances with respect to

quality and delivery. These are reviewed for continual improvements on weekly basis.

Major suppliers for bought out parts are group companies whereas raw material is

arranged from leading Indian steel manufacturers and through imports.

Finance Management:

Financial management system and policies are directed towards optimum utilization

of financial resources. The approach has been to use the financial resources for

minimizing returns to the company, and in return to the stakeholder. There is clear-cut

laid down rules and regulation for its transparent monitoring and inflows and outflowsof funds. There is transparent pricing system between the company and all major

customers, so that prices are continuously reviewed and rationalized in view of any

KAIZEN/Cost reduction/VA-VE exercise as the case may be. It is all that because of

this transparent price reviewing system in existence we have passed on around 20%

discounts to MUL since last five years. The other important stakeholders are banks

and Finance Institutions. The financial policies are in line with the expectations and

high level of commitment to them. The company ensures the timely payment to entire

supply chain partners in time. The company has been rated as P1 by CRISIL(one of

the best credit rating agency in India) various currency movements are monitored and

accordingly risks are hedged by forward coverage. The company has been constantly

working on the various financial strategies for reducing the cost of funds. Conversion

of term loan to lease Transactions, Foreign currency, short term unsecured loans, inter

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changeability of limits etc are negotiated from time to time which has

helped in bringing down its weighted average cost of funds from 13.25% in 2001 to

10% in 2002. By negotiating the L.C. charges and bank charges have been brought

down to half of normal rates. No commitment charges are paid to the bank. Due to

these measures, the other income on account of cash discount and interest earned has

been to the tune of 221 Lac in 2004. The company has been able to manage itsworking capital in efficient manner. The company is continuously improving its

financial system. Baan ERP System has been implemented. Decisions on all new

investment are based on IRR at the pre-project analysis stage.

Technology Management

In line with vision the company is continually upgrading the technology to world-

class level. Visiting collaborators plants, visiting exhibitions and regular interaction

with customer and different forums gather the information of new technology. The

company has one fully automated tandem press line, fully automatic laser cutting

machine etc. Latest IT technologies are being used like Baan ERP is used formanaging companies business. Integrated communication system is developed.

Knowledge management system has been developed to share improvements and good

practices adopted in the organization.

Shareholders Management

Annual shareholder s meeting and board meetings provide useful information on

needs and expectation on them. A shareholders grievance committee has been formed

at director s level. Grievances are reviewed in board meetings. Shareholders views are

captured in one to one communications, letters also. The company has been giving

dividend to share holders continuously.

Regulator Management

All the laws and regulations applicable to the operations are taken care off. The

company has been consciously and proactively ensuring compliance to all such

applicable laws and regulations. There has never been any challan from authorities

concerned with respect to labor laws and factories act. The company has been rated

"good" during the audits conducted by central excise department during the year 1999

to 2003. The sales tax and income tax returns have always been satisfactorily assessed

and no penalty was imposed. Company is actively involved in various industries and

association, which interact with government agencies.

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JBMS PRODUCT RANGE

JBM nicely diversified their business by starting manufacturing not only sheet metal

components but also started manufacturing other automobile components and tools.

PRESENT MANUFACTURING RANGE:

Skin panels (unpainted) for driver cabin of LCV and MCV.

Underbody parts / assemblies (unpainted) for passenger cars, e.g.,

Front and rear underbodies

Fenders

Aprons

Cross members

Floor tunnel

Rear axle (painted) for passenger cars.

Fuel neck pipe (electroplated)

Exhaust systems for

Passenger cars in SS / coated steel, and

Two wheelers in painted condition

JBMS MAIN PRODUCTS:

Sheet Metal Stamping.

Welded Sub Assemblies.

Chassis and Suspension System.

Jigs and Fixtures.

Exhaust System.

JBM manufactures a range of specialized components for front ranking OEMs.

Flawless on quality and reliability these products have won the confidence of industryleaders.

Production Volume:(Approximate)

Products per day: 32,000 assemblies of 203 types

Made up of about: 2,00,000 pressed parts

20,00,000 spots

1,20,000 hardware

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MX DEPARTMENT

MX Material transaction department deals with supply chain. This department is a

combination of raw material & consumable store, PPC, and Dispatch. JBM P2 supply

materials to JBM Plant 1, Maruti Udyog Ltd., Eicher Motor Ltd., Mahindra &

Mahindra, Honda Motorcycle & Scooters Pvt. Ltd. along-with job work for JBM

Auto components Ltd. There are two types of components supplied by JBM P2, one is

in house production and other is job work by subcontractors to fulfill the requirement

of customers. The components manufactured by subcontractors the raw material is

supplied by JBM P2. MX department monitor & control the whole supply chain of

subcontractors, raw material for production at JBM P2. The customers of JBM P1 are

JBM P2, MUL, EML, M&M, HMSI and JBM Auto. All customers have given theirproduction plan and schedule for dispatch of material. MUL communicate daily

schedule on their WEB SITE for vendors. In the MUL daily schedule and time of

deliveries is also indicated. This is to control inventories at MUL. All other customers

give their schedule on weekly basis. App. 70% of the total components manufactured

by JBM P1 is of Maruti Vehicles and remaining 30% are for other customers.

For the purpose of raw material planning JBM P1 consider the production of vehicles

per day at customer end and the requirement of our components for manufacturing

these vehicles MUL communicate their production plan in advance so every vendor

should plan production and purchase of raw material. To bring the planning on one

plate form a Daily Status Report (Annexure No.1) is generated by PPC department.On the basis of DSR raw material planning is done by raw material store and a

schedule is raised to suppliers. Daily consumption of steel at JBM P1 is app. 70-100

tons and for feed the lines of JBM P1we have to purchase the same quantity of

material per day. Therefore to avoid criticalities we should have the material, which is

required in next 3 days.

In making schedule for raw material (Annexure No.02) first we check the status of the

material, secondly requirement of material in the week for which schedule is

generated and third, material requirement date and forth, minimum loading plan. First,

status of material, status tells us about the finished goods inventory and seconds the

coverage. Coverage means the material in finished goods cover the requirement of

number of days. It is counted on the basis of production levels of our customers.

For example, If we take a component no. PPC58120 it is used in manufacturing of

Maruti 800, on any day its finished goods is 800 nos. and Maruti 800 production per

day is 600 nos. PPC58120 is required one component per vehicle so the coverage is

800/600 = 1.3 days. To feed the line of MUL we have to take loading of this material

of the same day or next day. Second, when we get the per-day requirement of material

and status of raw material then we can calculate requirement of material per week.

Third, on which date of the week material will be required for take loading, it is

calculated by the coverage of material and schedule for dispatch. For example: If any

day, coverage of PPC58120 is zero and there is no schedule in next two days then this

material required today because of coverage is zero. Fourth, and very important, to

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The company has also been awarded by the prestigious QS-9000 certificate by

KPMG Peat-Marvic, the Quality Register of India, representing Peat- Marvic, USA.

CRISIL, (in famed credit rating agency) has assigned P-1 rating to company for itscommercial paper program.

JBM, under the guidance ofProf. Y. Tsuda of Japan, Quality Management Advisor,

is working in close conjunction with a cluster of companies. Together they will march

towards TQM.

Furthermore, SUZUKI MOTOR CORPORATION has initiated a major drive to

improve the production process by the implementation of KAIZEN (continuous

improvement in small steps) in the various areas of operations, resulting in a

phenomenal improvement ISO 14000 Accreditation by UL 2001-02nt in JBML.

JBML`s GROUP COMPANIES

JAI BHARAT MARUTI LTD-PLANT -2

JBM AUTO COMPONENT LTD

NEEL METAL PRODUCT LIMITED

JBM INDUSTRIES LIMITED

JAI BHARAT BREEDS LIMITED

NEEL INDUTRIES PRIVATE LIMITED

JAY BHARAT EXHAUST SYSTEM LTD

THYSSENKRUPP JBM PRIVATE LTD

NEEL ENGINEERING SOLUTIONS

JAICO STEEL FASTENERS LTD

JBMS GLOBAL ALLIANCES:

BELLSONICA COMPANY, JAPAN.

MARUTI UDYOG LIMITED.

SUZUKI MOTORS COMPANY.

NAGATA AUTOPARTS CO. LTD., JAPAN.

HAMAMATSU PIPE COMPANY LTD., JAPAN.

JBMS MAJOR CUSTOMERS:

MARUTI UDYOG LIMITED.

ASHOKA LEYLAND.

DEFENCE.

DELPHI.

EICHER.

ESCORTS.

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HINDUSTAN MOTORS.

HONDA SCOOTERS.

MAHINDRA & MAHINDRA.

YAMAHA MOTORS INDIA L.T.D.

ACCOLADES AND RECOGNITIONS

MERIT CERTIFICATE FOR PRODUCTIVITY BY NPC 1993-94

AWARD FOR PRODUCTIVITY BY ACMA 1993-94

BEST VENDOR AWARD BY CUSTOMER (MUL) 1994-94

BEST VENDOR AWARD BY CUSTOMER (MUL) 1994-95

ISO 9002 ACCREDITATION BY RWTUV (GERMANY) 1994-95

MERIT CERTIFICATION FOR PRODUCTIVITY BY ACMA 1996-97 BEST VENDOR AWARD BY CUSTOMER (MUL) 1996-97

MERIT CERTIFICATION FOR PRODUCTIVITY BY NPC 1996-97

AWARD FOR QUALITY BY ACMA 1997-98

QS 9000 ACCREDITATION BY UL 1997-98

AWARD FOR QUALITY BY ACMA 1998-99

SAFETY & WELFARE AWARD BY GOVT. OF HARYANA 1999-00

MERIT CERTIFICATE FOR QUALITY BY ACMA 1999-00

AWARD FOR PRODUCTIVITY BY ACMA 2000-01

ISO 14000 ACCREDITATION BY UL 2001-02

ISO/TS 16949:2002 ACCREDITATION BY UL 2002-03

OHSAS 18001 ACCREDITATION BY UL 2003-04

OUTSTANDING OVERALL PERFORMANCE TROPHY 2003-04

BY MUL

CERTIFICATE BY MUL FOR COST REDUCTION THROUGH

(1) VA / VE 2003-04

(2) YIELD IMPROVEMENTS 2003-04

(3) KAIZENS 2003-04

CII-EXIM BANK AWARD FOR BUSINEES EXELLENCE 2003-04

&

STRONG COMMITMENT TO EXCEL 2004-05

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PROFIT AFTER TAX

218193

336

584

1034954

1197

0

200

400

600

800

1000

1200

RS. IN LACS

2001 2002 2003 2004 2005 2006 2007

3-D Column 1

YEAR

PROFIT AFTER TAX

The graph shows an increasingtrend till 2005 and there is a sharp

increase in 2004-05. But in 2006 it

shows an decrease, this is due to

decrease in depreciation which

resulted in an increase in profit. But

at the same time there is a increase

in tax liability, which brought profit

after tax down.

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NET WORTH

3172 2358 25232911

3728

4467

5664

0

1000

2000

3000

4000

5000

6000

RS. IN LACS

2001 2002 2003 2004 2005 2006 2007

3-D Column 1

YEAR

NET WORTH

With an increasing trend

net worth has increased

up to 19% form last yearand its reason is increase

in net sales and increase

in reserves and surplus

of the company.

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EARNING PER SHARE

EARNING PER SHARE

4.053.58

6.21

10.78

19.1

8.81

5.53

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007

YEAR

RS.

INL

ACS

The graph shows a

continuous increase in

EPS over five year. But

in 2006. EPS declined to

8.81 from 19.1 due to

decrease in Profit after

tax and split in face

value of shares from 10

to 5.

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MARKET PRICE OF SHARES AS ON 31ST MARCH (RS.)

18.00

20.1026.25

77.40

124.15125.00

126.00

0

20

40

60

80

100

120

140

RS. IN LACS

2001 2002 2003 2004 2005 2006 2007

YEAR

MARKET PRICE PER SHARE

The share price with values

Rs.18 has gone up to 125 in

2006. This is due to

increasing reputation of the

company and overall growth

and demand of the auto-

industry. The price in 2005

and 2006 are almost same

due to increasing

expectations of shareholders.

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RAW MATERIL STORE

AUTOMATIVE SYSTEM

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PRESS LINE

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INCOME STATEMENT OF JBML

FOR THE YEAR ENDING 31st MARCH,2007

(Rupees in lacks)

2007 2006

INCOME

Sales 62197.51 51104.84

Less: Excise Duty 10243.15 8217.16

Net Sales 51954.36 42887.68

Other Income 297.94 253.97

Increase / (Decrease) in Stock 69.81 137.89

52322.11 43279.54

EXPENDITURE

Raw Material Consumed 42017.54 33893.89Employee Remuneration & Benefits 2311.96 1902.40

Mfg, Administrative & Other Expenses 3422.86 2651.06

Lease Rent 10.64 478.26

Financial Charges 534.94 322.90

Financial Charges-Lease Assets 8.73 59.91

Depreciation

-on Fixed Assets 1889.32 1889.97

-on Lease Assets 274.21 608.53

50470.20 41806.92

PROFIT BEFORE TAX 1851.91 1472.62

Less: Provision for income tax

-earlier years (14.32) (29.73)

-current year 485.00 544.00

-deferred tax 162.48 (28.92)

-fringe benefit tax 21.33 22.65

PROFIT AFTER TAX 1197.41 954.12

Balance brought forward from previous year 2970.49 2332.38

PROFIT AVAILABLE FOR APPROPRIATIONS 4167.91 3286.50

(Rupees in lacks)

2007 2006

APPROPRIATIONS

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Proposed Dividend 0.00 186.44

Dividend Tax 0.00 26.57

Transferred to General Reserve 200.00 100.00

Balance carried to Balance Sheet 3967.91 2970.49

4167.91 3286.50

Basic and Diluted EPS (Rs.) 5.53 4.41

Face Value of a Equity Share (Rs.) 5.00 5.00

BALANCE SHEET OF JBML AS ON 31st MARCH, 2007(Rupees in lacks)

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2007 2006

SOURCES OF FUNDS

1. Shareholders Funds

Share Capital 1082.50 541.25

Reserves & Surplus 4581.66 3925.49

5664.16 4466.74

2. Loan Funds

Secured Loans 5564.16 3660.18

3. Deferred Payments 2166.47 1669.44

4. Deferred Tax Liability 1046.10 883.62

5. Finance Leased Assets Liability 0.00 217.87

14440.89 19897.85

APPLICATIONS OF FUNDS

1. Fixed Assets

a. Gross Block

- Fixed Assets 27333.26 23016.04

- Leased Assets 2532.53 2532.53

29865.79 25548.57

b. Depreciation 17493.22 15351.18

c. Net Block 12372.57 10197.39

d. Capital WIP including advances 1553.09 587.45

13925.66 10725.84

2. Investments

- Long Term 235.06 235.06

- Short Term 0.00 0.00

235.06 235.06

3. Current Assets, Loans & Advances

Inventories 1730.24 1605.37

Sundry Debtors 4155.26 2230.66

Cash & Bank Balances 127.42 133.35

Loans & Advances 1486.64 1518.96

7499.56 5487.96

Less Current Liabilities & Provisions 7219.37 5551.01

Net Current Assets 280.19 (63.05)

14440.91 10897.85

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RATIO ANALYSISThe Balance Sheet and the Statement of Income are essential, but they are only the

starting point for successful financial management. Apply Ratio Analysis to

Financial Statements to analyze the success, failure, and progress of your business.

Ratio Analysis enables the business owner/manager to spot trends in a business and to

compare its performance and condition with the average performance of similar

businesses in the same industry. To do this compare your ratios with the average of

businesses similar to yours and compare your own ratios for several successive years,

watching especially for any unfavorable trends that may be starting. Ratio analysis

may provide the all-important early warning indications that allow you to solve yourbusiness problems before your business is destroyed by them.

USEFULLNESS:

Ratio Analysis is used to evaluate financial condition of the firm and to:

Determine firms ability to meet its short term and long term obligations

Determine firms ability to generate profits

To know firms liquidity position to meet its current obligations when they becomedue.

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It helps in accessing solvency position with the help of leverage and

profitability ratios in a long run.

It helps in planning, controlling and forecasting.

Throw light on degree of efficiency in management and utilization of its assets

Draw conclusions regarding financial requirement and the capabilities of business

limits.It serves as a medium for inter-firm comparisons.

Purposes and Considerations of Ratios and Ratio AnalysisRatios are highly important profit tools in financial analysis that help financial

analysts implement plans that improve profitability, liquidity, financial structure,

reordering, leverage, and interest coverage. Although ratios report mostly on past

performances, they can be predictive too, and provide lead indications of potential

problem areas.

Ratio analysis is primarily used to compare a company's financial figures over a

period of time, a method sometimes called trend analysis. Through trend analysis, you

can identify trends, good and bad, and adjust your business practices accordingly.

You can also see how your ratios stack up against other businesses, both in and out of

your industry.There are several considerations you must be aware of when comparing ratios from

one financial period to another or when comparing the financial ratios of two or more

companies.

If you are making a comparative analysis of a company's financial statements

over a certain period of time, make an appropriate allowance for any changes

in accounting policies that occurred during the same time span.

When comparing your business with others in your industry, allow for any

material differences in accounting policies between your company and

industry norms.

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When comparing ratios from various fiscal periods or companies,

inquire about the types of accounting policies used. Different accounting

methods can result in a wide variety of reported figures.

Determine whether ratios were calculated before or after adjustments were

made to the balance sheet or income statement, such as non-recurring items

and inventory or pro forma adjustments. In many cases, these adjustments can

significantly affect the ratios.

Carefully examine any departures from industry norms.

PURPOSE OF RATIOS FOR DIFFERENT

Investors To help them determine whether they should buy shares in the business, hold on

to the shares they already own or sell the shares they already own. They also want

to assess the ability of the business to pay dividends.

Lenders To determine whether their loans and interest will be paid when due

Managers Might need segmental and total information to see how they fit into the overall

picture

Employees Information about the stability and profitability of their employers to assess the

ability of the business to provide remuneration, retirement benefits and

employment opportunities

Suppliers and other

trade creditors

Businesses supplying goods and materials to other businesses will read their

accounts to see that they don't have problems: after all, any supplier wants to

know if his customers are going to pay their bills!

Customers The continuance of a business, especially when they have a long term

involvement with, or are dependent on, the business

Governments and

their agencies

The allocation of resources and, therefore, the activities of business. To regulate

the activities of business, determine taxation policies and as the basis for national

income and similar statistics

Local community Financial statements may assist the public by providing information about the

trends and recent developments in the prosperity of the business and the range of

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its activities as they affect their area

Financial analysts They need to know, for example, the accounting concepts employed for

inventories, depreciation, bad debts and so on

Environmental

groups

Many organizations now publish reports specifically aimed at informing us about

how they are working to keep their environment clean.

Researchers Researchers' demands cover a very wide range of lines of enquiry ranging fromdetailed statistical analysis of the income statement and balance sheet data

extending over many years to the qualitative analysis of the wording of the

statements

Which ratios will each of these groups be interested in?

Interest Group Ratios to watchInvestors Return on Capital Employed

Lenders Financial leverage ratios

Managers Profitability ratios

Employees Return on Capital Employed

Suppliers and other trade creditors Liquidity

Customers Profitability

Governments and their agencies Profitability

Local Community This could be a long and interesting

list

Financial analysts Possibly all ratios

Environmental groups Expenditure on anti-pollution

measures

Researchers Depends on the nature of their study

What Ratios express???

Expression is a function of the ratio, relationship expressed and information it

provides.

Ratio generally expresses financial information in three different ways:-

1. As a percentage

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2. On a per unit basis

3. Number of times

Limitations of ratios

The company may change the accounting policies which may result into distortion in

comparisons of different company figures.

1. The business may apply creative accounting in typing to show the better

financial position or performance which may mislead users of financial

accounting.

2. Ratios need to be interpreted carefully. Ratios are not definitive measures as it

requires some quantitative information for an informed analysis to be made.

3. Outdated information in financial statement may give wrong indications.

4. Where Historical cost convention is used, asset valuations in the balance sheet

could be misleading

5. Ratios are based on the summarized year end information which may not be a

true reflection of the over all years results.

6. Change in prices (inflation) may create difference between calculated ratios

and current market prices which may lead to wrong interpretations.

7. Change in accounting standards may affect the reporting of an enterprise and

its comparisons of results over a number of years.

8. There may be impact of seasons on trading i.e. businesses which are affected

by the seasons can choose the best time to produce financial statement so as to

show better results.

9. Comparing ratios to compare one company with another could provide

misleading information. Business may be within same industry but may have

different financial and business risks.

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Ratios analysis is useful, but analysis should be aware of these

problems and make adjustments as necessary. Ratio analysis concluded in a

mechanical, unthinking manner is dangerous, but if used intelligently and with

good judgment, it can provide useful insight into the firms operations

Financial ratios can be classified according to the information they provide. Thefollowing types of ratios frequently are used:

Liquidity Ratios

Asset Management/Activity Ratios

Financial leverage (Gearing) Ratios

Profitability Ratios

Market Value Ratios

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LIQUIDITY RATIOS

The business should not only provide information on its profitability, but also to

provide information that indicates whether or not the business will be able to pay its

creditors, expenses, loans falling due at correct times. A company may be profitable

but if it fails to generate enough cash to settle its liability is said to be insolvent.

Suppliers and providers of short term finance are interested in these ratios as are usedin assessing the ability of the business to settle its current liabilities.

Liquidity refers to the ability of a firm to meet its short-term financial

obligations when and as they fall due.

The main concern of liquidity ratio is to measure the ability of the firms to

meet their short-term maturing obligations. Failure to do this will result in

the total failure of the business, as it would be forced into liquidation.

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CURRENT RATIO

The Current Ratio expresses the relationship between the firms current assets and its

current liabilities.

Current assets normally includes: cash, marketable securities, accounts receivable andinventories. Current liabilities consist of accounts payable, short term notes

payable, short-term loans, current maturities of long term debt, accrued income

taxes and other accrued expenses (wages).

CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

PARTICULARS 2006 2007

Current Assets 5487.96 7499.56

Current Liabilities 5551.01 7219.37

Currant Ratio 0.99 1.03

The rule of thumb says that the current ratio should be at least 2, that is the current

assetsshould meet current liabilities at least twice.

What does the calculated ratio tells us? In 2006, the company had 0.99 worth of

current assets for every rupee of liabilities. This grew to 1.03 in 2007 indicatingincreasing trend on liquidity. However the company is able to support its short-term

debt from its currents assets. A generally acceptable current ratio is 2 to 1. 1:1 current

ratio means; company has Re 1.00 in current assets to cover each Re 1.00 in current

liabilities.

QUICK RATIO

Measures assets that are quickly converted into cash and they are compared with

current liabilities. This ratio realizes that some of current assets are not easily

convertible to cash e.g. inventories.

The quick ratio, also referred to as acid test ratio, examines the ability of the business

to cover its short-term obligations from its quick assets only (i.e. it ignores stock).

The quick ratio is calculated as follows:

QUICK RATIO = (CURRENT ASSETS-INVENTORIES) / CURRENT

LIABILITIES

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Current Assets-Inventories 5487.96-1605.37 7499.56-1730.24

Current Liabilities 5551.01 7219.37

Quick Ratio 0.70 0.80

Clearly this ratio will be lower than the current ratio, but the difference between the

two (the gap) will indicate the extent to which current assets consist of stock.

The ratio shows an increasing trend on liquidity. This indicates extend to which

company can pay current liabilities without relying on current the sale on the

inventory. Generally ratio of 1:1 is considered satisfactory unless the majority of your

"quick assets" are in accounts receivable, and the pattern of accounts receivablecollection lags behind the schedule for paying current liabilities.

ASSET MANAGEMENT/ACTIVITY RATIOS

If a business does not use its assets effectively, investors in the business would rather

take their money and place it somewhere else. In order for the assets to be used

effectively, the business needs a high turnover.

Unless the business continues to generate high turnover, assets will be idle as it is

impossible to buy and sell fixed assets continuously as turnover changes. Activity

ratios are therefore used to assess how active various assets are in the business.

Note: Increased turnover can be just as dangerous as reduced turnover if the business

does not have the working capital to support the turnover increase. As turnover

increases more working capital and cash is required and if not, overtrading occurs.

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AVERAGE COLLECTION PERIOD

The average collection period measures the quality of debtors since it indicates thespeed of their collection.

The shorter the average collection period, the better the quality of debtors,

as a short collection period implies the prompt payment by debtors.

The average collection period should be compared against the firms credit

terms and policy to judge its credit and collection efficiency.

An excessively long collection period implies a very liberal and inefficient

credit and collection performance.

The delay in collection of cash impairs the firms liquidity. On the otherhand, too low a collection period is not necessarily favourable, rather it

may indicate a very restrictive credit and collection policy which may

curtail sales and hence adversely affect profit.

AVERAGE COLLECTION PERIOD = 360 / AVERAGE ACCOUNTS

RECEIVABLE TURNOVER

Where Average Accounts Receivable Turnover = Net Sales/ Average Receivables


Average Accounts Receivable

Turnover

51104.84/2120.23 62197.51/2440.29

Average collection period 14.94 14.15

This ratio simply indicates average account is outstanding for 14days approx. It

indicates that the company is efficient in collecting money due you from their

customers.

If this indicates that payments are taking a long time to collect, then collection/billing

procedures should be reviewed. On the other hand, too short a period could cause

customers to move to another supplier that has more reasonable collection policies.

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INVENTORY TURNOVER

This ratio measures the stock in relation to turnover in order to determine how often

the stock turns over in the business. It indicates the efficiency of the firm inselling its product.

INVENTORY TURNOVER =COST OF GOODS SOLD / AVERAGE

INVENTORY


COGS 1379503.92 1679507.82

Average Inventory 53719 63250

Inventory Turnover 25.68 26.66

The ratio shows a relatively high stock turnover which would seem to suggest that the

business deals in fast moving consumer goods.

The company Inventory turnover has increased from 25.68 in 2006 to 26.66 in

2007.

The high stock turnover ratio would also tend to indicate that there was little

chance of the firm holding damaged or obsolete stock.

TOTAL ASSETS TURNOVER

Asset turnover is the relationship between sales and assets

The firm should manage its assets efficiently to maximize sales.

The total asset turnover indicates the efficiency with which the firm uses

all its assets to generate sales.

It is calculated by dividing the firms sales by its total assets.

Total assets include current assets, fixed assets and investments.

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TOTAL ASSET TURNOVER = SALES/TOTAL ASSETS


Sales 51104.84 62197.51

Total assets 16448.86 21660.28

Total Assets Turnover 3.11 2.87

Generally, the lower the firms total asset turnover, the more efficiently its assets have

been utilized. From the above calculations:

It appears that the activity of the business is relatively constant, with a

slight upward trend.

The ratio also confirms that in 2007 the company has utilized its assets less

efficiently.

FIXED ASSETS TURNOVER

The fixed assets turnover ratio measures the efficiency with which the firm has been

using its fixed assets to generate sales.

FIXED ASSETS TURNOVER = SALES / NET FIXED ASSETS


Sales 51104.84 62197.51

Net fixed Assets 10725.84 13925.66

Fixed Assets Turnover 4.76 4.46

Generally, high fixed assets turnovers are preferred since they indicate a betterefficiency in fixed assets utilization. As net fixed assets has grown rapidly. Thus the

ratio shows a slight decrease in fixed assets turnover which confirms that the business

places a less reliance on working capital than it does on the fixed assets.

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FINANCIAL LEVERAGE (GEARING) RATIOS

The ratios indicate the degree to which the activities of a firm are

supported by creditors funds as opposed to owners.

The relationship of owners equity to borrowed funds is an important

indicator of financial strength.

The debt requires fixed interest payments and repayment of the loan and

legal action can be taken if any amounts due are not paid at the appointed

time. A relatively high proportion of funds contributed by the owners

indicates a cushion (surplus) which shields creditors against possible

losses from default in payment.

Note: The greater the proportion of equity funds, the greater the degree of financial

strength. Financial leverage will be to the advantage of the ordinary shareholders as

long as the rate of earnings on capital employed is greater than the rate payable onborrowed funds.

The following ratios can be used to identify the financial strength and risk of the

business.

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With higher debt ratio (low equity ratio), a very small cushion has

developed thus not giving creditors the security they require. The company would

therefore find it relatively difficult to raise additional financial support from external

sources if it wished to take that route. The higher the debt ratio the more difficult it

becomes for the firm to raise debt.

DEBT TO EQUITY RATIO

This ratio indicates the extent to which debt is covered by shareholders funds. It

reflects the relative position of the equity holders and the lenders and indicates the

companys policy on the mix of capital funds. The debt to equity ratio is calculated as

follows:

DEBT TO EQUITY RATIO = TOTAL DEBT / TOTAL EQUITY


Total Debt 9211.19 12783.53

Total Equity 4466.74 5664.18

Debt to Equity Ratio 2.06 2.25

The debt to equity ratio shows that for every 1 rupee of shareholders funds in 2007

there is 2.25 dollars of debt, compared to 2.06 dollars in 2006. This ratio is extremelylow and indicates the financial strongness of the business.

Comparison of how much of the business was financed through debt and how much

was financed through equity. For this calculation it is common practice to include

loans from owners in equity rather than in debt. The higher the ratio reflects the

greater the risk to present or future creditors. Look for a debt to equity ratio in the

range of 1:1 to 4:1. Most lenders have credit guidelines and limits for the debt equity

ratio (2:1 is commonly used limit for small business loans). Too much debt can put

your business at risk... but too little debt may mean you are not realizing the fullpotential of your business and may actually hurt your over all profitability. This is

particularly true for large companies where shareholders want high reward (dividendrate) then lenders (interest rate).

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TIME INTEREST EARNED RATIO

This ratio measure the extent to which earnings can decline without causing financial

losses to the firm and creating an inability to meet the interest cost.

The times interest earned shows how many times the business can pay its

interest bills from profit earned. Present and prospective loan creditors such as bondholders, are vitally

interested to know how adequate the interest payments on their loans are

covered by the earnings available for such payments.

Owners, managers and directors are also interested in the ability of the

business to service the fixed interest charges on outstanding debt.

The ratio is calculated as follows:

TIMES INTEREST EARNED RATIO=EBIT / INTEREST CHARGES


EBIT 1694.19 1855.43

Interest Charges 469.28 382.81

Times Interest Earned Ratio 3.61 4.85

The companys major form of credit are non-interest bearing (Trade Creditors) which

reasults in business enjoying very healthy interest coverage rates. In 2007 the

company could pay their interest 4.85 times from EBIT. However this is a

increase from 3.61 in 2006.

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PROFITABILITY RATIO

Profitability is the ability of a business to earn profit over a period of time. Although

the profit figure is the starting point for any calculation of cash flow, as already

pointed out, profitable companies can still fail for a lack of cash.

Note: Without profit, there is no cash and therefore profitability must be seen as a

critical success factors.

A company should earn profits to survive and grow over a long period of time.

Profits are essential, but it would be wrong to assume that every action

initiated by management of a company should be aimed at maximising profits,

irrespective of social consequences.

The ratios examined previously have tendered to measure management efficiency and

risk.

Profitability is a result of a larger number of policies and decisions. The profitability

ratios show the combined effects of liquidity, asset management (activity) and debt

management (gearing) on operating results. The overall measure of success of a

business is the profitability which results from the effective use of its resources.

GROSS PROFIT MARGIN

Normally the gross profit has to rise proportionately with sales.

It can also be useful to compare the gross profit margin across similar

businesses although there will often be good reasons for any disparity.

GROSS PROFIT MARGIN = GROSS PROFIT / NET SALES * 100

Here, Net sales = Sales Excise Duty

And Gross Profit = Sales - COGS


Gross Profit 8990.79 9936.82

Net Sales 42884.68 51954.36

Gross Profit Margin 20.96 19.13

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The ratio above shows the increasing trend in the gross profit since the ratio has

improved from 15.2% in 2000 to 20.3% on 2002. This indicates that the rate in

increase in cost of goods sold are less than rate of increase in sales, hence the

increased efficiency.

NET PROFIT MARGIN

This is a widely used measure of performance and is comparable across companies in

similar industries. The fact that a business works on a very low margin need not cause

alarm because there are some sectors in the industry that work on a basis of high

turnover and low margins, for examples supermarkets and motorcar dealers.

What is more important in any trend is the margin and whether it compares well withsimilar businesses. It is calculated as follows:

NET PROFIT MARGIN = NET PROFIT / NET SALES * 100


Net Profit 954.12 1197.41

Net Sales 42887.68 51954.36

Net Profit Margin 2.22 2.30

The Net Margin Ratio shows that the Margin is fair. However, to know how well the

firm is performing one has to compare this ratio with the industry average or a firm

dealing in a similar business.

RETURN ON INVESTMENT (ROI)

Income is earned by using the assets of a business productively. The more efficient

the production, the more profitable will be the business. The rate of return on total

assets indicates the degree of efficiency with which management has used the assets

of the enterprise during an accounting period. This is an important ratio for all readers

of financial statements.

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ROI 8.95 9.28

ROI shows the amount of income for every rupee tied up in assets. Here ratio

indicates from 8.95 in 2006 to 9.28 in 2007.

EARNINGS PER SHARE

Whatever income remains in the business after all prior claims, other than owners

claims (i.e. ordinary dividends) have been paid, will belong to the ordinary

shareholders who can then make a decision as to how much of this income they wishto remove from the business in the form of a dividend, and how much they wish to

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retain in the business. The shareholders are particularly interested in

knowing how much has been earned during the financial year on each of the shares

held by them. For this reason, an earning per share figure must be calculated. Clearly

then, the earning per share calculation will be:

EARNINGS PER SHARE = NET INCOME AFTER TAX - PREFERENCE

DIVIDEND / NO. OF ISSUED ORDINARY

SHARES


PAT-Preference dividend 954.12 * 1 Lac 1197.41* 1 Lac

No. Of Issued Ordinary

Shares

10825000 21652984

EPS 8.81 5.53

There is sharp down fall of EPS is because JBML Splits their equity share capital

from face value of Rs 10 to Rs. 5 per share.

MARKET VALUE RATIO

These ratios indicate the relationship of the firms share price to dividends and

earnings. Note that when we refer to the share price, we are talking about the Market

value and not the Nominal value as indicated by the par value.

For this reason, it is difficult to perform these ratios on unlisted companies as the

market price for their shares is not freely available. One would first have to value the

shares of the business before calculating the ratios. Market value ratios are strongindicators of what investors think of the firms past performance and future prospects.

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DIVIDEND YIELD RATIO

The dividend yield ratio indicates the return that investors are obtaining on their

investment in the form of dividends. This yield is usually fairly low as the investors

are also receiving capital growth on their investment in the form of an increased share

price. It is interesting to note that there is strong correlation between dividend yields

and market prices. Invariably, the higher the dividend, the higher the market value of

the share. The dividend yield ratio compares the dividend per share against the price

of the share and is calculated as:

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DIVIDEND YIELD RATIO = DIVIDEND PER SHARE / STOCK

PRICE


Dividend Per Share 1.75 .75

Stock Price 125 126

Dividend Yield Ratio 1.4 .59

There is fall in dividend yield ratio due to decrease in dividend per share, Stock price

being constant. DPS decline due to Split of Equity Shares.

This is fairly unusual because share prices usually increase when dividends increase.However there could be number of reasons why this has happened, either due to the

economy or to mismanagement, leading to a loss of faith in the stock market or in this

particular stock.

Normally a very high dividend yield signals potential financial difficulties and

possible dividend payout cut. The dividend per share is merely the total dividend

divided by the number of shares issued. The price per share is the market price of the

share at the end of the financial year.

PRICE EARNING RATIO ( P/E Ratio)

P/E ratio is a useful indicator of what premium or discount investors are prepared to

pay or receive for the investment.

The higher the price in relation to earnings, the higher the P/E ratio which

indicates the higher the premium an investor is prepared to pay for the share.

This occurs because the investor is extremely confident of the potential growth

and earnings of the share.

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The price-earning ratio is calculated as follows:

P/E RATIO = MARKET PRICE PER SHARE / EPS

Where, EPS = Net Profit / Total no. Of Equity Shares


Market Price Per Share 125 126

EPS 8.81 5.53

P/E RATIO 14.19 22.78

High P/E generally reflects lower risk and/or higher growth prospects for earnings.

The above ratio shows that the shares were traded at a much higher premium in 2006

than were in 2007. P/E Ratio has increased sharply from 6,50 to 14.19 due to steep

decrease in EPS.

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DIVIDENT COVER RATIO

This ratio measures the extent of earnings that are being paid out in the form of

dividends, i.e. how many times the dividends paid are covered by earnings

(similar to times interest earned ratio discussed above).

A higher cover would indicate that a larger percentage of earnings are being

retained and re-invested in the business while a lower dividend cover would

indicate the converse.

DIVIDENT COVER RATIO = EARNING PER SHARE / DIVIDENT PER

SHARE


EPS 8.81 5.53

Dividend Per Share 1.75 .75

Dividend Cover Ratio 5.03 7.37

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In spite of increase in debtors bad debts written off are lesser in

comparison to last year which shows efficient management of collection.

The major part for increase in profit is decrease in lease rent in

company to last year which is 75%. The financial charges for lease assets are also50%. This shows company is relying more on own assets rather than leased.

Company deals frequently in purchase and sale of fixed assets and

investments. Loss on sale of fixed assets is quite less in comparison to last year

which is Rs. 9.51 lakhs.

Sale of investment has also resulted in a loss but has been

considerably reduced from 41,18 to 3.53 lakhs. This clearly shows the efficiency

of staff in dealing with investments. This could be the reason for not providing

for provision for diminution in value of investment. which was 6.75 lakh last year.

In spite of good results company has reduced its activities in sale

and purchase of investments which has resulted in lesser dividend received.

Inspire of increase in profit before tax , profit after tax has been

reduced because of new rules of income tax Act 1961 for fringe benefit tax.

Fringe benefit tax amounts to Rs. 21.33 lakhs this year in comparision to Rs 22.65

in the previous year.

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LIQUIDITY

The emerging liquidity position of the company appears to be satisfactory.

The current ratio has increased from 0.99% in year 2006 to 1.03% in the year

2007. The acid test ratio has also increased from 0.70 to 0.80, it near by to the

standard.The company is unlikely to encounter ant serious difficulty in paying the short-

term obligations as and when they become due for payment.

However, the management should realise that the policy relating to

collection of debt is not sound as reflected in the declining trend of receivables

turnover from14.94 in year 2006 to 14.15 in the year 2007. There is less

carelessness either (1) in collecting the payments from debtors, or (2) in extending

credit sales to customers leading to an increase in bed debts and there by an

increase in the expenses ratio. The excessive investment in current assets seem to

be affecting the rate of return.

The delay in collection of receivables would mean that, apart from the interest

involved in maintaining a higher level of debtors, the liquidity position of the firm

would be adversely affected.

But the interest paid by Jay Bharat Maruti Ltd. Shows the

reversing trend. In spite of increase in Debtors collection period interest cost has

goes down by 7.3% in comparision to previous year. Which has also increased

blocking of money in debtors.

This also can be confirmed by decreasing working capital. The

decreased working capital is also the result of the following

Increase in stock of raw materials up to 25%.

Increase in finished goods up to 25%

Increase in Advances to suppliers of Raw material and stores/spares

consumables up to 19%

Increased in accrued expenses up to 26%

The stable dividend policy of the company is commendable and is

likely to have a salutary effect on the market price of its shares.

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POSITION FROM THE INVESTORS POINT OF VIEW

An investor is primarily concerned with three things

Earning per share

Dividend per share Prospects of growth in the market value of the share.

The analysis of the financial data of Jay Bharat Maruti Ltd. indicates upward

trend in all these respects. The EPS has gone down from Rs. 8.81 in year 2006

to Rs. 5.53 in year 2007. The dividend cover has also goes up from Rs. 5.03 to

7.14 during the same period. The rate of return on equity investment has gone

up from 27.72 to 29.36.

The company has splited its shares of Rs. 10 to Rs. 5 of two. Though

the EPS of the company has decreased because of the spilt of shares which has

increased no. of shares twice. If we dont consider the split, then the difference

between the EPS of last year and this year just Rs. 1.48 which is quite

acceptable

The same thing applies in DPS also .Every investor is earning the same

dividend as He/She was in last year. If doubled the dividend of this year as the

no. of shares increased twice. Dividend cover ratio of the company has gone

up from 5.03 to 7.14 which shows the company has given same amount of

dividend in spite of reduction in earnings this can be good from the investors

side but the retained earnings of the company have declined in the year 2006,which may require funding from outsider.

Another view can be that company has sufficient working capital

with in. But this is not true company is depending more on debt which can be

seen from its debt to equity ratio which has gone up from 2.06 in the year 2006 to

2.25 in the year 2007. High debt to equity ratio have the benefit of leverage for

equity investors.

Dividend yield ratio of company has reduced to 50% from 1.14 in

year 2006 to .59 in the year 2007. This is merely because of increasing the number of

shares. Because of split in spite of reducing the face value of shares from Rs. 10 toRs.5 the market value of share has gone up. If we dont take in to account the split in

this year market value has been twice in comparison to last year which shows the

investors have faith in companys policies.

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CONCLUSION

In conclusion, it may be said that from the point of view of all parties the overall

performance of the company is very satisfactory. It should improve its position on the

cost and profitability.

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Jbml- Ratio Analysis

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