AFINANCIAL RESEARCH REPORT

ONTVS MOTOR COMPANY LTD .

AREA OF STUDY: PROFITABLITY ANALYSIS

PREPARED BY : BHARAT N. DUDHAIYA

CLASS: T.Y. B.B.A.

ROLL NO: 58

COLLEGE: R.P. BHALODIA COLLEGE, RAJKOT

ACADEMIC YEAR: 2008-09

SEAT NO:

SUBMITTED TO: SAURASHTRA UNIVERSITY

GUIDED BY: MR. KULDEEP JOBANPUTRA

DECLARATION

I undersigned Mr. Bharat N. Dudhaiya the student of T.Y. B.B.A. hereby declare that the

project work presented in this report is my own work and has been carried out under the guidance of

prof. Kuldeep Jobanputra of Shree R. P. Bhalodia College.

This work has not been submitted to any other University for any other examination.

Year: - 2008-09 Signature

ACKNOWLEDGEMENT

I wish to express my sincere appreciation to all those, whose works, ideas have been useful in

writing this report.

First of all I would like to convey my gratitude to our prof. Kuldeep Jobanputra, I am also

thankful to the staff members of JIVRAJANI TVS for granting me the permission for my report and

providing me the sufficient information and guidance. And at last I am much thankful to my parents.

Date:

Place: RAJKOT

PREFACE

Financial activity plays and important role in overall economic development of the

developing country like India. Financial Research is a part of practical training contained in B.B.A.

course.

B.B.A. is a special course of management, where the management knowledge is given during

the year and which is more related practically with the managerial field.

So, I am very please to get a chance to make a financial research report on TVS Motors Ltd.

It was really a great experience for me to get practical experience in such a reputed Co.

INDEX

1. GENERAL INFORMATION

2. FINANCE DEPARTMENT

3. FINANCIAL RESEARCH

4. SUMMARY

5. CONCLUSION

6. LIMITATION OF THE STUDY

7. SUGGESTION

8. BIBLIOGRAPHY

GENERAL INFORMATION

INDEX

1. HISTORY

2. COMPANY PROFILE

3. COMPANY POLICE

4. ACHIVEMENTS OF THE COMPANY

5. ORGANISATION CHART

6. PRODUCTS

HISTORY

TVS MOTOR COMPNAY LTD. is the holding company for the TVS Group of companies

(TV Sundram Iyengar and Sons Limited) was founded by T. V. Sundram Iyengar in 1911. TVS

MOTOR COMPNAY LTD. is engaged in the manufacturing of almost all kinds of automotive

components, two wheelers. TVS MOTORS COMPANY LTD is mainly situated in Padi, Tamil

Nadu.

It is the only automotive manufacturer in India to get the prestigious Deming Prize. This

prize is "given to organizations or divisions of organizations that have achieved distinctive

performance improvement through the application of TQM in a designated year."

In 1980 TVS Motors rolled out TVS 50, India's first two-seater moped. Likewise the TVS

champ and super Champ gave a reliable and sturdy two wheeler to public. These two wheelers

together redefined the category of mopeds in India. TVS later left its collaboration with Suzuki

Motors Corporation, Japan and started to manufacture its own vehicles.

TVS is currently the third largest two wheeler company in India with sales of 107,117

units (as of June 2007). The company exported 9,133 units of two wheelers in June 2007.

COMPANY PROFILE

Company: TVS Motor Company Ltd.

Founded: 1911 by Shri.T V Sundaram Iyengar

Headquarters: Jaylaxmi Estate, Haddows Road, Chennai, Tamilnadu,

India

Key people: Mr.Venu Srinivasan Chairman

Products: Motorcycles, Mopeds, Ungeared scooters

Revenue: USD 2.2 billion (2006)

Auditors: Sundaram & Shrinivasan

Registrar: Sundaram-Clayton Ltd.

Employees: 4,000 (2006)

Website: http://www.tvsmotor.in/

COMPANY POLICY

TVS believes that the success of any enterprise is built on the solid foundation of customer

satisfaction. Continuous innovation and close customer interaction have enabled TVS to stay ahead

of competition.

TVS delivers total customer satisfaction by anticipating customer need and presenting quality

vehicles at the right time and at the right price. The customer and his ever changing need is our

continuous source of inspiration.

TVS is committed to being a highly profitable, socially responsible, and leading manufacturer

of high value for money, environmentally friendly, lifetime personal transportation products under

the TVS brand, for customers predominantly in Asian markets and to provide fulfillment and

prosperity for employees, dealers and suppliers

ACHIVEMENTS OF THE COMPANY

Star of Asia Award

Mr. Venu Srinivasan, CMD TVS Motor Company by Business Week International.

The Deming Prize

TVS Motor Company is the only two-wheeler company in the world to be awarded the

world’s most prestigious and coveted recognition in Total Quality Management.

Technology Award 2002

From Ministry of Science, Government of India for the successful commercialization of

indigenous technology for TVS Victor.

Asian Network for Quality Award 2004

TVS Scooty Pep won the prestigious 'Outstanding Design Excellence Award' from

Business World and National Institute of Design.

Best Managed Company award

From Business Today, one of India’s leading business magazines.

ORGANISATION CHART

CHAIRMAN & M.D

VENU SHRINIVASAN

DIRECTORS

GOPAL SHRINIVASAN

T.K. BALAJI

T.K. KANNAN

N. GANGA

C.R. DUA

H. LAXMANAN

T. R. PRASAD

K. S. BAJPAI

PRESIDENT

K. N. RADHAKRISHNAN

PRESIDENT FINANCE

S. G. MURALI

SECRETARY

T. S. RAJAGOPALAN

PRODUCTS

BIKES

TVS Star city

TVS Victor

TVS Flame

TVS Apache

TVS Apache RTR

SCOOTERETTES

TVS Scooty Teenz

TVS Scooty Pep

TVS Scooty Pep+

FINANCE DEPARTMENT

INDEX

1. INTRODUCTION

2. FINANCE DEPARTMENT CHART

3. WORKING CAPITAL STRUCTURE

4. ACCOUNTING & FINANCIAL METHOD & STANDARD

5. FINANCIAL POLICY

6. PRICE OF PRODUCTS

7. FINANCIAL DETAILS

INTRODUCTION

Finance is the life blood of a business. Without finance no business activity can be

undertaken. It is a lubricant for the business. Finance is the center of business world.

Financial management is that managerial activity which is concerned with the planning and

controlling of the firm’s financial resources.

Finance is required not only at the time of establishment but also at the time of expansion,

modernization, diversification and replacement of assets. Every company should be able to manage

its finance efficiency only a company can prosper.

Financial management includes the activities of raising funds, proper utilization of funds,

deciding up on the terms and conditions and period of borrowing.

FINANCIAL DEPRATMENT CHART

PRESIDENT

K. N. RADHAKRISHNAN

SR. VICE PRESIDENT

S. G. MURALI

FINANCE MANAGER

DEPUTY FINANCE MANAGER

HEAD ACCOUNTANTS

SUNDARAM & SHRINIVASAN

WORKING CAPITAL STRUCTURE

Working Capital is that proportion of a company’s capital which is employed in short term

operations.

There are two types of working capital:

Gross working capital

Net working capital

1. Gross working capital:Gross working capital is the sum total of all current assets.

2. Net working capitalNet working capital is the amount by which the value of current assets exceeds the value of

current liabilities.

Working Capital Structure Of

Year

Current assets

Inventories

2007

396.56

2006

357.90

2005

233.23

2004

216.66

2003

214.07Sundry Debtors 111.40 58.19 39.56 51.90 52.21Cash and Bank Balance 86.56 24.35 73.87 18.00 82.46Loans and Advances 266.07 233.68 180.61 159.95 105.92

Less: Current liabilities

Current Liabilities

860.59

774.22

674.12

691.97

527.27

616.32

446.51

554.54

454.66

497.34Provisions 49.73 62.44 55.61 43.11 33.07

Net Current Assets

823.95

36.64

754.41

-80.29

671.93

-144.66

597.62

-151.14

530.41

-75.75 TVS Motor Company Ltd. (Rs. in Cr)

ACCOUNTING & FINANCIAL METHODS & STANDARDS

Mainly there are two types of accounting methods

1. Single entry system

2. Double entry system

The law and the Stock Exchange rules are concerned with disclosure that the accounts

prepared should provide a “true and fair view” of the financial position and results.

Financial reports of “accounts” required for external users include two financial statements

and accompanying notes, a balance sheet and a profit and loss account, plus a third statement

required under SSAP No.10 (Statement of Standard Accounting Practices) namely, a statement of

sources and application of funds, or funds statement.

According to the Company Act, 1956 every company which is listed of the Stock Exchange

is required to prepare its accounts as per double entry system. TVS Motor Company Ltd. is listed of

both the Stock Exchanges: BSE and NSE

BSE NSE

TVS Motor Company Ltd.: 532343 TVS Motor Company Limited TVSMOTOR

Double Entry System:

Regarded as the most distinctive and fundamental concept of accounting the Dual aspect

concept provides the basis for accounting mechanics. Before explaining this concept, let us define

the term “assets” and “equity”.

Assets are resources owned by the firm. They are very broadly divided in to two broad

categories: Fixed assets and Current assets.

There are two types of equities: Owner equity and Liabilities. Owners equity represents the

claim of the owner, liabilities, on the other, reflects the claims of the creditors of the firm.

Now, according to the Dual aspect concept, each event has two aspects. These are such that

the accounting identity is always preserved.

FINANCIAL POLICY

This is one of the challenging and key issues of the financial management. The main long

term financial decisions relating to the financial policies are related to the structure of debt, equity

ratio, and dividend policy.

TVS Motor Company has been following yearly financial policies relating to the competitors’

move in the market.

The financial year 2007-08 was an eventful year for TVS Motor Company. During the year,

the company completed its product portfolio with the launch of TVS Flame in the executive segment.

With the various initiatives and a complete portfolio in two wheelers, the company is now in

a better position to reverse the declining trend in sales and to report improved results.

Till the launch of the TVS Flame towards the end of the year, the company was absent in the

executive segment, which accounts for over 50% of the motorcycle market.  TVS Motor Company's

motorcycle portfolio was largely dependent on the entry level Star range of products and non-

availability of retail finance had a severe impact on sales. The Company continues its rigorous focus

on its costs through an effective deployment system. Value engineering and aggressive global

sourcing projects are being pursued to reduce material costs and also to neutralize input material cost

increases.

PRODUCT PRICE

BIKES

TVS Star city 33300

TVS Victor 42200

TVS Flame 46600

TVS Apache 58800

TVS Apache RTR 65500

SCOOTERETTES

TVS Scooty Teenz 29900

TVS Scooty Pep 33300

TVS Scooty Pep+ 34400

FINANCIAL DETAILSPROFIT & LOSS ACCOUNT (Rs. In Cr)

Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

Sales Turnover (net sales) 4,473.44 3,731.75 3,321.25 3,260.01 3,111.28

Other Income 85.34 80.72 88.22 45.30 29.28

Stock Adjustments -37.72 60.70 3.18 -7.77 39.82

Total Income 4,521.06 3,873.17 3,412.65 3,297.54 3,180.38

Raw Materials 2,865.65 2,381.79 1,984.60 1,847.40 1,898.50

Excise Duty 618.48 496.79 445.34 439.80 406.75

Power & Fuel Cost 43.10 36.47 27.41 29.34 20.85

Other Manufacturing Expenses 72.03 63.58 64.97 69.25 44.43

Employee Cost 171.39 155.20 139.73 132.68 101.67

Selling and Administration

Expenses502.51 446.94 390.35 392.66 332.19

Miscellaneous Expenses 27.10 9.05 61.84 81.69 83.70

Less: Preoperative Expenditure

Capitalized0.00 0.00 0.00 0.00 0.00

Profit before Interest, Depreciation

& Tax220.80 283.35 298.41 304.72 292.29

Interest & Financial Charges 42.35 20.99 8.33 10.30 11.24

Profit before Depreciation & Tax 178.45 262.36 290.08 294.42 281.05

Depreciation 87.60 93.91 89.63 79.89 79.91

Profit Before Tax 90.85 168.45 200.45 214.53 201.14

Tax 24.25 51.45 62.88 76.04 73.19

Profit After Tax 66.60 117.00 137.57 138.49 127.95

Adjustment below Net Profit -0.32 5.50 1.42 6.03 1.40

P & L Balance brought forward 35.50 38.21 34.43 32.63 23.17

Appropriations 72.69 125.21 135.21 142.72 119.89

P & L Bal. carried down 29.09 35.50 38.21 34.43 32.63

Equity Dividend 20.19 30.88 30.89 31.41 27.72

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Corporate Dividend Tax 2.94 4.33 4.22 4.25 2.07

Equity Dividend (%) 85.00 130.00 130.00 130.00 120.00

Earning Per Share (Rs.) 2.68 4.74 5.61 5.65 5.39

Book Value 34.07 32.26 28.58 24.21 183.10

BALANCE SHEET

(Rs. In Cr)Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

Share Capital 23.75 23.75 23.75 23.75 23.10

Reserves & Surplus 785.52 742.37 655.08 551.20 399.85

Total Shareholders Funds 809.27 766.12 678.83 574.95 422.95

Secured Loans 446.16 308.61 175.01 37.50 41.03

Unsecured Loans 187.40 76.43 11.83 81.51 80.86

Total Debt 633.56 385.04 186.84 119.01 121.89

Total Liabilities 1,442.83 1,151.16 865.67 693.96 544.84

Gross Block 1,483.01 1,378.41 1,287.22 1,132.57 806.51

Less: Accum. Depreciation 685.93 611.63 523.64 437.91 302.03

Net Block 797.08 766.78 763.58 694.66 504.48

Capital Work in Progress 205.83 54.68 6.90 9.52 28.19

Investments 344.74 344.19 175.39 128.02 87.92

Inventories 396.56 357.90 233.23 216.66 214.07

Sundry Debtors 111.40 58.19 39.56 51.90 52.21

Cash and Bank Balance 86.56 24.35 73.87 18.00 82.46

Loans and Advances 266.07 233.68 180.61 159.95 105.92

Current Liabilities 774.22 691.97 616.32 554.54 497.34

Provisions 49.73 62.44 55.61 43.11 33.07

Net Current Assets 36.64 -80.29 -144.66 -151.14 -75.75

Miscellaneous Expenses not w/o 58.54 65.80 64.46 12.90 0.00

Total Assets 1,442.83 1,151.16 865.67 693.96 544.84

Contingent Liabilities 255.75 197.82 159.31 138.57 113.18

FINANCIAL RESEARCH

INDEX

1 STATEMENT OF OBJECTIVE

2 OBJECTIVE OF STUDY

3 INTRODUCTION OF THE TOPIC

4 DATA SOURCES

5 ANALYSIS

6 CALCULATIONS

STATEMENT OF OBJECTIVE

The main objective of preparing this report is to make a research work on financial aspects of

the concerned company. The main contents of this financial research include the analysis of the

financial statements i.e. Balance sheet, Profit and Loss accounts and other related analysis of

financial information.

“In this report of TVS Motor Company Ltd. the main objective of financial research is

related with the PROFITABLITY ANALYSIS of concerned matters of Profit & Loss account.”

All the research and analytical work shown in this report is totally unofficial and not binding

to any legal or official purpose.

OBJECTIVE OF STUDY

Financial Management is one of the main functions of the management. The three

broad activities of financial management are:

1. Financial analysis, financial planning, financial control

2. Management of the firm’s asset structure

3. Management of the firm’s financial structure

Here in this project report the main focus is lying on the research and analysis of the financial

statements and position of the TVS Motor Company Ltd. All the information and research work in

this report is just for the sake of analytical development and form the point of view of research

power.

By doing this activity of research of financial information the interested parties can come to

know the main facts and figures of the concerned company and then a lot many decisions can be

taken relating to investments, future profitability, forecasts relating to the future growth of the

company.

In this financial research report all the research work is carried form the information from the

financial statements like balance sheet, profit and loss account and working capital structure.

INTRODUCTION OF TOPIC

The topic for making research on this project of TVS Motor Company Ltd. is about

ROFITABILITY ANALYSIS of financial statements i.e. Balance sheet and Profit & loss account.

Profitability analysis is of vital importance for a business firm. Profitability analysis includes

mainly comparison of sales turnover, expenses, profit before tax, profit after tax,

appropriations made after tax payment, return on equity comparison, comparison of selling

and administrative expenses etc.

If properly analyzed and interpreted Profitability analysis can provide valuable insights in to

a firm’s performance. It is helpful in assessing corporate excellence, judging creditworthiness,

forecasting share price, etc.

The profitability analysis is very useful to judge the current financial position of the firm

from an outsider point of view and also from the owner’s point of view to control the costs and

making changes relating to the performance to improve the efficiency.

In accordance to the research work all the comparisons and analysis is been made on the basis

of the first of the last five year’s data so as to judge the proper accuracy of the financial changes.

DATA SOURCES

The data sources are broadly of two types namely:

1. Primary data source

2. Secondary data source

1. PRIMARY DATA SOURCE:

Primary data source are called as the sources from which the information is directly received

by the way of interviews, seminars, lectures, public poll, telephone, post etc.

In PRIMARY DATA SOURCE the main fault is that the cost of collecting data is too high as

well as the time is more required to do all the procedure.

2. SECONDARY DATA SOURCE:

Secondary data source are called as the sources from which the information is received by

way of mediums like television, magazines, internet, newspapers, templates, books by authors,

company booklets etc.

Information can be get much easier and faster and with least cost from the SECONDRY

DATA SOUNRCES.

The data sources used in this report are from the secondary data sources, which includes

mainly internet, reference books by authors and company brouchers.

CALCULATIONSProfitability analysis

PROFIT & LOSS ACCOUNT (Rs. In Cr)Year Mar 07 Mar 06 Mar 05 Mar 04 Mar 03

INCOME:

Total Income

[A]

4,521.06 3,873.17 3,412.65 3,297.54 3,180.38

EXPENSES:

Raw Materials 2,865.65 2,381.79 1,984.60 1,847.40 1,898.50

Excise Duty 618.48 496.79 445.34 439.80 406.75

Power & Fuel Cost 43.10 36.47 27.41 29.34 20.85

Other Manufacturing Expenses 72.03 63.58 64.97 69.25 44.43

Employee Cost 171.39 155.20 139.73 132.68 101.67

Selling and Administration

Expenses502.51 446.94 390.35 392.66 332.19

Miscellaneous Expenses 27.10 9.05 61.84 81.69 83.70

TOTAL EXPENSES

[B]4300.26 3589.82 3114.24 2992.82 2888.09

EBIT (operating profit)

[A-B]220.80 283.35 298.41 304.72 292.29

Total debt

Interest

633.56

42.35

385.04

20.99

186.64

8.33

119.01

10.30

121.89

11.24

EBDT 178.45 262.36 290.08 294.42 281.05Depreciation 87.60 93.91 89.63 79.89 79.91

EBT 90.85 168.45 200.45 214.53 201.14

Tax 24.25 51.45 62.88 76.04 73.19

EAT 66.60 117.00 137.57 138.49 127.95

Equity Dividend 20.19 30.88 30.89 31.41 27.72

Equity Dividend (%) 85.00 130.00 130.00 130.00 120.00

Earning Per Share (Rs.) 2.80 4.93 5.79 5.83 5.39

Book Value 34.07 32.26 28.58 24.21 183.10

No of shares 237543557 237543557 237543557 237543557 237543557

CALCULATIONS

Profitability analysis

% CHANGES IN PARTICULARS (Rs. In Cr)

PARTICULARS 2007 2006 2005 2004 2003SALES TURNOVER

% CHANGE

4,473.44

+43.78

3,731.75

+19.94

3321.25

+6.75

3,260.01

+4.78

3,111.28

100

INTEREST

% CHANGE

42.25

+276.78

20.99

+86.74

8.33

-25.89

10.33

-8.36

11.24

100TAX

% CHANGE

24.25

-66.87

51.45

-29.70

62.88

-14.09

76.04

+16.66

73.19

100EAT

% CHANGE

66.6

-47.95

117.00

-8.56

137.57

+7.52

138.49

+8.24

127.95

100EPS

% CHANGE

66.6

237543557

-48.05

117.00

237543557

-8.53

137.57

237543557

+7.42

138.49

23754355

7

+8.16

127.95

237543557

100

EPS (Rs.) 2.80 4.93 5.79 5.83 5.39

FORMULA:

VALUE OF CUREENT YEAR

% CHANGE IN THE VALUES =

VALUE OF THE BASE YEAR (2003)

EARNING AFTER TAX

EPS =

NO OF SHARES

ANALYSIS

Profitability analysis is very useful from the company point of view it helps in to know about

the sales trend, profit changes, debt position, price of shares etc. It is also useful from the outsider’s

point of view it helps to know the debt payment position of the company, investment opportunity,

market value of the firm etc. From research point of view it shows the real picture and helps into take

decisions about to make necessary changes if any deviations are found due to any financial decision.

1. SALES TURNOVER:

Sales turnover is the net sales of the firm. Here in case of TVS Motors Ltd. the sales turnover

has subsequently increased due to the increased marketing efforts and increased selling and

administrative expenses.

(Rs. In Cr)

SALES TURNOVER

% change

20074,473.44

+43.78

20063,731.75

+19.94

20053321.25

+6.75

20043,260.01

+4.78

20033,111.28

100

2003 :Its total two-wheeler sales was 4,86,189 units. The newly-launched TVS Fiero F2 sold 4,028 units

in 2003. The recently-launched TVS Scooty Pep registered sales of 4,047 units. The company was

working on increasing its production by twice the present level.

2004 :

The company launched its new model Centra in 100cc segment which sold about 14,188 units. The

scooterette sales grew 37 per cent. The total no of units sold were 5, 70,671.

2005 :

6,79,099 units with a substantial increase in the sales of Scooty in 2004-05.

2006:

The motorcycles sales recorded 8,06,708. This represents the highest volumes ever in the history of

TVS Motor Company both in motorcycles as well as in the overall two-wheeler segment. The

launch of TVS Star City &Victor GLX & TVS Apache added to the significant sales growth,

received overwhelming response in the markets where it has been launched in March.

2007:

TVS Motor Co. records highest ever two wheeler sales of 15,28,214 units in 2006-07 compared to

2005-06. This year company launched TVS Apache RTR 160 and new TVS scooty Teenz.

There has been a tremendous increase of 43.78% in the last five year. The sales &

promotional expenses have increased up to 51% in last 5 years. The overall result of the

increase in the sales was annual launch a new model.

2. INTEREST: (Rs. In Cr)

Total Shareholders Funds2007809.27

2006766.12

2005678.83

2004574.95

2003422.95

Total Debt 633.56 385.04 186.84 119.01 121.89

Total Liabilities 1,442.83 1,151.16 865.67 693.96 544.84

Debt as a % of total liabilities 43.91 % 33.45 % 21.58 % 17.15 % 22.37

Interest

% change

42.25

+276.78

20.99

+86.74

8.33

-25.89

10.33

-8.36

11.24

100

2003:During 2003 the payment of interest was 11.24 cr. The portion of unsecured loan in total debt

was 66.33% so due to the heavy burden of unsecured loan the interest payment was high.

2004:During 2004, the payment of interest reduced only to 91 Lacs because the portion of unsecured

loans was 68.49% which was higher than the previous year’s portion of unsecured loan.

2005:In 2005, the portion of unsecured loans in the total debt was only 6.33%. So, the payment of

interest, 8.33 Cr was much reduced in spite of a big amount of debt.

2006:In 2006, the amount of debt was about double than the debt of 2005 with the portion of unsecured

about 19.85%. The payment of interest 20.99 Cr increased to thrice paid in 2005.

2007:During 2007 the payment of interest was 42.25 cr. The portion of uncured loan in total debt was

29.58%. The debt was also 44% of the total liability so, ultimately the payment of interest was

double than the amount of interest paid in 2006.

There has been a tremendous increase in interest payment except 2004. There has been

increase of 276% in the payment of interest. This is mainly because of the increasing portion of

debt in the capital structure. The portion of debt has almost doubled in the last five years in

comparison of 22% of 2003 to 43% of 2007.

3.TAX:

(Rs. In Cr)

TAX

% change

200724.25

-66.87

200651.45

-29.70

200562.88

-14.09

200476.04

+16.66

200673.19

100

2003:In 2003, the portion of unsecured loan was 66.33% so, the payment of interest was much

higher and due to this the tax liability was reduced.

2004:During 2004, the portion of unsecured loan was 68.49%. However, the payment of interest

was lesser than 2004 because of the lesser amount of debt than 2003. So this has increased the tax

liability.

2005:In 2005, the portion of unsecured loan was about 6.33% but the depreciation charged was

much higher than 2003 & 2004.So, the tax liability was lesser than 2004.

2006:In 2006, the tax liability has much reduced due to increase in payment of interest and

depreciation charged.

2007:Due to the law operating profit and high payment of interest the tax liability has almost

reduced to half of the tax payment of 2006.

To conclude the Tax liability has reduced 66% in 2007 except 2004 because of low

portion of debt capital. Because most of the part of the earning is spent on the payment of

interests as a result of it the EBT decreases and the tax liability also decreases.

4.EAT:EAT means Earning After Tax. It is the profit after making deductions of interest,

depreciation and tax.

(Rs. In Cr)

EAT

% change

200766.6

-47.95

2006117.00

-8.56

2005137.57

+7.52

2004138.49

+8.24

2003127.95

100

2003:Due to the savings in the Employee cost and Excise duty the Company managed to increase

the profit in spite of increased expenses.

2004:During 2004, the Company has managed to increase the profit due to increase in sales and

decrease in Raw material costs & Miscellaneous expenses.

2005: This year the Company had a slight fall in profit because of the increasing expenses but due

to the efficient control over the miscellaneous expenses and interest payment, the Company

managed to control fall in the profit.

2006: This year the Company had to face the fall in the profit due to increase in Selling &

Administrative expenses. However there was a big fall in the miscellaneous expenses but the

payment of interest was much higher.

2007:During the year the Sales turnover was very high due to the launch of the new Apache but the

increase in Raw material cost, Selling & Administrative expenses and Miscellaneous expenses and

also increase in the payment of interest led the profit to decline to the lowest of the last five year.

The EAT has reduced 47% as compare to 2003. The portion of borrowed capital has

reduced the tax liability but higher rate of interest. There has been mammoth increase in the

payment of interest which is almost about 276%, which clearly shows the increase in the rates

of interests which reduces the profit.

5.EPS: (Rs.

In Cr)

EPS

200766.6

237543557

2.80

2006117.00

237543557

4.93

2005137.57

237543557

5.79

2004138.49

23754355

7

2003127.95

237543557

5.39

% change -48.05 -8.53 +7.42 8.16 100

2003:Due to the savings in the Employee cost and Excise duty the Company managed to

increase the profit in spite of increased expenses. Because of the sufficient profit the EPS was also

very good.

2004:Because of the increase in sale the Company managed to increase the profit and that has

changed the EPS slightly upward.

2005:In spite of the increasing expenses and interest payment the Company managed to

maintain EAT with a slight fall and due to this the EPS also fall with a slight decrease.

2006: The increase in Selling & Administrative expenses and high payment of interest has

heavily affected EPS to the lowest of the last 4 year.

2007: Due to the increase in Raw material cost, Selling & Administrative expenses,

miscellaneous expenses and high payment of interest led to the lowest EPS of the last 5 years.

The effect of decrease in EAT has also lower down the EPS almost to the 2.8 Rs in

comparison to 5.4 Rs. of 2003. This accounts for almost 50% reduction in EPS. Further the

portion of debt in the capital structure has also doubled so this has affected the EAT in form of

payment of interest so ultimately the EAT has also declined and as a result of it EPS has also

declined.

SUMMARY

From the analysis of the all the parameters of the profitability the short summary about each

parameter is as follows:

1. SALES TURNOVER:

There has been a tremendous increase of 43.78% in the last five year. The sales turnover

has increased due to the increased marketing efforts and increased selling and administrative

expenses. The overall result of the increase in the sales was annual launch a new model.

2. INTEREST:

There has been a tremendous increase in interest payment except 2004. The portion of debt

has almost doubled in the last five years from 22% to 43% of 2007 with the increase of 276% in

the payment of interest. This is mainly because of the increasing portion of debt in the capital

structure.

3.TAX:

The Tax liability has reduced up to 66% in last five years 2007 except 2004 because of

low portion of debt capital. Because most of the part of the earning is spent on the payment of

interests as a result of it the EBT has decreased and the tax liability has also decreased.

4.EAT:

The EAT has reduced 47% in last five years. The portion of borrowed capital has reduced

the tax liability. There has been mammoth increase in the payment of interest which is almost about

276% which has reduces the profit.

5.EPS:

The effect of decrease in EAT has also lower down the EPS from Rs.5.4 To Rs. 2.8 in last

five years. This accounts for almost 50% reduction in EPS. Further the portion of debt in the

capital structure has also doubled so this has affected the EAT so ultimately the EAT has also

declined and as a result of it EPS has also declined.

CONCLUSION

Financial research is of analytical in nature. Financial research and analysis provides a

balanced evaluation of corporate performance calls for looking at it from four perspectives: customer

perspective, internal perspective, innovation and learning perspective and financial perspective.

Analysis of financial information provided useful figure by the comparison of which useful

conclusions can be drawn.

Here in this research report of TVS Motor Company Ltd. the research work has been done on

the profitability criteria of the company. The profitability analysis in this report covers the topics

relating to sales turnover, payment of interest, EBIT, EBT, TAX, EAT and EPS.

The high inflation and restricted availability of retail finance will continue to affect the

prospects of the two-wheeler industry. However, the company will have the benefit of all the new

products launched towards the end of 2007 –08. This will help the company to reverse the declining

trend in sales and to report improved results.

LIMITATION OF THE STUDY

Every research has its own limitations. It cannot be an exact science. The main limitation of

this financial research is as follows:

1. TIME PERIOD: Financial research usually requires the information of the time period of minimum 10 to 15

years to have exact measure of the variations due to the changing circumstances.

2. LIMITATION OF FINANCIAL RESEARCH METHODS: Financial research requires the use of different techniques and established theories to have

perfect measure of the changes occurring in the business which is not feasible to use due to the

requirements of other data requirements.

3. LIMITATION OF SKILL :

Financial analysis just provides the figure and reasons for the occurrence of the changes in

the financial position but the results which fits in one situation might not fit in other situation as well

it differs from person to person as skill of analysis differs from person to person.

4. LIMITATION OF THE DATA SUFFCIANCY:The main limitation of this report is that the insufficiency of the data required. Financial

research generally requires all types of financial statements and reports which is not available in all

cases so work of analysis becomes tedious.

5. LIMITATION OF BIAS:Financial research is done by researchers and all the researchers have their own different

opinion on the same situation again if the opinion of the researcher is biased, the purpose of the

research might get defeated.

6. LIMITATION OF THE RESOURCES:Financial research requires sufficient monetary resources. Since sufficient monetary

resources are not made available to do the research, secondary data sources have to be used which is

not at all fully reliable.

7. LIMITATION OF USEFULNESS:Financial research is not just a paper process its main usefulness is laid with its proper and

effective use in removing the mistakes and improving the decisions but it ultimately depends upon

the value of the results and analytical power of the decision maker.

SUGGESTION

After making the research work on Profitability of TVS Motor Company Ltd. few points

have been derived from the research and on the basis of that I would like to make following

suggestions.

The company should reduce the portion of borrowing capital in the capital structure.

Currently the portion of debt in capital structure is 43 %.

The selling and promotional expenses have increased though to have substantial increase

in sales selling and promotional expenses should be increased and promotional activities should

be conducted.

The balance between the debt and equity is required to be maintained so as a result of

it EAT as well as EPS can be increased to more.

The company should adopt the PLOUGH BACK POLICY to reform the capital

structure and to have the advantages of minimization of tax and burden on interest payment.

Due to the increase in the rate of interests the company should maintain a ratio between

Dividend payment and Depreciation. If the portion of depreciation is increased then it can have a

big future benefit and the Tax liability can also be minimized so the company can have huge future

benefit from its own funds.

BIBLIOGRAPHY

WWW.TVSMOTOTR.IN

Encyclopaedia of Management by Philip A. Vale

Financial Management by Prasanna Chandra

Financial Management by Khan & Jain