A STUDY ON FINANCIAL PERFORMANCE ANALYSIS OF THREE TYRE

INDUSTRY.
CHAPTER I
INTRODUCTION
In our present day economy finance is defined as the provision or money at the time
when it is required every enterprise whether big medium or small needs finance to carry on its
operation and to achieve its target. In fact finance is so indispensable today it is rightly said that
it’s the life blood of industry without adequate finance no enterprise can possibly accomplish its
objectives.
Since finance is viewed as the most important factors in every enterprise therefore the
management requires special mention and attention. the conventional approach to finance
function in business highlight the procurements of funds on the most economic and favorable
terms to the concern but of the efficient and proper use of the needed for various venture and
project how much to allocate when to allocate and how to allocate the required funds to a
particular project
Deserves special attention in every concern. the management has to look in to the book
and corner of each project the amount of funds necessary for them and the sources from which to
arrange and the sources from which to arrange financial management plays vital role in
procurement allocation and control of funds.
The basis financial planning and analysis is financial Information. Financial information
is needed to predict compare and evaluate the firms earning ability. It is also required to aid in
economic decision making investment and financing decision statements or accounting reports.
It contains summarized information of the firm’s financial situation to owners creditors are the
general public preparation of these statement is the responsibility as possibly because they are
very useful to judge .The financial efficiency of the company.

Financial is regarded as the life blood of a business enterprise. In the modern oriented
economy, finance is one of the basic foundations of all kinds of economics activities .Finance
statements are prepared primary for decision -making .They play a dominant role in setting the
frame work and managerial conclusion and can be drawn from these statements is of immense
use in decision- making through analysis and interpretation of financial statements .As said
earlier finance is said to be life blood of any business Every business under taking needs finance
for its smooth working .it has to raise funds from the cheapest and risky source to utilize this in
most effective manner . So every company will be interested in knowing its financial
performance.

The project entitled “Financial performance analysis of APOLLO ,MRF,JK TYRE

INDUSTRY throw light on overall financial performance of the company.

Finance is a life blood of business it is required from the establishment of the business to
liquidity or winding up of a business, so financial institutions played a very important role on
the operation of the business.

In the early days banking business was been confined to receiving of deposits and lending of
money. But now a modern banker under take wide variety of functions to assist their customers.
They provide various facilities to customers which makes the transaction easy and comfortable.

Financial institutions such as banks, financial service companies, insurance companies,

securities firms and credit unions have very different ways of reporting financial information.
Running a bank is just difficult as analyzing it for investment purposes.

“Finance is that business activity which is concerned with the organization and conversation
of capital funds in meeting financial needs and overall objectives of a business enterprise.”-
Wheeler

Financial management is that managerial activity which is concerned with the planning and
controlling of a firm financial reserve. Financial management as an academic discipline has
undergone fundamental changes as regards its scope and coverage. In the early years of its
evolution it was treated synonymously with the raising of funds.
In the current literature pertaining to this growing academic discipline, a broader scope so as
to include in addition to procurement of funds, efficient use of resources is universally
recognized. Financial analysis can be defined as a study of relationship between many factors as
disclosed by the statement and the study of the trend of these factors.
The objective of financial analysis is the pinpointing of strength and weakness of a business
undertaking by regrouping and analyzing of figures obtained from financial statement and
balance sheet by the tools and techniques of management accounting. Financial analysis is as
the final step of accounting that result in the presentation of final and the exact data that helps
the business managers, creditors and investors.

Financial performance is an important aspect which influences the long term stability,
profitability and liquidity of an organization. The Evaluation of financial performance using
Comparative Balance Sheet Analysis, Common Size Balance Sheet Analysis, Trend Analysis
and Ratio Analysis had been taken up for the study with “APOLLO ,MRF,JK TYRE
INDUSTRY ” as the project.

Analysis of Financial performance is of greater assistance in locating the weak spots at the
APOLLO ,MRF,JK TYRE INDUSTRY even though the overall performance may be
satisfactory.

It is the process of identifying the financial strength and weakness of a firm from the
available accounting data and financial statement.

The analysis is done by properly establishing the relationship between the items of balance
sheet and profit and loss account the first take of financial analyst is to determine the
information relevant to the decision under consideration form the total information contained in
the financial statement.

The second step is to arrange information in a way to highlight significant relationship. The
final step is interpretation and drawing of inferences and conclusion.

Thus financial analysis is the process of selection relating and evaluation of the accounting
data information. This studying contain following analysis:

 Ratio analysis,
 Liquid ratios,
 Solvency ratios.
Financial performance of a company, being one of the major characteristics, defines
competitiveness, potentials of the business, and economic interests of the company’s
management and reliability of present or future contractors.

Therefore, financial performance analysis and identification of their weaknesses and

strengths using financial performance indicators has its contribution to the management,
shareholders, the public (customers of the bank), the regulator (the government), the financial
sector, 6 and the economy as a whole. In a competitive financial market, bank performance
provides signal to depositors and investors whether to withdraw or invest funds respectively
from the bank.

Similarly, it flashes direction to bank managers whether to improve its deposit service or
loan service or both. Regulators are also interested in the financial health of banks for regulation
purposes. The objective of financial statements is to provide information about the financial
position, performance and changes in financial position of an enterprise that is useful to a wide
range of users in making economic decisions. Owners and managers require financial
statements to make important business decisions that affect its continued operations.

Financial analysis which measure financial performance is then performed on these

statements to provide management with a more detailed understanding of the figures.
Furthermore, the rationale of financial analysis is to diagnose the information contained in
financial statement so as to judge the future earning, ability to pay interest, debt maturities,
profitability and sound dividend polices.

FINANCIAL STATEMENT
Financial statements refer to formal and original statements prepared by a business concern to
disclose its financial information

1. ACCOUNTING

Accounting process involves recording classifying and summarizing various business

transactions. The Day to today transaction of a business are recorded in the different subsidiary
books .the transaction are posted in to various ledger accounts and the balance are taken out at
the end of financial period the aim of maintaining various records is to determine the profit
ability of the enterprise from operations of the business and also to find out it financial position

DEFINITION
Hampton J.J “The statement disclosing status of investment is known as balance sheet and the
statement showing the result is known as profit and loss account”
The definition for financial statement says that “ the financial statement provide a summary of
the accounts of a business enterprise the balance sheet reflecting the assets & liabilities and
capital as on certain date and the income statement showing the result s of operation during a
certain period.

1. Balance sheet
2. Profit loss a/c
3. Working capital
4. Ratio analysis
5. Trend analysis

1. BALANCE SHEET

Balance sheet is most significance financial statement it indicates the financial condition or the
statement of affairs of a business at a particular moment the time. More specially, balance sheet
contains information about resources and obligation of a business entity and about its owner
interest in the business at particular point of the time. Thus the balance sheet of a firm prepared
on the 31st December at every year the firm financial position on the specific date .in the
language of the accounting, balance sheet communicates information about assets and liabilities
and owners equity for business firm as on a specific date it provides a snapshot of the financial
position of the firm close of the firm accounting period

2. COMMON SIZE BALANCE SHEET

Common size balance sheet statement indicates the relationship of various items with common
items (Expressed as percentage of the common item) in the income statement the sales figure is
taken as basis and all other figure are expressed as percentage of sales. Similarly in the balance
sheet the total assets & liabilities are taken as base and all other figure are expressed as
percentage of this total.
3. PROFIT AND LOSS ACCOUNTS

Balance sheet is consider as a very significant statement by bankers and others lenders because it
indicates the firm’s financial solvency and liquidity ,as measured by it’s resources and obligation
.however ,creditors ,particularly bankers and financial analyst in India have recently started
paying more attention to the firm’s earning capacity as a measure of it’s financial strength. The
earning capacity and potential of a firm are reflected by it’s performance during a period of time
.the generally accepted convention is to show one year’s events in the in the profit and loss
account.
Since the profit and loss accounts reflect the result of operation for a period of time, it is flow
statement .in contrast, the balance. Sheet Is a stock, or status statement as it shows assets,
liabilities and owners equity at a point of time.

Profit and loss account present the summary of the revenues, expenses and net income (or net
loss) of a firm. It serves as a measure of the firm’s profitability revenues are amounts which the
customers pay to the firm for providing them goods and services to customers. The cost of the
economic resources used to earn revenues during a period of time is called expenses.

Thus, to determine net income (or net los), the accounting system matches expenses incurred
during the accounting period against revenues earned during that period. This matching of
expenses with revenues is called matching concept.

4. WORKING CAPITAL

There are two types working capital

I. Gross working capital
II.Net working capital
I. GROSS WORKING CAPITAL
Gross working capital refers to the firm’s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year ( or operating cycle ) and
include cash , short term securities ,debtors ,( accounts receivable or book debts ) bill receivable
and stock ( inventory).

II. NET WORKING CAPITAL

Net working capital refers to the difference between current assets and current liabilities. Current
liabilities are those claims of outsiders which are expected to mature for payment within an
accounting year and include creditors (accounts payable), bills payable, and outstanding
expenses.

5. TREND ANALYSIS

In financial analysis the direction of changes over a period of years is of crucial importance.
Time series or trend analysis of ratio indicates the direction of changes. This kind of analysis is
particularly applicable to the items of profit and loss account. It is advisable that trend of sales
and net income may be studied in the light of two factors: The rate of fixed expansion or secular
trend in the growth. Of the business and the general price level. It might be found in practice that
a number of firms would show a persistent growth over a period of years.

For trend analysis, the use of index number is generally advocated. The procedure followed is to
assign the number 100 items of the year and to calculated percentage changes in each item of
other years in relation to the base year. This procedure may be called as “Trend – Percentage
Method “.
6. RATION ANALYSIS

Analysis and interpretation of financial statement with the help of ‘Ratio’ is termed as ‘Ratio
Analysis’. Ratio analysis involves the process of computing determining and presenting the
relationship of items or groups of items of financial statement.

PURPOSE OF THE STUDY

A financial services sector plays a critical role in fulfilling the needs of growing and
increasingly diverse economy, offering high quality services to business and individual alike.
Though Indian banking system registered commendable progress in terms of geographical and
functional coverage, its performance in terms of operational efficiency and viability still leaves
considerable room for improvement

A bank’s balance sheet and income statement are valuable information sources for identifying
risk taking and assessing risk management effectiveness. Although amounts found on these
statements does not provide valuable insights of performance so ratio analysis is required for
determining good or bad performance of bank and also for determining its causes. The study
includes the calculation of different financial ratios. It compares three years financial statements
of the company to know its performance in these different years.

A financial statement is an organized collection of data according to logical and consistent

accounting procedures. Its purpose is to convey an understanding of some financial aspects of a
business firm. It may show a position at a moment of time as in the case of a balance sheet, or
may reveal a series of activities over a given period of time, as in the case of an income
statement.

Thus, the term financial statement generally refers to the basis statements;
i) The income statement
ii) The balance sheet
iii) A statement of retained earnings
iv) A statement of charge in financial position in addition to the above two statement.
 v) The basic objective of studying the ratios of the company is to know the financial
position of the company.

NEED FOR THE STUDY

The need for the study is as follows:
1. The study aim at assessing profitability and solvency position of the company.
2. The liquidity and activity positions of the firm are analyzed using liquidity and
turnover ratios involving current liabilities.
3. The solvency position of the company is also analyzed using ratios

OBJECTIVES OF THE STUDY

1. PRIMARY OBJECTIVES
 To analyze the overall financial performance analysis of three tyre industry
2. SECONDARY OBJECTIVES

 To ascertain the short term and long term solvency position of the three tyre industry
 To ascertain the profitability ratio of three tyre industry limited during the past five
financial years.
 To know the overall financial position of three tyre industry during the past fives
financial years
 TO Draw the significant relationship between increase or decrease of income and
expenditure with respect to different activities
 To study the changes which take place in revenue account during the years and their
trends
 To study the growth rate which take place with respect to each activity
 To highlight the service coming in the area of finance with the help of the trend Analysis
comparative balance sheet Analysis commensurate balance sheet analysis and the view to
increasing efficient of the three tyre industry
 To assess the working capital employed by the three tyre industry
SCOPE OF STUDY
 The activities as the sources are planned in on systematic manner.
 It provides validity, objectives & reliability in business management.
 It creates harmony in the relationship between the management & employee.
 The management aims to control the cost of the production at the same time increase
the efficiency of Employee.
 Studying the financial statement Analysis needs and its implication for the MRF Ltd.
 Impact of ratio analysis for three tyre industry
 To study how the short term funds and long term funds are generated.

LIMITATIONS OF THE STUDY

 Time has been a limit factor and it has been difficult the various aspects of finance with
the prescribed time.
 Financial statements are only in terms of reports. They are not final because the exact
financial position can be known only when the business is closed.
Financial statement are prepare on the basis of certain accounting concepts and
conventions any changes in the method or procedure of accounting limits the utility the
utility of financial statements.
 The number of parties interested in the financial statement is large and their interest
differs. The financial statements cannot meet the purpose of parties interested in them.
 The authenticity of the financial statement has not been checked with the book of
accounts of the company.
INDUSTRY PROFILE

APOLLO TYRE INDUSTRY PROFILE

HISTORY OF APOLLO TYRE COMPANY

“People deliver innovation

Innovations deliver success
A few of the difference our people made”

 1975 Inception

 1976 Registered as a company

 1977 First Plant commissioned in Perambra(Cochin, Kerala)

 1991 Second Plant commissioned in Limda (Baroda, Gujarat)

 1995 Acquired Premier Tyres in Kalamassery (Cochin, Kerala)

 1996 Exclusive Tubes Plant Commissioned in Ranjangaon (Pune, Maharastra)

 2000 Exclusive Radial Capacity established in Limda

 2000 Established APOLLO TYRES Health Care Clinic for HIV. Aids awareness

 2003 Expansion of passenger car radial capacity to 6600 tyres per day

 2004 Production of India’s first H-Speed rated tubless passengers car radial tyres

 2004 Support in setting up India’s first emergency medical service in Baroda

  2005 APOLLO TYRES health care clinic in Udaipur in Rajasthan and Kanpur in Uttra
Pradesh

 2006 Expansion of passenger car radial capacity to 10000 tyres per day

 2006 Expansion of passenger car range to include 4x4 and all terrain tyre

 2006 Acquired Dunlop tyres international in South Africa and Zimbabwe

 2006 Opening of Apollo tyres health care clinic in Ukkadam, Tamilnadu

 2006 Launch of Dura Tread, trading material and solutions

 2006 Launch of India’s first range of ultra high performance V and W-speed rated
passenger car radial

 2007 Launch of Regal Truck and Bus radial tyres

 2007 Launch of Dura tyres, retreaded tyres from Apollo

 2007 Launch of the Apollo Tennis Initiatinve and Mission 2018

Apollo Tyres Ltd is a high-performance company and the leading India tyre manufacturer. Head
quartered in Gurgaon, a corporate-hub in the National Capital Region of India, Apollo is a young,
ambitious and dynamic organisation, which takes pride in its unique identity. Registered as a
company in 1976, Apollo is built around the core principles of creating stakeholder value through
reliability in its products and dependability in its relationships. Apollo’s present strength and
market dynamism steps from its early years of strife in establishing itself as a tyre manufacturer
within the closed Indian economy. Over two decades, Apollo worked on a portfolio of products,
tuned to customer needs and an array of innovative marketing initiatives to establish itself as a
leader in its home market. Some of these include segmenting customers by their load and mileage
requirements, running tyre loyalty programmes, establishing customer contact programmes which
resulted in better health and driving habits, introducing India’s first farm radials and India’s first
range of high-speed tubeless passenger car tyres. For the first time, in 2006 Apollo ventured outside
India in its quest to test itself outside its home comforts. Apollo acquired Dunlop Tyres
International Pty Ltd in South Africa (since renamed as Apollo Tyres South Africa Pty Ltd) and
Zimbabwe, taking on southern Africa as the second domestic market. The company holds brand
rights for the Dunlop brand across 30 African countries.

In 2009, Apollo acquired Vredestein Banden B V in the Netherlands, and thereby adding Europe as
its third crucial market. The company currently produces the entire range of automotive tyres for
ultra and high speed passenger cars, truck and bus, farm, Off-The-Road, industrial and specialty
applications like mining, retreaded tyres and retreading material. These are produced across
Apollo’s eight manufacturing locations in India, Netherlands and Southern Africa. A ninth facility
is currently under construction in southern India, and is expected to commence production towards
the end of 2009. The major brands produced across these locations are: Apollo, Dunlop, Kaizen,
Maloya, Regal and Vredestein. In the three domestic markets of India, Southern Africa and Europe,
Apollo operates through a network of branded, exclusive or multi-product outlets. In South Africa
the branded outlets are called Dunlop Zones, while in India they are variously named Apollo Tyre
World (for commercial vehicles) and Apollo Radial World (for passenger cars). Exports out of
these three key manufacturing locations reach over 70 destinations across the world, with key
comprising Europe, Africa, the Middle East and South-East Asia. For Apollo Tyres, offering the
right product to the right customer is essential. Special efforts are made to understand customer
needs and segment the market accordingly. After which, products are developed for niche
applications within a larger category to enable the company to provide efficient, fuel and cost-
saving products to each customer segment. Innovation has always been an integral part of the
Apollo way of doing business, this applies as much to product development and marketing as to
how the company as a whole is focused on challenging existing boundaries. An integral part of the
Apollo Tyres world is its community involvement and giving programmes directly related to its
business. In India, the focus has always been on finding ways to ensure a direct benefits to customer
groups. For the commercial vehicle community the company runs extensive HIV-AIDS awareness
and prevention programmes and has established Health Care Clinics across the country to cater to
the community’s health needs. For passenger car customers the focus is on cultivating Safe Driving
habits. Across its manufacturing locations, the key initiatives revolve around health and education
programmes. Apollo is one of the largest corporate investors in developing sporting talent through
its Mission 2018, which is focused on nurturing and training youngsters in the sport of tennis to
enable an Indian to win a Singles Grand Slan Championship by the year 2018

MRF COMPANY PROFILE

COMPANY PROFILE

The company has incorporated nearly eight years. The company was started by K.M. MAMMEN
MAPILLAI (Director of the Company).The authorized capital of company is RS.4.24 Crores the
directors is the experienced person He. Opened a small toy balloon manufacturing unit in a shed at
Thiruvottiyur , Chennai They produce a variety of products ranging from balloons and latex-cast
squeaking toys to industrial gloves and contraceptives were produced MRF ventured into the
manufacture of tread rubber. And with that the first machine a rubber mill was installed at the
factory. This step into tread-rubber manufacturing was later to catapult.

MRF into a league the few had imagined possible MRF soon became the only Indian-owned unit to
manufacture the superior extruded non-blooming and cushion backed tread – rubber, Enabling it to
complete with the MNC”S operating in INDIA at that time MRF had become the market leader
with a 50% share of the tread-rubber market in India .So effective was MRF”S hold on the market,
that the large multinational had no other option but to gradually withdraw from the tread rubber
business in India. With the success achieved in tread rubber, MRF entered into the manufacture of
Tyres .MRF established a technical collaboration with Mansfield & Rubber Company of USA.
Around the same time it also became a public company it set up a pilot plant for Tyre
manufacturing at Thiruvottiyur.

Currently Mr.K.M.Mamman is the CMD of the company. The promoters hold about 26% of the
total equity in the company, while institutional investors hold about 14% and individuals hold about
34%.
The registered office of the company is located at Chennai (Tamilnadu) and its plants at arkonam
(TN), Gummidpoondi (TN), tiruvottiyur, medak (AP), Ponodocherry and Usgon (GOA) and
Vadavathoor (kerala).

CHRONOLOGY

1946- A young entrepreneur, K. M. Mammen Mappillai, opened a small toy balloon manufacturing
unit in a shed at Tiruvottiyur, Madras (now Chennai).

1949 - Although the `factory` was just a small shed without any machines, a variety of products,
ranging from balloons and latex-cast squeaking toys to industrial gloves and contraceptives, were
produced. During this time, MRF established its first office at 334, Thambu Chitty Street, Madras
(now Chennai), Tamil Nadu, India.

1952 - MRF ventured into the manufacture of tread rubber. And with that, the first machine, a
rubber mill, was installed at the factory. This step into tread-rubber Manufacture was later to
catapult MRF into a league that few had imagined possible.

1955 - MRF soon became the only Indian-owned unit to manufacture the superior extruded, non-
blooming and cushion-backed tread-rubber, enabling it to compete with the MNC`s operating in
India at that time.

1956 -The quality of the product manufactured was of such a high standard that by the close of
1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So
effective was MRF`s hold on the market, that the large multinationals had no other option but to
withdraw from the tread rubber business in India.

1990 - The Aruna Leathers & Exports Ltd. was amalgamated with the Company. As per the scheme
one equity share of Rs 10 each of MRF Ltd. was allotted for every 10,000 shares of Rs 10 each
fully paid-up held in ALEL. Accordingly, 25 equity shares were allotted to the erstwhile
shareholders of ALEL.

- The Company introduced `Vapocure` colors in the market.

- (6 months), the Company privately placed 15, 00,000 - 14% non-convertible Debentures of Rs
100 each (III Series). The debentures are redeemable - at a premium of 5% in three annual
installments of Rs 35 each commencing from 31st July, 1997.

- The Company privately placed with SBI Mutual Fund 10, 00,000 - 14% debentures (IV the
Series) which are redeemable at a premium of 5% on 26th June, 1998.

- During the year 5, 00,000 - 14% debentures were also privately placed with Infrastructure Leasing
& Financial Services, Ltd. These debentures are redeemable in three annual installments at a
premium of 5% commencing from 23rd July, 1997.

1991 - The Company promoted a new Company viz. MRF International, Ltd., in view of the
tremendous growth potential in the export market.

- 3,85,000 No. of equity shares issued to (prem. Rs 242 per share) to the foreign collaborators M/s.
Asia Trading Services, Honking.

1992 - The Company has formed a new Company, viz., MRF INTERNATIONAL LIMITED and
the Company has received the certificate of commencement of business.

1993 - K. M. Mammen Mappillai was awarded the Padmashri Award of National Recognition for
his contribution to industry - the only industrialist from South India to be accorded this honor. MRF
also became the first Tyre Company in India to cross the INR 10 billion mark. In addition, the
company was voted by the Far Eastern Economic Review, as one of the ten leading Corporate
Groups in India and a Leader in Asia, and by readers of the A & M magazine, as one of India`s
most admired Marketing Companies.

1995 - The Company has received the Top Export Award for the year from All India Rubber
Industries Association.

1996 - The Company has received an award from CAPEXIL - Certificate of Merit based on the
export performance for the year.

- The Far Eastern Economic Review Award was presented to MRF for the fourth year in succession
in recognition of excellence.

1997 - MRF Ltd has been assigned a credit rating of `PR1+` (superior) for its proposed Rs 100 core
commercial paper (CP) programme by Credit Analysis and Research Ltd (CARE).

- MRF is setting up a new plant in Pondicherry for the production of radial Tyres.

- The company set up the Arakonam plant in Chennai to produce bicycle Tyres and tubes.

- MRF began manufacturing Tyres and tubes in technical collaboration with Mansfield Tire and
Rubber Company, USA.

- MRF has launched Nylogrip Zapper, a high performance Tyre for new generation bikes.

- The company tied up with Uniroyal Goodrich Tire Co. of USA, a subsidiary of the French Tyre
giant Michelin, which held 9.8 per cent stake in the company.

1998 - MRF Tyres has signed an OEM (original equipment manufacturer) alliance with Spiel
Honda Motors and Hindustan Motors. MRF has launched a market sampling operation for the MRF
Zigma.

1999 - MRF Ltd has decided to set up more such clinics in Northern and Western cities.

- The Company has entered into agreements with the Depositories viz., National Securities
Depository Ltd. [NSDL] & Central Depository Services (India) Ltd.

- AIRIA Highest Export Award was given in recognition of our outstanding Export performance in
respect of Auto Tyres & Tubes during the year.

2000 - The Company has set up shop in Dubai to target markets in the UAE as part of its export
thrust. MRF has launched a steel-belted premium radial Tyre variant called `MRF ZVTS`.

2002 -MRF was ranked highest in customer satisfaction along with multinational Bridgestone in a
study conducted by JD Power Asia pacific. MRF Tyres Ltd sees slump in commercial vehicle Tyre
market and passenger car growth has also declined.
-High court dismisses the writ petition filed by MRF Employees Union challenging the order of
dismissal of a worker, who was the secretary of the union.

-Advertising Standard Council of India Quashed the objection raised by MRF by upholding J K
Industries claim of being India`s Number one tire maker in the four wheeler segment.

-MRF Ltd has obtained the `Outstanding Corporate Sports Initiative` award from the Federation of
Indian Chamber of Commerce and Industry.

2003 -MRF and Bridgestone are ranked highest in a tie for the second year in a row in customer
satisfaction with original tries according to JD Power Asia Pacific.

-Sheri K.M. Mammen Mappillai, Chairman and Managing Director expired on March 2nd.
Mr.C.D Khanna has ceased to be the Director of the company. And Mr. K S Narayanan has
resigned from the board of MRF. Mr. Kumar and Mr. Ranjith Issac Jesudasen have been appointed
as the directors of the company.

-Mr. K S Narayanan ceased to be director of the Company with effect from April 17, 2003,
consequent to his resignation from the Board of Directors.

-MRF Ltd. has informed the Exchange that at its meeting held on December 19, 2003 the BOD has
re-designated Jt. Managing Director Mr. Arun Mammen as Managing Director of the Company i.e.
April 01, 2004.

2004 -MRF Ltd. has informed that Mr. Ravi Mannish has been appointed as Additional Company
Secretary of the Company i.e... January 05, 2004. MRF received the highest rankings in the study in
four of the five factors determining overall satisfaction with Tyres appearance, durability, traction
and handling.

- MRF Tyres is the biggest consumer of natural rubber in India during 2002-03 -Ties up with
Maruthi Udyog to boost motorsports in India.

2007 - MRF Ltd launches premium truck Tyre Super.

VISION OF MRF

MRF will be a significant global player delighting customer worldwide Leadership in Technology
 Excellence in manufacturing
 World-class systems
 Driven by a team of motivated high performances to achieve profitable growth

POLICY

1. To maintain proper book keeping.

2. To standardize the accounts closing activities.
3. To reduce the document retrieval time.
4. To make the payment on due dates.
5. To maintain the vendor satisfaction.

MRF TEAM SPIRIT

 Has proprietary interest.

 Has height Trust.
 Faces all problems.
 Delegates & develops.
 Seeks help.
 Help others succeed.
 Creates high performance Situation.
 Innovative.
 Avoids surprise.
 Has process happiness.
THE PRIMARY PRODUCTS BY MRF ARE AS FOLLOWS

 Truck / Bus Tyres.

 Light Commercial, Jeep & Utility Vehicle Tyres.
 Passenger Cars Tyres.
 Off the road Tyres.
 Two-Wheelers Tyres.
 Farm Service Tyres.
 Jeep & utility vehicle Tyres.

Heavy Duty Truck / Bus Light truck

MUV/RCV/Passenger car Motor sports

Off the road / Earth movers Military service

Farm service Fork lift

Two /Three wheeler

ARKONAM ORNIZATION MACHINARY IMPLAMENTS
AND PLANT IMPLAMENTATION

2005 - MB BANBURY

2000 - DIP PLANT

 1999 - EASY PLANT

1997 - TUBE PLAT

1992 - BELTING PLANT

1972 - MAIN TYRE PLANT

ARAKONAM PLANT MAILESTONE

2006 -OHAS-18001

2005 - ISO-(TS 16949-2002)

2004- TPM (Total

Productive Maintenance) KICK OFF

2002 - ISO-9001-2000

2001 - ISO-14001
1998 - ISO-9001

PRESENT ACHIEVEMENT & ACTIVITIES

 Formula 1 racing.
 T.V. serial.
 Sponsors Sachin Tendulkar & Steve Waugh.
 12th place worldwide.
 Largest selling radial car Tyre- ZIGMA.
 Largest selling tractor Tyre- SHAKTI.
 Largest selling TWO Wheeler Tyre- NYLOGRIP.

PRODUCTS AND BRANCHES

PRODUCTS BRANCHES
1.Toys 1.New Delhi

2.Paints 2.Maydak

3.Sports goods 3.Goa (fun school toys)

4.Tread Rubber 4.Pondicherry

5.Tyre (radial) bias Tubless Tyre 5.Arkonam

6. Inner tubes flips 6.Thiruvottiyur (Chennai)

INDUSTRY PROFILE

MRF Ltd."Tyres with Muscle"

MRF Ltd. is the first Indian company to export tyres to the US, the very birthplace of tyre
technology. It is the first company in India to manufacture and market Nylon tyres passenger tyres
commercially. In 2004, the company's turnover crossed INR 30 billion mark. The company was
given the title of most ethical company by 'Business World' magazine after a survey conducted in
1999.

Quick Facts Founder K. M. Mammen Mappillai

Country India
Year of Establishment 1946 as a toy factory
Industry Tyre Manufacturing
Listings & its codes NSE: MRF; BSE: 500290
Registered Office 124, Greams Road
Chennai - 600 006
India
Tel.: +(91)-(44)-28292777
Fax: +(91)-(44)-28291844/ 0562
Website www.mrftyres.com
Related WebsitE www.mrf-exports.com (MRF Exports)

Segment and Brands

Truck / Bus Tyres
Light Commercial, Jeep & Utility Vehicle Tyres
Passenger Cars Tyres
Off the road tyres
Two-Wheelers Tyres
Farm Service Tyres
Company Flashback
The company, MRF Ltd., originally started as a small manufacturing unit of balloons, latex cast
squeaking toys and industrial gloves. The company established its first office in 1949 at Chennai,
Tamil Nadu, India. It began the manufacturing of tyres in 1961.
Today, MRF has 6 manufacturing plants in India located in Tiruvottiyur and Arakonam in Tamil
Nadu, Kottayam in Kerala, Ponda in Goa, Medak in Andhra Pradesh, and one in the Union
Territory of Pondicherry. It has a distribution network of more than 2,500 outlets in the country and
exports tyres in over 75 countries globally.

Market profile

While the tyre industry is mainly dominated by the organised sector, the unorganised sector holds
sway in bicycle tyres. The major players in the organised tyre segment consist of MRF, Apollo
Tyres, Ceat and JK Industries, which account for 63 per cent of the organized tyre market. The
other key players include Modi Rubber, Kesoram Industries and Goodyear India, with 11 per cent,
7 per cent and 6 per sent share respectively. Dunlop, Falcon, Tyre Corporation of India Limited
(TCIL), TVS-Srichakra, Metro Tyres and Balkrishna Tyres are some of the other players in the
industry. MRF, the largest tyre manufacturer in the country, has strong brand equity. While it rules
supreme in the industry, other players have created niche markets of their own

Sector specifics

The tyre industry is a major consumer of the domestic rubber production. Natural rubber constitutes
80 per cent of the material content in Indian tyres. Synthetic rubber constitutes only 20 per cent of
the rubber content of a tyre in India. World wide, the ratio of natural rubber to synthetic rubber is
30:70. Apart from natural and synthetic rubber, rubber chemicals are also widely used in tyres.

Sector trends

Crossply tyres have been used in India for several decades. In these tyres, the ply cords run across
each other or diagonally to the outer surface of the tyre. Rayon and nylon tyre cords are used as the
reinforcing medium. These tyres can be retreaded twice during their lifetime and are hence
preferred by Indian transport operators who normally overload their trucks.
Outlook

Globally, the OEM segment constitutes only 30 per cent of the tyre market, exports 10 per cent and
the balance from the replacement market. In India, the scenario is quite different. Nearly 85 per cent
of the total tyre demand in the country is for replacement. This anomaly has placed the retreaders in
a better position than the tyre manufacturers.

Simply put, rethreading is replacing the worn-out tread of the old tyre with a new one. The
popularity of rethreading stems from the fact that it costs only 20 per cent of a new tyre but
increases its life by 70 per cent to 80 per cent. Most of the transporters in India retread their tyres
twice during its lifetime, while a few fleet owners even retread thrice.

NEED FOR THE STUDY

The need for the study is as follows:
4. The study aim at assessing profitability and solvency position of the company.
5. The liquidity and activity positions of the firm are analyzed using liquidity and turnover
ratios involving current liabilities.
6. The solvency position of the company is also analyzed using ratios

OBJECTIVES OF THE STUDY

1. PRIMARY OBJECTIVES
 To analyze the overall financial performance analysis of APPOLO,MRF,CK TYRE
industry
2. SECONDARY OBJECTIVES

 To ascertain the short term and long term solvency position of the APPOLO,MRF,CK
TYRE industry
 To ascertain the profitability ratio of APPOLO,MRF,CK TYRE limited during the past
five financial years.
 To know the overall financial position of APPOLO,MRF,CK TYRE industry during the
 past fives financial years
 TO Draw the significant relationship between increase or decrease of income and
expenditure with respect to different activities
 To study the changes which take place in revenue account during the years and their trends
 To study the growth rate which take place with respect to each activity
 To highlight the service coming in the area of finance with the help of the trend Analysis
comparative balance sheet Analysis commensurate balance sheet analysis and the view to
increasing efficient of the APPOLO,MRF,CK TYRE industry
 To assess the working capital employed by the APPOLO,MRF,CK TYRE industry

SCOPE OF STUDY
 The activities as the sources are planned in on systematic manner.
 It provides validity, objectives & reliability in business management.
 It creates harmony in the relationship between the management & employee.
 The management aims to control the cost of the production at the same time increase
the efficiency of Employee.
 Studying the financial statement Analysis needs and its implication for the Ltd.
 Impact of ratio analysis for APPOLO,MRF,CK TYRE industry
 To study how the short term funds and long term funds are generated.

LIMITATIONS OF THE STUDY

 Time has been a limit factor and it has been difficult the various aspects of finance with the
prescribed time.
 Financial statements are only in terms of reports. They are not final because the exact
financial position can be known only when the business is closed.
Financial statement are prepare on the basis of certain accounting concepts and conventions
any changes in the method or procedure of accounting limits the utility the utility of
financial statements.
 The number of parties interested in the financial statement is large and their interest differs.
The financial statements cannot meet the purpose of parties interested in them.
 The authenticity of the financial statement has not been checked with the book of accounts
of the company.
 CHAPTER II
REVIEW OF LITERATURE
REVIEW OF LITERATURE
1. Barton and Schmidt (1986) The size of the equity pool also may depend on the rate of
profitability, income distribution, and equity redemption. Decisions by cooperative
management and members regarding equity investment should be based on the members
cost of equity capital. The cost to the member of providing equity is the opportunity cost of
investing money in a member's own operation or other alternatives.
2. Cobia and Brewer (1988). An agricultural cooperative requires capital to finance fixed
assets (such as land, buildings, and equipment) and other assets (such as investments in
other cooperatives), and to provide working capital. Thus, cooperative management may
follow the practice of maximizing the use of equity capital and minimizing the use of debt.
3. Featherstone (1989) The cooperative needs to determine a leverage level and then manage
equity investment and redemption to achieve this level. Cooperatives must be lie to identify
optimal levels of debt and equity to operate efficiently and to guard against unexpected
economic shocks, because leverage affects the probability of equity loss and bankruptcy
4. Cobia and Brewer (1990) Cooperatives also acquire capital through debt financing. Using
debt is attractive to cooperative directors who represent members' interests, because it
allows for members to achieve a higher return on patronage and equity when the cost of debt
is less than the cost of equity. However, acquiring too much debt subjects the cooperative to
unbearable financial risk caused by varying profitability and interest rates.
5. JL Berens and CJ Cuny (1995) corporate finance researchers have long been puzzled by
Iow corporate debt ratios given debt's corporate tax advantage. This article recognizes that
firm value typically reflects a growing stream of earnings, while current debt reflects a no
growing stream of interest payments. Debt to value is therefore a distorted measure of
corporate tax shielding
6. Hopkins (1995) one of the most important and most difficult decisions cooperative
management must make is the choice of capital structure. Through proper capital sln1cture,
management can influence the financial performance of the business (Forster). The cost of
debt is less than the cost of equity capital because of differences in risk and the tax
deductibility of debt.
7. Davis, Henry A (1998) Capital structure describes how a corporation has organized its
capital-how it obtains the financial resources with which it operates its business. Businesses
adopt various capital structures to meet both internal needs for capital and external
requirements for returns on shareholders investments Executives Research Foundation.
8. Vojislav Maksimovic (1999) This paper analyzes the relationship between a firm's capital
structure and its information acquisition prior to capital budgeting decisions. It is found that
low-growth industries can sustain a large number of levered firms. In these industries,
leverage is negatively related to a firm's incentive to acquire information during the capital
budgeting process.
9. Arntzen. L. Fallan (2003) The most important arguments for what could determine capital
structure is the pecking order these static trade off theory. These two theories are reviewed,
but neither of them provides a complete description of the situation and why some firms
prefer equity and others debt under different circumstances.
10. Christopher J. Green (2004) capital structure and firm ownership in order to identify the
leading theoretical and empirical issues in this area. The theoretical component of the survey
attempts to reconcile competing theories of capital structure and appraises recent models
which use agency theory and asymmetric information to explore the impact of managerial
shareholdings, corporate strategy and taxation on the firm's capital structure.
11. Denis (2004) The field of empirical capital structure studies is very actively researched, the
large majority of studies has been conducted on samples of large firms. The relative
shortage of research into private small firm capital structure is troubling because small firms
provide about half of private sector employment and produce about half of private sector
output in the United Even their aggregate importance as users of financing has recently
surpassed that of better-known large-firm markets.
12. Dirk hack births (2004) This paper develops a framework for analyzing the impact of
macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by
 observing that when cash flows depend on current economic conditions, there will be a
benefit for firms to adapt their default and financing policies to the position of the economy
in the business cycle phase.

13. Fernandez (2004) capital structure and factor-product markets. These studies relate some
elements of the modern financial theory to the stakeholder theory, industrial organization,
and firms strategic management. Three main points are highlighted. First, the relevant role
of non-financial stakeholders in capital structure design. Second, the interactions between
capital structure and market structure.
14. Frank Adams (2004) Capital structure theories grounded in the finance paradigm (agency
theory, transaction cost theory) have contributed to our understanding of capital structure
decision making. However, they do not address the intricacies of capital structure decision
making from a managerial choice perspective, especially in privately held firms.
15. Hovakimian (2004) This study examines capital structure decisions in a small and medium
enterprise (SME) setting. Specifically, we look at two main issues. First, we test whether
industry median leverage, which has been found to affect large firm capital structure
decisions also guide financing patterns of SMEs
16. Yimin Zhang and Tianmu Wang (2010) have considered the cost structure, profitability
and productivity of the Chinese textile industry and estimated the impacts of RMB
appreciation on this industry for 1999–2006. It was found that the industry had suffered
from very low profit margins and returns on capital. Because the input prices have been
increasing, particularly since 2001, generating profits had become more difficult task for the
industry.
17. Nevertheless, the industry achieved substantial productivity growth during the period
examined. Although at an inadequate level, the profitability of the industry did show some
signs of improvement. As long as this trend continued, the industry could have obtained a
decent level of profitability. Since 2011, the industry has faced a new challenge; the
appreciation of the RMB. Based on 2006 data, it estimated the maximum rate of RMB
appreciation
18. Neha Mittal (2011) has studied the determination of the capital structure choice of the
selected Indian companies. The main objective was to investigate whether and to what
 extent the main structure theories could explain the capital structure choice of Indian firms.
It has applied multiple regression models on the selected industries by taking data for the
period 2010-2015. The study concluded that the main variables determining capital structure
of industries in India were agency cost, assets structure, non-debt tax shield and size. The
coefficients of these variables were significant at one per cent and five per cent levels.
19. Merger and acquisition for long have been an important phenomenon in the US and UK
economics. In India also, they have now become a matter of everyday occurrence. They are
the subject of counting interest to different persons such as the business executives who are
looking for potential merger partners, investment bankers who manage the mergers, lawyers
who advice the parties, regulatory authorities concern with the operations of security market
and growing corporate concentration in the economy and academic researchers who want to
understand these phenomenon better.
20. Gallet C.A (1996), “Merger and Market Power in the US Steel industry” He examine the
relationship between mergers in the U.S. steel industry and the market power. The study
employed New Empirical Industrial Organization (NEIO) approach which estimates the
degree of market power from a system of demand and supply equations. The study analyzed
yearly observations over the period between 1950 and 1988 and results have revealed that in
the period of1968 to 1971 merges did not have a significant effect on market power in the
steel industry; whereas mergers in 1978 and 1983 did slightly boost market power in the
steel industry.
21. Anup Agraval Jeffrey F. Jaffe (1999), “The Post-merger Performance Puzzle” they
examines the literature on long-run abnormal returns following mergers. The paper also
examines explanations for any findings of underperformance following mergers. We
conclude that the evidence does not support the conjecture that underperformance is
specifically due to a slow adjustment to merger news. We convincingly reject the EPS
myopia hypothesis, i.e. the hypothesis that the market initially overvalues acquirers if the
acquisition increases EPS, ultimately leading to long-run under-performance.
22. Saple V. (2000), “Diversification, Mergers and their Effect on Firm Performance: A Study
of the Indian Corporate Sector” he finds that the target firms were better than industry
averages while the acquiring firm shad lower than industry average profitability. Overall,
acquirers were high growth firms which had improved the performance over the years prior
 to the merger and had a higher liquidity.
23. Beena P.L (2000), ‘An analysis of merger in the private corporate sector in India’ she
attempts to analyze the significance of merger and their characteristics. The paper
establishes that acceleration of the merger movement in the early 1990s was accompanied
by the dominance of merger between firms belonging to the same business group of houses
with similar product line.
24. Vardhana Pawaskar (2001), “Effect of Mergers on Corporate Performance in India” he
studied the impact of mergers on corporate performance. It compared the pre- and
postmerger operating performance of the corporations involved in merger between 1992 and
1995 to identify their financial characteristics. The study identified the profile of the profits.
The regression analysis explained that there was no increase in the post- merger profits. The
study of a sample of firms, restructured through mergers, showed that the merging firms
were at the lower end in terms of growth, tax and liquidity of the industry. The merged firms
performed better than industry in terms of profitability.
25. Paul (2003) “The merger of Bank of Madura with ICICI Bank”. The researcher evaluated
the valuation of the swap ratio, the announcement of the swap ratio, share price fluctuations
of the banks before the merger decision announcement and the impact of the merger
decision on the share prices. He also attempted the suitability of the merger between the 57
year old Bank of Madura with its traditional focus on mass banking strategies based on
social objectives, and ICICI Bank, a six year old ‘new age’ organisation, which had been
emphasizing parameters like profitability in the interests of shareholders. It was concluded
that synergies generated by the merger would include increased financial capability, branch
network, customer base, rural reach, and better technology. However, managing human
resources and rural branches may be a challenge given the differing work cultures in the two
organizations.
26. Joydeep Biswas (2004) “ Recent trend of merger in the Indian private corporate sector”.
They research about Corporate restructuring in the form M&A has become a natural and
perhaps a desirable phenomenon in the current economic environment. In the tune with the
worldwide trend, M&A have become an important conduit for FDI inflows in India in
recent years. In this paper it is argued that the Greenfiled FDI and cross-border M&As are
not alternatives in developing countries like India.
 27. Vanitha. S (2007) “Mergers and Acquisition in Manufacturing Industry” she analyzed the
financial performance of the merged companies, share price reaction to the announcement
of merger and acquisition and the impact of financial variables on the share price of merged
companies. The author found that the merged company reacted positively to the merger
announcement and also, few financial variables only influenced the share price of the
merged companies.
28. Vanitha. S and Selvam. M (2007) “Financial Performance of Indian Manufacturing
Companies during Pre and Post Merger” they analyzed the pre and post merger performance
of Indian manufacturing sector during 2000-2002 by using a sample of 17 companies out of
58 (thirty percent of the total population). For financial performance analysis, they used
ratio analysis, mean, standard deviation and ‘t’ test. They found that the overall financial
performance of merged companies in respect of 13 variables were not significantly different
from the expectations.
29. Kumar (2009), "Post-Merger Corporate Performance: an Indian Perspective" examined the
post-merger operating performance of a sample of 30 acquiring companies involved in
merger activities during the period 1999-2002 in India. The study attempts to identify
synergies, if any, resulting from mergers. The study uses accounting data to examine merger
related gains to the acquiring firms

CHAPTER III
RESEARCH METHODOLOGY
RESEARCH METHODOLOGY

The term research is derived from French word research meaning, “search back”,
research is a careful inquiry or examination in seeking fact or principle intelligent investigation
in order to ascertain something web masters international dictionary. Research methodology is
way to systematically solve the problem when we talk of research methodology we not mean the
research methods. Also, consider the logic behind the methods used in the context of research
study and explain why a particular method or technique is used, so that research results are
capable of being evaluated.

RESEARCH DESIGN
RESEARCH DESIGN
A research design is a basis of framework, which provides guidelines for the rest
of research process. It is the map of blueprint according to which, the research is to be
conducted. The research design specifies the method of study. Research design is prepared after
formulating the research problem

TYPE OF RESEARCH
DESCRIPTIVE RESEARCH
The study follows descriptive research method. Descriptive studies aims at portraying
accurately the characteristics of a particular group or situation. Descriptive research is concerned
with describing the characteristics of a particular individual or a group. Here the researcher
attempts to present the existing facts by collecting data.
RESEARCH TYPE

The type of research used in this study is desk research.

DESK RESEARCH
Desk research (sometimes known as secondary data or secondary research ) involves
gathering data that already exists either from internal some of the client, publications of
governmental institutions, free access data on the internet, in professional newspapers and
magazines, in annual reports of companies and commercial databases to name but a few. In
many projects, carrying out an initial desk research stage is strongly recommended to
background knowledge to a subject as well as providing useful leads that will help to get the
maximum from a research budget.

DATA COLLECTION METHOD

SECONDARY DATA

The rest of the data is collected from the annual report brochures and websites and annual
reports of the organization.

ANALYSIS TOOL
i. Comparative Balance sheet
ii. Common Size Balance Sheet
iii. Comparative Income Statement
iv. Changes in Working Capital
v. Trend Analysis
vi. Ratio Analysis