A

Project Report
On
(METRO TYRES LIMITED)
Submitted in Partial fulfillment of the requirements for the award of
MASTER of Business Administration
(MBA)
By
ANMOLDEEP SINGH DHILLON

PUNAJB TEHCNICAL UNIVERSITY

APEEJAY INSTITUTE OF MANAGEMENT & TECHNOLOGY
JALANDHAR

Contents

Preface
Acknowledgement
Director Certificate
Project guide certificate
Company certificate

Chapter 1: Introduction
Chapter 2: Industry profile
Chapter 3: Company profile
Chapter 4: Research methodology
Chapter 5: Data presentation and analysis
Chapter 6: Finding
Chapter 7: Conclusions and suggestion
Annexure
Bibliography

Preface
A management professional should not only be well versed with the principles and theories of management but
should also be capable of applying the theories and principles studied successfully in the practical life.
Considering the practical aspect of the theoretical knowledge to be the supreme importance, Summer Training
forms an integral part of the business management curriculum.

I pursued my summer internship at METRO TYRES LIMITED and completed my projects. I am submitting
the report as a partial fulfillment for the Award of degree of Master of Business Administration.

I hope that the project report will communicate the actual quality of the experience gained with subtlety and
precision which is unapproachable by any other means.

ANMOLDEEP SINGH

ACKNOWLEDGEMENT

This report took a long time and effort on my part. But, inspite of all the hard work put in by me,
this report would not have been possible without the help of certain people, whom I wish to convey
my thanks.

I express my gratitude towards Mr.VARUN NAYYAR (Colg guide) and MR.SANDEEP KOHLI T(company
guide), who has given me an opportunity to make this project.
At the very outset, I would also like to express my gratitude to all the people associated, without whose active
support & constant guidance, this project would not have been a success.

ANMOLDEEP SINGH DHILLON

INTRODUCTION

From humble beggining in 1968, Metro Tyres made steady progress to establish itself as a market leader for
bicycle tyres and tubes in India.With steadily increasing production of quality products, the Company ventured
into overseas market and developed a niche for itself in the international market. The Company also kept itself
abreast with latest technologies and developed Nylon tyres and Butyl tubes with its own R&D efforts.
The Company has diversified into the field of home appliances such as electric fans, electric irons, sewing
machines.
.
The customer being foremost in our mind, for ease of foreign buyers, the Company has established a full
fledged "Export Division" located at New Delhi. The Export Division has the capability for entertaining and
servicing enquiries not only for the Company products, but also for non-company commodities and engineering
goods.
Metro's most precious assets is its professionally trained and dedicated personnel.
Metro Group is a US $140 million conglomerate consisting of Metro Tyres Limited, Metro International and
Metro Ortem Limited. The Group has seven ISO 9001:2008 certified, state-of-the-art manufacturing facilities,
producing tyres and tubes for bicycles, motorcycles, scooters and three wheelers. Metro today has become a
leader in the industry, through expansion in related products and diversifying into lifestyle and consumer
durable/products
.
Technical collaboration with Germany's Continental AG, has greatly enhanced Metro Group's position and today
it is regarded as a company manufacturing superior quality products .
Gradually the company is increasing its volumes and venturing into overseas markets where it is developing a
niche for its products. Today the group has a presence in more than 53 countries and is the largest exporter of
bicycle tyres and tubes from India. Under the aegis of Metro Ortem Limited, the group has diversified into
manufacturing a whole range of fans and other home appliances. Today Ortem fans and sewing machines are
household names. The group exports are being
handled by Metro International which is a government
recognized trading house.
In Metro Group, quality is the result of a profound understanding of what it takes to make state-of-the-art
products for the ultimate customer, even if they are from the world's most quality conscious markets like the
European Union and USA. This places Metro ahead of other brands in India.
Metro Group has manufacturing capacity close to 30 Million tyres and 30 Million tubes annually and it enjoys
around 24% market share in India. Currently, Metro Group employs over 4000 people who are its greatest
asset.

SWOT ANALYSIS
Strengths
1.Wide product offering at different interest rates.
2.Large distribution network

Weakness
1. Lack of advertisement activites,
2. Focus only on middle class.
3. Limited products

Opportunity
1. Rise of Indian middle class and small cities.
2. A booming economy

Threats
1. Many players fighting for the same cake
2. Entry of new players

TYRES INDUSTRY
The report elucidates facts about the Indian Tyre Industry, supplemented by latest statistical data
and comprehensive analysis.
Emphasis is laid on the following key subject matters to accomplish the report

The characteristics of the industry (raw material intensity, cyclicality, competition, wide
distribution network, capital intensity, low bargaining power, branding, technology
requirements, margins and duty structure) and its demand drivers (vehicle production &
population, regulatory norms, retreading of tyres etc.).
Category-wise tyre production and market-wise tyre offtake analysis for the period FY
03-07.
Market competition and category-wise market share of players. Change in category-wise
market share of players in FY07 vis-a vie FY06.
Cost Analysis (raw material, power & fuel, employee and selling expense) of the top
players with specific focus on raw material costs.
Category-wise tonnage offtake growth projection for the tyre industry for a fi ve year
horizon (FY 07-12) along with SWOT analysis of the industry.
Financial profi le, international forays, expansion plans of the top fi ve players along with
the details of corporate actions by other global and local players in India.

The Indian Tyre Industry produced 736 lakh units of tyres (11 lakh tonnes) garnering Rs. 19,000
crores in FY 07. MRF Ltd. was the market leader (22% market share) followed closely by
Apollo Tyres Ltd. (21%). The other major players were JK Tyre & Industries Ltd (18%) and
Ceat Ltd. (13%). The industry tonnage production registered a 5 year CAGR of 9.69% between
FY 02-07.
Truck & Bus tyre category (accounting for 57% of the tonnage production) recorded a 5 year
CAGR of 7.85% (a rate slower than that of the industry) while Light Commercial Vehicle
(LCV), Motorcycle and Car tyre categories grew at 15%, 16% and 14% respectively (at rates
faster than that of the industry). Off the road (OTR) tyres (customized tyres which fetch a
higher margin compared to other tyres) category is growing at a fast pace. The OTR tyre
category registered a 5 year CAGR of over 20% in the last five years. Most of the top players
are increasing their capacity for the production of OTR tyres so as to improve their product mix,
for e.g. CEAT Ltd. is increasing its OTR capacity at its Nasik plant from 60,000 to 1,00,000
tyres by end 2008, JK Tyre & Industries is expanding its OTR capacity from 25,000 tyres to
42,000 tyres by end 2008, even smaller player like Falcon tyres is making its foray into the
OTR category.

The exports from the country clocked a CAGR of 13% in unit terms and 18% in value terms in
the period FY 0207. Most of these tyres that are exported are of cross ply design. With
radialisation catching up in some of these markets, the manufacturers will need to graduate to
radial tyres so as to protect their share in the export market. Radialisation of tyres is still
minimal in India. Only the car tyre market has moved to radial tyres (95%) but in all other
categories cross ply tyres are still preferred. Poor road conditions, overloading in trucks, higher
initial cost of radial tyres and poor awareness levels in tyre users are the main reasons for the
non transition of the domestic market to radial tyres. However, going ahead, radialisation in
truck & bus tyres may increase due to governments focus on infrastructure development.
CARE Research expects the tyre industry to register a tonnage growth of 910% in the next
five years (FY 0712). The truck & bus and LCV tyre category are expected to register a
CAGR of 8% and 14% respectively (FY 0712).
The report elucidates facts about the Indian Tyre Industry, supplemented by latest statistical data
and comprehensive analysis.Emphasis is laid on the following key subject matters to
accomplish the report.The characteristics of the industry (raw material intensity, cyclicality,
competition, wide distribution network, capital intensity, low bargaining power, branding,
technology requirements, margins and duty structure) and its demand drivers (vehicle
production & population, regulatory norms, retreading of tyres etc.).Category-wise tyre
production and market-wise tyre offtake analysis for the period FY 03-07.Market competition
and category-wise market share of players. Change in category-wise market share of players in
FY07 vis-a vie FY06.Cost Analysis (raw material, power & fuel, employee and selling expense)
of the top players with specific focus on raw material costs.Category-wise tonnage offtake
growth projection for the tyre industry for a fi ve year horizon (FY 07-12) along with SWOT
analysis of the industry.Financial profi le, international forays, expansion plans of the top fi ve
players along with the details of corporate actions by other global and local players in India.
Truck/Bus
The truck and bus tyre segment accounted for 19% of tyres produced in India in FY2003. Every truck/bus
manufactured generates a demand for seven tyres (six regular and one spare) as against three in the case of twowheelers and five for passenger cars. In addition, the price of a truck tyre is significantly higher than that of a
passenger car tyre (roughly 10 times) or a motorcycle tyre. Thus the demand multiple emanating from the
commercial vehicle segment is highest in value terms.
Given the regular use and heavy wear and tear of truck and bus tyres, the demand from the replacement market
in this segment worked out to 68% of the total demand for truck and bus tyres in FY2003; the OEM demand
accounted for around 9% the same year. With the Indian manufacturers of cross-ply tyres focusing on the export
market, this segment accounts for around 22% of the demand for truck and bus tyres.

Tyre industry

The tyre industry has witnessed a CAGR of 8.3% over the last decade mainly fuelled by the
strong growth in the domestic auto industry. Though the replacement market has driven the
industry growth for long time, the OEM market has seen a robust growth over the last couple
of years.

The industry is highly capital intensive, as it requires around Rs4bn to setup a radial tyre
plant with a capacity of 1.5mn tyres and around Rs1.5-2bn for a crossply tyre plant of a
capacity to manufacture 1.5mn tyres.

The profitability of the industry has high correlation with the prices of key raw materials
such as rubber and crude oil as they account for more than 70% of the total costs. The
raw material to sales ratio in the industry is around 65%.

The industry has high entry barriers because of its capital intensive nature and low
operating margins. With demand increasing at a steady pace, the industry is expected to
go through a consolidation phase.

The industry is dominated by four players viz MRF, Apollo Tyres, JK Industries and Ceat
and enjoys more than 70% of the total market share.

The fortunes of the industry are linked to the trend in the domestic auto industry,
retreading, trend in road transportation and spending on road infrastructure.

The companies have lined up further expansion plans to meet the increasing demand.
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The Indian tyre industry is characterized by its raw material intensity (raw material costs
account for approximately 70% of operating income), capital intensity, cyclicality, fierce
competition among the top players, low bargaining power and resulting low margins. The top
players are now focusing on branding their products and strengthening their distribution
network so as to increase their market share.
The industry derives its demand from the automobile Industry. While OEM market offtake is
dependent on the new vehicle sales, replacement market demand depends on the total
population of vehicles on road, road conditions, vehicle scrapping rules, overloading norms for
trucks, average life of tyres and prevalence of tyre retreading.
The main category of tyres produced in the country is that of Truck & Bus tyres. These tyres
accounted for 57% of the total tyre tonnage production in FY07 followed by LCV tyres which
accounted for 9% of the total tyre tonnage production. Approximately 53% of the total tyre
tonnage offtake was by the replacement market, 31% by OEM and 15% by the export market in
FY07.
The industry tonnage production registered a 5 year CAGR of 9.69% between FY 02-07. The
largest category of Truck & Bus tyres recorded a 5 year CAGR of 7.85% (slower than the
industry) while Light Commercial Vehicle (LCV), motorcycle and car tyre categories grew at
15%, 16% and 14% respectively (faster than the industry). Off the road (OTR) tyre category
(customized tyres) which fetch a higher margin compared to other tyre categories, is the fastest
growing category. The OTR tyre category has registered a 5 year CAGR of over 20% in the last
five years. Most of the top players are increasing their capacity for the production of OTR tyres
so as to improve their product mix, this being a high margin product.
The exports from the country clocked a CAGR of 13% in unit terms and 18% in value terms in
the period FY 02-07. Most of these tyres that are exported are of cross ply design. With
radialisation catching up in some of these markets, the Indian manufacturers will need to
graduate to production and export of radial tyres so as to protect their share in the export
market.
Radialisation of tyres is still minimal in India. Only the car tyre market has moved to radial
tyres (95%) but in all other categories, cross ply tyres are still preferred. Poor road conditions,
overloading in trucks, higher cost of radial tyres and poor awareness of the tyre users are the
main reasons for the non transition of the domestic market to radial tyres. However, going
ahead radialisation in truck & bus tyres may increase due to government's focus on
infrastructure development.

RESEARCH METHODOLOGY
Research Methodology refers to the framework or plan according to which the researcher has to carry out his activity.

Research can be defined as a "systematized effort to gain new knowledge."

Marketing Research is a systematic and objective process of identifying and formulates the marketing
problems;

Setting research objectives and methods for collecting, editing" coding, tabulating,

evaluating, analyzing, interpreting and presenting the various information does it 985 data in order to
find justified solutions for these problems.

Research Methodology is the procedure for conducting the research. It is a way to systematically solve
the problem. It may be understood as a science of studying how research is done scientifically. In it we
study the various steps that are generally adopted by a researcher In studying his research problem along
with the logic behind them. If the researcher wants to claim objectivity of His research and wishes to
establish a truth and gain wide /* aceptability than lot of attention has to be devoted to the procedure and
methodology of the research.

Market research involves the following steps:

Step 1: Define the problem and research objectives.
Step 2: Developing the research plan

Selection method

Questionnaire method

Sampling method

Contact method

Step 3: Collect the information

Step 4: Analyze the information.
Step 5: Present the findings.

Step 1: Define the research objective

After discussing with the external project guide the topic for the project was selected as:
Financial analysis of Metro Tyres ltd.
Step 2: Developing the research plan

Questionnaire method

Marketing researchers have the best instrument in collecting primary data i.e. a questionnaire to collect the
data and to establish the view of the people from all the sectors of the society.
Questionnaires are designed to elicit information that meets the studies requirements.
Questions should be:

clear

easy to understand

directed towards meeting an objective.

Need to define objectives before designing the questionnaire. Must maintain impartiality and be very
careful with personal data. Four basic types of questions are:
o

Open ended

Dichotomous

Multiple choice.

Scaled (lickert)

The questionnaire designed for this project contains open-ended questions. All the questions are clearly
defined. The questions are framed keeping in mind the objective of research and kind of information
required .Sampling method
.
Sampling procedures are used in studying the likelihood of events based on assumptions about the future.
o

Random sampling, equal chance for each member of the population

Stratified sampling, population divided into groups re: a common characteristic, random sample
each group

Area sampling, as above using areas

Quota sampling, judgmental, sampling error cannot be measured statistically, mainly used in
exploratory studies to develop a hypotheses, non-probablistic.

Random sampling is selected as the sampling method for this project.

Selection Method
o Mail-wide area, limited funds, need incentive to return the questionnaire Mail panels, consumer
purchase diaries. Must include a cover letter to explain survey!!
o Telephone-speed, immediate reaction is negative, WATS, computer assisted telephone
interviewing.

o Personal interviews-flexibilty, increased information, non-response can be explored. Most

favored method among those surveyed. Can be conducted in shopping malls.
o In home (door-to-door) interview, get more information but it is costly and getting harder to
accomplish.
o Mall intercepts-interview a % of people passing a certain point. Almost half of major consumer
goods and services orgs. use this technique as a major expenditure. Can use demonstration,
gauge visual reactions. Regarding social behavior, mall surveys get a more honest response than
telephone surveys. There is a bias toward those that spend a lot of time in malls. Need to weight
for this. On site computer interviewing, respondents complete self administered questionnaires
conducted in shopping malls. Questions can be adaptive depending on the responses.
o Focus groups-observe group interaction when members are exposed to an idea or concept,
informal, less structured. Consumer attitudes, behaviors, lifestyles, needs and desires can be
explored in a flexible and creative manner. Questions are open ended. Cadillac used this method
to determine that they should be promoting safety features.
A sample of 200 people was taken and judgement was done to select the right prospects to secure accurate
information. The sample consisted of people like businessman, doctors, pvt. Company employees.

Contact/Observation method

Record overt behavior, note physical conditions and events. Can be combined with interviews, i.e. get
demographic variables.
Mechanical observation devices, IE cameras, eye movement recorders, scanner technology, Nielsen
techniques for media.
Observation avoids the central problem of survey methods, motivating respondents to state their true feelings
or opinions. If this is the only method, then there is no data indicating the causal relationships.
Step 3: Collection of information
The information of the project was gathered in 2 forms:
Primary data

In primary data collection, you collect the data yourself using methods such as interviews and questionnaires.
The key point here is that the data you collect is unique to you and your research and, until you publish, no one
else has access to it.
There are many methods of collecting primary data and the main methods include:

questionnaires

interviews

focus group interviews

observation

case-studies

diaries

critical incidents

portfolios.

Secondary data
Secondary data - collected by others to be "re-used" by the researcher

What Form Does Secondary Data Take?

o

Qualitative Sources

Sources for Qualitative Research:

Biographies - subjective interpretation involved

Diaries - more spontaneous, less distorted by memory lapses

Memoirs - benefit/problem of hindsight

Letters - reveal interactions

Newspapers - public interest & opinion

Novels & Literature In General Handbooks, Policy Statements, Planning Documents,

Reports, Historical & Official Documents (Hansard, Royal Commission reports)

Quantitative Sources

Published Statistics:

National Government Sources

Local Government Sources

Other Sources

Non-Published / Electronic Sources

Data Archives eg the Data Archive At Essex

On-Line Access To National Computing Centres

International Sources on Internet & Web

For this project the secondary sources used are:

Journals

Company product brouchers

Internet

Market Research Design

Research

Descriptive type

Data Source

Primary & secondary

Research approach

Survey method

Research instrument

Questionnaire

Type of questions

Closed ended

Sample sizes

100 samples

Mode of collecting data

collection

Respondents to be
:

chosen randomly.

RESEARCH DESIGN
A research design is simply a framework for the study that is used as a guide for collecting and analyzing the
data. Decision regarding what, where when, how much, by what means concerning an inquiry or a research

study constitutes a research design. This framework ensures collection and analysis of data in a manner that
aims to combine relevance to the research purpose with economy in procedure. In fact, the research design is
the conceptual structure within which research is conducted. It constitutes the blue print for collection,
measurement analyses of data. Research design depends on the purpose of study. Research purpose may be
grouped into four categories:
a) EXPLORATORY RESEARCH: It is also termed as formulate research. The main purpose of such
research is to gain familiarity with a phenomenon or discovery of ideas and insights.
b) DESCRIPTIVE RESEARCH: These are studies, which are concerned with describing the
characteristics of a particular individual, situation or a group.
c) DIAGNOSTIC RESEARCH STUDIES: These studies determine the frequency with which something
occurs or with which it is associated with something else.
d) HYPOTHESIS TESTING RESEARCH STUDIES: These are concerned with testing a hypothesis of
a causal relationship between variables.

TYPE OF RESEARCH

SAMPLE DESIGN
All items in any field of study constitute the UNIVERSE. In any study it is almost impossible to
examine the entire universe. The only alternative that is best, suitable and economical is to resort to sample.
'This is absolute for present study. The basic principle, which is followed is that the sample chosen should be
representative of the entire universe to be studied.
A SAMPLE DESIGN is a definite plan for obtaining a sample from a given population. It refers to the
technique or the procedure the researchers would adopt in selecting items for the sample. Sample design may as
well lay down the number of items to be included in the sample i.e. the size of sample and also the sampling
units. Sampling units implies the unit of sample considered and the unit of inquiry

There are different types of sample designs based on two factors viz., REPRES.ENTATION BASIS and,
the ELEMENT SELECTION TECHNIQUE.

On the REPRESENTATION BASIS, the sample may be PROBABILITY SAMPLING or it may be

NON PROBABILITY SAMPLING.

Probability sampling is based on random selection and in this every element in the universe has an equal
chance of being selection in sample.

Non-Probability is non-random sampling and it does not afford any basis for estimating the probability
that each item in the population

has of being included in the sample.

On ELEMENT SELECTION BASIS, the sample may be either RESTRICTED or UNRESTRICTED.

Unrestricted sampling is based when each sample element is drawn individually from the population at
large, then the sample so drawn is known as 'unrestricted sampling'.

Restricted sampling includes all other forms of sampling like quota, judgmental, stratified sampling etc.

TYPE OF SAMPLE

In the PRESENT STUDY non-probability sampling technique was applied, where samples are selected
RANDOMLY BASED ON CONVENIENCE AND JUDGEMENTAL.
SAMPLE SIZE
A sample of 50 Dealers was selected.

TECHNIQUES USED IN THE RESEARCH

Various techniques were used for making and studying the report. These
are: Ratio analysis
Profitability ratio
Long-term solvency ratio
Short-term solvency ratio
Turnover ratio

Objective: Assesement of METRO TYRES Ltd in order to come out with the potential
areas for improvement and suggest the recommendations for the same.

Data collection process design: Collecting the Dealer list of metro tyres Ltd. for
the regions of Delhi and Gurgaon from the Asst. Managers in the Corporate Sales
Dept. Selecting the dealers to whom the goods were send from last six months
and the data was compared

FINANCIAL ANALYSIS

INTRODUCTION
o Financial analysis is the process of determining the significant operating and financial characteristics of
a firm from accounting data and financial statements
o The goal of such analysis is to determine the efficiency and performance of the firms management, as
reflected in the financial records and reports.
o The analyst attempts to measure the firms liquidity, profitability and other indication that business is
conducted in a rational and orderly way.
o If a firm does not achieve financial norms for its industry or relationships among data that seem
reasonable, the analysts note the deviations. The burden of explaining the apparent problems may then
be placed upon management.
Managers, shareholders, creditors, tax authorities and other interested groups seek answers to the following
important questions about the firm:
#

What is the financial position of the firm at a given point of time?

How did the firm perform financially over a given period of time?

The firm itself and outside providers of capital creditors and investors all undertake financial statement
analysis. The type of analysis varies according to the specific interests of the party involved. Trade creditors
(suppliers owed money for goods and services) are primarily interested in the liquidity of the firm. Their claims
are short term, and the ability of the firm to quickly pay these claims is best judged by the analysis of the firms
liquidity. The long term lenders on the other hand accordingly are more interested in the cash flow ability of the
firm to service debt over a long period of time. They evaluate this ability by analyzing the capital structure of
the firm, the major sources and uses of funds, the firms profitability over the time, and projections of future
profitability. Investors in a companys common stock are principally concerned with present and expected
future earnings as well as with the stability of these earnings about a trend line. As a result, investors usually
focus on analyzing the profitability of the firm. They would also be concerned with the firms financial
condition insofar as it affects the ability of the firm to pay dividends continuously.
All the cases described so far have involved suppliers of capital. Therefore, the analysis has taken an
external point of view. Internally, management also employs financial analysis for the purpose of internal
control and to better provide what capital suppliers seek in financial condition and performance from the

firm. From an internal control standpoint, management needs to undertake financial analysis in order to
plan and control effectively

FINANCIAL STATEMENTS
Financial analysis involves the use of various financial statements. A financial statement is a collection of data
organised 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 in time, as in the case of
Balance Sheet (A summary of firms financial position on a given date that shows total assets = total liabilities +
owners equity ), or may reveal a series of activities over a given period of time; as in the case of an Income
Statement ( A summary of the firms revenues and expenses, over a specified period ending with net income or
loss for the period ), or may show the sources and uses of funds, as in the case of Fund Flow Statement (A
summary of a firms changes in financial position from one period to another).The Income statement, the
statement or retained earnings and the statement of changes of financial position report what has actually
happened to earnings during a specified period. The balance sheet presents a summary of financial position of
the company at a given point of time. The statement of retained earnings reconciles income earned during the
year and any dividends distributed with the change in retained earnings between the start and end of financial
year under study. The statement of changes in financial position provides a summary of funds flowing during
the period of financial statements.

BALANCE SHEET
The balance sheet is the first of the three major financial statements. The balance sheet shows the assets,
liabilities and the equity for the firm as of the last day of the accounting period. In effect, it matches
resources (assets) with sources (liabilities and equity). It is commonly presented in two columns that
illustrate the relationship between assets and the sources of these assets. The assets or resources of the firm
are displayed in the right hand column and the sources of these assets in the left hand column.

INCOME STATEMENT

The income statement, is a report of the firms activities during a given accounting period. Firms often publish
income statements showing the results of each quarter, each half year and the full accounting year. It shows the
revenues and expenses of the firm, the effect of interest and taxes, and the net income for the period. It may be
called by other titles, such as the profit-and-loss statement or the statement of earnings. It is an accounting
device designed to show stockholders and creditors whether the firm is making money. It can also be used as a
tool to identify the factors that affect the degree of profitability
FLOW OF FUNDS STATEMENTS
A third important financial statement is the flow-of-funds or sources-of- funds statement. This statement shows
the movement of funds into the forms current asset account from external sources such as stockholders,
creditors and customers. It also shows the movement of funds to meet the firms obligations, retire stock or pay
dividends. The movements are shown for a specific period of time, normally the same time period as the firms
income statement. The financial manager makes decisions to ensure that the firm has sufficient funds to meet
financial obligations when they are due and to take advantage of financial opportunities. To help the analyst
appraise these decisions (made over a period of time), we need to study the firms flow of funds.

RATIO ANALYSIS-A TOOL

Ratio analysis is a very powerful analytical tool for measuring performance of an organization. The ratio
analysis concentrates on the inter-relationship among the figures appearing in the aforementioned four financial
statements. The ratio analysis helps the management to analyze the past performance of the firm and to make
further projections. Ratio analysis allows interested parties like shareholders, investors, creditors, Govt. and
analyst to make an evaluation of certain aspects of a firms performance.
Ratio analysis is a process of comparison of one figure against another, which make a ratio, and the
appraisal of the ratios to make proper analysis about the strengths and weaknesses of the firms operations.
The calculation of ratios is a relatively easy and simple task but only the skilled analyst can make the proper
analysis and interpretation of the ratios. While interpreting the financial information, the analyst has to be
careful in limitations imposed by the accounting concepts and methods of valuation. Information of nonfinancial nature will also be taken into consideration before a meaningful analysis is made.

Ratio analysis is extremely helpful in providing valuable insight into a companys financial picture. Ratios
normally pinpoint a business strengths and weakness in two ways:
1. Ratios provide an easy way to compare todays performance with past.
2. Ratio depict the areas in which a particular business is competitively advantaged or disadvantaged
through comparing ratios to those of other businesses of the same size within the same industry.

FINDINGS FROM RATIO ANALYSIS OF METRO TYRES

GROSS PROFIT RATIO
The gross profit ratio is also called the average markup ratio. This ratio expresses relationship between gross
profit and net sales. This ratio indicates the degree to which income per unit may decline without resulting in
losses from operations to the firm. It also helps in ascertaining whether the average percentage of mark up on
the funds is maintained. It is calculated by comparing the gross profit of the firm with the net sales as follows:
GP Ratio= Gross profit x 100
Net sales
Gross profit = Gross income Interest and other charges.

GP RATIO - 2007
=

( Current Year)

50.13

x 100

718.43
=

6.97%

GP RATIP 2006
=

(Previous Year)

40.85 x 100
320.67

12.73%

Hence, gross profit of year 2007 is better then 2006.

NET PROFIT RATIO

The NP ratio establishes the relationship between the net profit (after tax) of the firm and the net sales. The NP
ratio measures the efficiency of the management in generating additional revenue over and above the total cost
of operations. The NP ratio shows the overall efficiency in manufacturing, administrative, selling and
distributing the product.
It may be calculated as follows:
NP ratio = Profit (after tax) x 100
Net sales
Net Profit 2007 (Current Year)
=

131.90
718.43

1 00

= 18.35%
Net Profit 2006 (Previous Year)
=

40.56
320.67

100

= 12.64%

Hence, Net profit of year 2006 is better then 2007

RETURN ON ASSETS (ROA)

The ROA measures the profitability of the firm in terms of assets employed in the firm. The ROA is calculated
by establishing the relationship between the profits and the assets employed to earn that profit. Usually the
profit of the firm is measured in terms of the net profit after tax and the assets are measured in terms of total
assets or total tangible assets or total fixed assets. Conceptually, the ROA may be measured as follows:
ROA = Net profit after taxes x 100
Total assets

ROA 2007 (Current Year)

=
=

131.90
1172.73

X 100

11.24%

ROA 2006 (Previous Year)

=

40.56
241.79

16.77%

100

Hence, ROA of the year 2007 is better then 2006.

RETURN ON INVESTMENT (ROI)

The profitability of the firm can also be analyzed from the point of view of total funds employed in the firm.
The term funds employed or the capital employed refers to the total long-term sources of funds.
Capital employed = shareholders funds plus long-term debts.
Alternatively, capital employed = fixed assets plus + working capital.
The ROI may be calculated as follows:

ROI = Net profit before interest and taxes x 100

Capital employed
ROI 2007 (Current Year)
=

197.63
17.25

1145.68%

100

ROI 2006 (Previous Year)

=

58.17
7.30

7.96%

100

Hence, ROI of the year 2007 is better then 2006

RETURN ON EQUITY (ROE)

The ROE examines profitability from the perspective of equity investors by relating profits available for the
equity shareholders with the book value of equity investment. The return from the point of view of equity
shareholders may be calculated by comparing the net profit less preference dividend with their total contribution
in the firm
ROE = Net Profit after tax x 100
Total shareholders fund

ROE 2007 (Current Year)

= 131.90 x 100
931.91
= 14.15%

ROE 2006 (Previous Year)

=

40.56 X 100
141.94

28.57%

Hence, the ROE of year 2006 is better then Year 2007

CONCLUSIONS & SUGGESTIONS

FINANCIAL PERFORMANCE (1ST APRIL,2006 TO 31ST MARCH,2007)
a) SHARE CAPITAL
As on march 31st 2007, paid up equity share capital of the company stood at rs 28,37,52,750/-(i.e. 5,67,50,550
equity share Capital of rs 5/- each, fully paid up). However, consequently upon the issue and allotment of bonus
Equity share on 04.05.2007 in the ratio of 1:1 in terms of approval of members received on 19.03.2007 by
voting through postal ballot, the paid up capital of the company inceased from rs. 28,37,52,750/- to Rs.
56,75,05,500/-(i.e. 11,35,01,100 equity shares of Rs 5/- each, fully paid up).
b) RESERVE & SURPLUS
An amount of rs 7500 lacs has been transferred to General Reserve out of the Net Profit for the year ended
31.03.2007 as compared to the Rs 3000 lacs in the previous year.
c) LOANS
Secured loans stood at rs 23361.37 lacs as compared to rs. 8930.98 lacs in the previous year. This includes an
amount of rs 5000 lacs raised by issue of 819659 no. of Zero Coupon Secured Redeemable optionally
Convertible Debentures(ROCD) of Rs 100/- each
Unsecured loans stood at Rs 720.91 lacs as compared to rs 1054.46 lacs in the previous year.
d) CURRENT ASSETS

Inventories: During the year, Inventory level has increased by Rs 18821.83 lacs i.e from Rs
30639.53 lacs to Rs 13270.19 lacs.

Sundary Debtors: There is also an increase in Subdary Debtors of rs 7167.21 lacs i.e from Rs
6039-98 lacs to rs 13207.19 lacs.

Loans & Advances: During the year, the loans and advances also increases by Rs 60519.86 lacs
i.e. from Rs 30844.72 lacs to Rs 91364.58 lacs.

Current Liabilities: Current Liability stood at Rs 63532.75 lacs as compared to Rs 49500.91 lacs
in the previous year.

NET CURRENT ASSETS

During the year, the net current of the company have increased by rs 92492.75 lacs i.e from Rs 20486.94 lacs as
compared to Rs 112979.69 lacs.
e) INTEREST
During financial 2006-07, company has paid an amount of rs 1942.41 as interest as compared to rs 1203.68 lacs
in the previous year.
f) STAFF EXPENSES
During the year, the staff cost of he company stood at rs 2255.96 lacs as compared to rs 952.08 lacs in the
previous year. This includes Eployees Stock Option Compensation Expenses of rs 45.97 lacs pursuance to grant
of 1,16,700 Option on 26.10.2006 in terms of the approval of the members received on 02.05.2006.
g) DEPRICIATION
During financial 2006-07, depreciation increased from rs 213.14 lacs to rs 310.64 lacs

ANNEXURES

Profit & Loss A/C Of Metro Tyres Ltd

PARTICULARS

2007

2006

Sales Turnover
Other Income
Stock adjustments
Total Income
Raw Material
Excise Duty
Power & Fuel Cost
Other manufacturing Expenses
Employee Cost
Selling & Administration Expenses
Miscellaneous Expenses
Less: Preoperative Expenditure
Capitalised
Profit before interest, Depreciation
& Tax
Interest & Financial Charges
Profit Befire Depreciation & Tax
Depreciation
Profit before Tax
Tax
Profit after Tax
Adjustment below Net Profit
P & L Balance brought forward
Appropriations
P & L Balance carried down
Equity Dividend
Preference Dividend
Corporate Dividend Tax
Equity Dividend (%)
Earning Per Share (Rs)
Book Value
Extraordinary Items

718.43
47.72
-6.59
759.56
0.12
0.00
0.49
469.46
17.25
43.75
6.45
0.00

320.67
34.51
3.73
258.91
1.04
0.00
0.29
241.86
7.30
12.85
21.56
0.00

222.04

74.01

21.30
200.74
3.11
197.63
65.73
131.90
0.00
23.46
86.49
68.87
9.93
0.00
1.56
25.00
22.96
163.31
0.01

13.71
60.30
2.13
58.17
17.61
40.56
0.00
16.89
33.99
23.46
3.50
0.00
0.49
20.00
22.90
78.11
-10.14

Balance sheet of METRO TYRES LTD.

PARTICULARS

2007

2006

Share Capital
Reserve & Surplus
Total Shareholders Fund
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Gross Block
Less: Accum Depreciation
Net Block
Capital Work In process
Investments
Inventories
Sundry debtors
Cash and Bank Balance
Loans and Advances
Current Liabilities
Provisions
Net Current Assets
Miscellaneous Expenses not w/o
Total Assets
Contigent Liabilities

28.38
903.53
931.91
191.81
49.01
240.82
1,172.73
50.13
19.86
30.27
0.00
11.22
494.61
132.07
224.79
915.40
614.95
20.68
1,131.24
0.00
1,172.73
196.47

17.50
124.44
141.94
89.31
10.54
99.85
241.79
40.85
15.81
25.04
0.00
9.03
306.39
60.40
24.64
311.30
475.17
19.84
207.72
0.00
241.79
110.48

BIBLOGRAPHY
WEBSITES:

www.wikipedia.com

www.yahoo.com

www.google.com

Metro tyres ltd.

BOOKS REFFERED:

Financial Management by I.M.Pandey

Cost accounting by S.N. Maheshwari