indian tyre industry
TRANSCRIPT
Business Strategy Project
A Study onStrategical and Financial Analysis
OfIndian Tyre Industry
Submitted By:Abhishek Kulshrestha
Suhas P C
Table of ContentsObjective....................................................................................................................................................3
The Indian Tyre Industry.........................................................................................................................3
Nature of the Industry...............................................................................................................................3
Tyre Exports by Indian Tyre Industry....................................................................................................3
Pricing Strategy in Tyre industry.............................................................................................................4
Demand Drivers of the Industry...............................................................................................................4
Competition................................................................................................................................................4
Demand for Tyres......................................................................................................................................5
Segments According to Vehicle Categories..............................................................................................5
PESTEL Analysis......................................................................................................................................6
Industry's SWOT Analysis.......................................................................................................................8
Michael Porter's Five Forces Model - A way to look at Indian Tyre Industry...................................10
Market Share and Other Details............................................................................................................12
Critical Success Factors..........................................................................................................................13
Company Details and SWOT Analysis..................................................................................................14
A. MRF Tyres......................................................................................................................................14
B. Apollo Tyres...................................................................................................................................17
C. GOOD YEAR COMPANY..................................................................................................................21
D. CEAT Tyres.....................................................................................................................................23
E. JK Tyres..........................................................................................................................................26
F. TVS Srichakra.................................................................................................................................28
Ratio Analysis..........................................................................................................................................31
Comparative Analysis of Balance Sheet.................................................................................................34
Observations............................................................................................................................................36
Data Sources............................................................................................................................................36
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Objective:
To analyze the external and internal factors which influences the strategic planning of each individual company.
To determine the challenges faced and study the scope of entering new promising markets.
To assess the past performance and current position, and to predict the profitability, operational efficiency and growth prospects.
The Indian Tyre Industry:The origin of the Indian Tyre Industry dates back to 1926 when Dunlop Rubber Limited set up the first tyre company in West Bengal. MRF followed suit in 1946. Since then, the Indian tyre industry has grown rapidly. Indian Tyre Industry now provides direct and indirect employment to nearly 1 million persons, including dealers, retraders, growers of Natural Rubber, employment in raw material sector etc.
The Indian tyre industry has become one of the most competitive markets in the world and with the help of new technology, ultra-modern production facilities and availability of raw materials at lower rate, the sector is set to grow further. At present, India has forty large and medium tyre manufacturing companies, of which the top 10 account for over 90 percent of the country's total tyre production.
During 2013-14, the Indian tyre industry witnessed a turnover of Rs 47,500 crore, producing 123 million tyres. The industry has witnessed muted growth during the period largely aided by the two wheeler and tractor segments. Overall demand from the replacement segment was modest, while original equipment makers (OEM) demand increased just by 2-4 percent. Industry-wide revenues during 2013-14 have been higher than before at around 6 percent on the back of the improvement in product mix, limited price discounting despite the falling input costs and higher realisations in the export markets.
Nature of the Industry:Tyre Industry is highly raw-material intensive. Raw materials cost accounts for approx. 63% of tyre industry turnover and 72% of production cost. The industry is a major consumer of the domestic rubber market. Natural rubber constitutes 80% while synthetic rubber constitutes only 20% of the material content in Indian tyres, 62% of total Natural Rubber consumption is by the Tyre Sector, balance by rubber based non-tyre industries. Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres is 30:70.
Tyre Exports by Indian Tyre Industry:Indian tyres have good acceptance in global markets. Compounded Average Growth Rate (CAGR) of tyre exports in the last one decade has been 8%.
Exports to over 65 countries worldwide. 17% export to highly quality conscious US market. Other major export markets are - (countries in) Latin America; UAE, Bangladesh, Iran,
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Philippines, Vietnam, etc. Over 20% of truck and bus tyres (bias) produced domestically are exported. Emphasis now is on export of radial tyres, including Passenger Car radial tyres. All large tyre companies are exporting as a long term commitment
Pricing Strategy in Tyre industry:Pricing a product is a function of many factors. The tyre market is not very price sensitive. Consumers are more concerned about the tyres functionality, than its price. Besides, being a homogenous product, most tyre companies price their tyres at more or less the same levels. International players such as Bridgestone price their tyres slightly higher than the rest of the market. This is partially to demonstrate its superior quality and pedigree.
Demand Drivers of the Industry:1) Industrial and freight activity
The truck and bus tyre segment accounted for 19% of tyres produced in India. Every truck/bus manufactured generates a demand for seven tyres. In addition, the price of a truck tyre is significantly higher than that of a passenger car tyre (roughly 10 times). Thus the demand multiple emanating from the commercial vehicle segment is highest in value terms.
2) Personal purchasing power
As the economy booms and disposable incomes in the hands of the Indian middle- class burgeon, the sale of passenger cars has been witnessing an upward swing over the past decade. Since tyre sales are directly linked to car sales, both through OEMs and the replacement market, the tyre industry has witnessed a corresponding increase in its sales figures.
3) Automobile sales
The demand from the OEM segment is a derived one and directly correlated to the level of automotive production. The recent Slowdown in automotive industry and global economic in general negatively impacted the Indian tyre industry.
Competition:Indian tyre industry is facing intense competition from China and other South East Asian countries in tyre exports to other countries. Though the quality of Indian tyres is better and has wider acceptance, due to cheaper pricing, higher volumes and aided by Government support and subsidies, Chinese tyres are cutting into the share of Indian tyre exports. There is a need to promote India Brand for tyres as one which spells quality and higher standards.
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Demand for Tyres:
Segments According to Vehicle Categories:
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PESTEL Analysis:Political factors - The Customs Duty Rate on Tyres
The peak rate of Customs Duty on all nonagricultural products were progressively reduced in the Union Budgets during the last few years, but in the case of Natural Rubber the rate of 20% has remained unchanged for over a decade. This has resulted in a serious anomaly of Customs Duty on raw-material (Natural Rubber - 20%) being higher than the Customs Duty on finished product (Tyres - 10%).
FICCI has also given the following recommendations for the tyre industry:
FICCI would request for waiver of Customs Duty on all raw materials not manufactured domestically.
To overcome problem with respect to exports of tubes / flaps, it is suggested to include 'Tyre Manufacturer' as a class of Exporters under Rule 20 of Central Excise Rules to allow them procure tubes and flaps without payment of duty for exports.
Economic factors - The Demand Cycle of the Tyre Industry
There is a hike in the tyre prices due to the devaluation in rupee. Around 15 % decline in rupee in the month of May and June has put pressure on the margins of tyre companies as the raw material costs have gone up. Growth in M&HCV replacement demand is affected by as lower economic growth. Since there is a slowdown in demand the tyre giants are evaluating how much of the increase in cost can be passed on to the customers.
Raw materials comprise almost 85 % of the cost of the tyre and with the devaluation of rupee, the import cost has gone up. The tyre makers are still importing rubber, a key raw material, as it is cheaper. The OE tyre market is sluggish while the replacement tyre market is stable. The car sales are expected to pick up in the second half of the year provided the interest rates come down. In the current situation exports have become viable for the tyre companies. The economic turmoil in Europe has not affected exports as the region is not a big buyer. Indian exports are made to South America and Africa for exports in a big way,
Social Factors - Explosion in the Number of Nuclear Families
As the joint-family system crumbles and the number of nuclear families explode, more small families seem to be demanding a two/four wheeler for themselves. This has directly resulted in higher sales of tyres in the past decade.
Higher car density per family: The number of upper-class and upper-middle class families is more than one car per family, seems to be increasing exponentially. This is especially true in cities where working members of same family find it difficult to survive without more than one car for transportation. With higher disposable incomes, these families are finally able to afford this need.
Shifting Savings to EMI culture: Another notable trend that seems to be fueling car sales (and therefore tyre sales) is the shift in the middle-class consumer saving habits. The Indian middle-
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class family has long been known for its saving frenzy. But with a younger workforce, higher disposable incomes, lower unemployment and the influence of globalization, the average Indian middle-class family is slowly warming up the idea of EMI and buying on credit. This has helped in furthering the sales of passenger cars significantly.
Rubber has helped the farmers to get a steady income, and they are able to get good money for their produce almost throughout the year. The best part about rubber is that it can yield almost throughout the year, only except for a brief gap in summer and here in winter. If the economic growth improves, then consumption of rubber will also go up.
Technical factors
The Indian tyre market has attracted global manufacturers on account of encouraging growth figures. These manufacturers are expected to invest huge amounts into the industry over the next few years, with a major proportion of this investment directed towards the Truck & Bus (T&B) radial tyre capacity expansion. As per the study, several “Greenfield” plants are in pipeline to include new capacities. The implementation of brown-field projects is executed to cater to the growing demand. Greenfield units are expected to go on-stream in the coming years, just by the time when there will be an urgent need to bridge an increasing demand-supply gap in T&B radial tyre segment.
Environmental Factors
Scrap tyres are about to become the latest headache for a government still smarting from the debacle over its mountain. New ways will have to be found to dispose the tyres that are stockpiled or put in landfills every year. The problem is huge. The number of tyres in use is forecast to increase by up to 60% by 2021, as the number of vehicles rises. Every day, 100,000 are taken off cars, vans, trucks, buses and bicycles. It is widely estimated that there are now more than 200m lying around.
By their very nature, tyres are difficult to dispose off. They are designed not to fall apart while you're driving along the motorway, so they are one of the more intractable issues. Although tyres remain substantially intact for decades, some of their components can break down and leach. Environmental concern centers on the highly toxic additives used in their manufacture, such as zinc, chromium, lead, copper, cadmium and sulphur.
The environment agency is launching a campaign later this month to alert the public and industry to the need to prolong the life of existing tyres and find new recycling methods. The best use of tyres is probably to retread them, but this is now expensive, and fewer than ever are recycled in this way. Around 48,500 tonnes are converted into "crumb rubber", used in carpet underlay and to make surfaces such as those on running tracks and children's playgrounds.
More controversially, a further 18% are burnt as a "replacement fuel" in the manufacture of cement. This is fast becoming the most popular way of disposing of them, but it is of increasing concern to environmentalists and scientists. Tyre burning emits ultra-fine particles that have a toxicity all of their own. The toxicity is even stronger if this contains metals such as nickel and
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tin, which you get when you throw the whole tyre into the furnace. If the metal content of the particles goes up, then there is going to be an increasing impact on health.
Legal Factors
Incidence of excise duty on tyres continues to be high around 24%, the same as on luxury products like air-conditioners etc. In addition there are several local taxes and levies imposed on tyres. Ultimate burden of high taxes falls on the consumer. Apart from high Excise Duty, various embedded taxes (viz. Sales Tax, Cess etc.) take the total tax incidence on tyres to an even higher level. Truck and Bus tyres are used in vehicles for transportation of common man and goods.
In February, 1988, as per a directive of the Ministry of Industry, Embossing of MRP on truck and bus tyres was started. This was based on the recommendations of the Committee on Tyre Industry (1984, known as Satyapal Committee). In the last over 15 years, the economic scenario has undergone a sea change with liberalization, removal of controls and free global trade in most items.
Tyre Industry is also delicensed. Major raw-materials of tyre industry (Natural Rubber and petroleum based materials) undergo wide fluctuations in prices. In such a dynamic scenario, it is a not practical to emboss the price on tyres due to market dynamics.
Industry's SWOT Analysis:Strengths
Revival in economic activity: After reporting falling car sales over the past two fiscal, India's automotive industry had begun a gradual recovery as customer sentiment improved following the general election in May 2014. India's new government, led by Prime Minister Narendra Modi promising to revive economic growth and kick-start investment. With economic growth, demand revival likely to sustain in consumer durables, particularly in automobiles, it would have a positive impact on the tyre sector. Besides, emphasis on infrastructure in terms of development of roads will also increase demand for tyres.
R&D initiatives by top players: With the focus on providing better products and services, the Indian tyre manufacturers are setting up well-equipped in-house R&D centers with emphasis on developing cutting edge technology for compound development, development of new designs for different segments, reinforcement materials, cost optimization for quality improvements and orientation towards changing customer requirements. Although most of the tyre players do not engage in basic research due to the high costs involved, but a significant proportion of R&D effort in the tyre sector is being carried out by four- five top companies.
Limited competition: Despite having more than 40 players in the Indian market, the industry's competition is limited to top ten players only as the industry is controlled by these top ten players, holding 90 to 95% of the market share.
Weakness
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Highly capital intensive: The tyre industry is highly capital intensive and the level of technological expertise required is also highly specific. One requires roughly Rs 400 crore to set up a radial tyre plant with a capacity of 15 Lakh tyres and around Rs 150-200 crore, for a cross-ply tyre plant of a 15 Lakh tyre-manufacturing capacity.
Fluctuation of exchange rate: As most of the tyre companies are expanding their operations around the globe there is a widespread impact of sharp currency fluctuations. In simple terms, it shrinks the receivables of exporters and makes life easier for importers as the prices of imports get cheaper. A sharp fluctuation in the currency hits the small and mid-cap companies harder than their larger peers, as the larger players can manage the situation through actively managing (hedging) the currency and working with the scale. Eg. Balkrishna Industries' approximately 90% revenues are generated through exports and the Company also imports lot of its raw materials and capital equipment’s; it is exposed to high risks due to currency fluctuations.
Pricing Pressures: The tyre industry in India is a highly competitive sector with a very cut throat competition among the leading players. Any rise in raw material costs would result in pressure on the realizations and though the players vouch to increase the prices, due to competitive pressures, they have not been able to pass on the entire increase to the consumers.
Opportunities
Improvement in Automobile Industry prospect: Growing economy leads to improving Automobile Industry prospect which further leads to Increasing OEM demand that in turn leads to Subsequent rise in replacement demand. With continued emphasis being placed by the Central Government on development of infrastructure, particularly roads, agricultural and manufacturing sectors, the Indian economy and the automobile sector/ tyre industry are poised for an impressive growth.
Access to global sources for raw materials: with the access to global sources for raw materials, Indian tyre industry can stabilize price fluctuation in raw materials and control their margins. Furthermore, Indian tyre companies can also follow and maintain global quality standards and international process and system certifications, which will help them during export. Eg. Balkrishna Industries imports natural rubber and has very little exposure to domestic rubber price fluctuations and thus margins have remained strong.
Exploration of new markets: Many Indian tyre companies are exploring the opportunities to enter into new markets. Recently, Apollo Tyres confirmed Hungary as the location for its first Greenfield facility outside India. The company has decided to setup facility over there after receiving the necessary approval from its board of directors on the proposed investment towards setting-up a Greenfield facility in Eastern Europe. This facility will produce both, Apollo and Vredestein branded tyres, and will cater to the entire European market, and will complement Apollo Tyres' existing facility in the Netherlands.
Threats
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Introduction of other transport facilities: Introduction of other transport facilities like metro, monorails and local trains keeping pollution hazards caused by combustion of automobile fuels.
Cheaper imports of Tyres: The major concern for the Indian manufacturers is that the price of the tyres in the overseas market like China and South Korea is comparatively low compared to domestic market. Therefore, many automobile manufacturers have switched to the option of importing tyres from international market. The landed cost of tyres from China is much lower than the Indian price. In addition, tyres from South Korea are imported at 30% customs duty while from other countries the duty levied is 35%. Therefore in both cases the Indian tyre manufacturers are on receiving end.
Expectation of rise in natural rubber prices: Natural rubber prices, which accounts for over one third of total raw material costs, are expected to rise as Total output of Natural rubber in India is likely to drop over 10 percent in 2014/15 from the previous crop year, hit by heavy rain in key growing regions and as farmers suspends tapping due to lower prices.
Michael Porter's Five Forces Model - A way to look at Indian Tyre Industry
1) Bargaining power of supplier
Rubber
There are two reasons behind this being low first one is most of the tyre firm’s get 150 day’s credit for buying the rubber from international market which is not the case if they buy it from domestic rubber growers. And the second reason is, this credit is being offered at LIBOR, which
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is the London Inter-bank Offered Rate. It is the rate of interest at which banks borrow funds from other banks.
Other Petro chemical based material (Carbon black, Nylon tyre cord etc.)
The power of suppliers is high in this category as India is limping back in case of Petro based raw materials like carbon black and chemicals which account low in quantity terms but are high cost generators. Also the price of NTC fluctuates in line with the prices of Caprolactam (a petroleum derivative)-it’s main raw material. The prices of these materials are beyond control of tyre industry.
2) Bargaining power of buyers
OEM's
The OEMs are always in strong position when the bargaining power of buyers is concerned. The reason behind this is most of them are having contract with their relative tyre manufacturer under which the prices of tyre remains stable for this OEM irrespective of market price. The benefits are given to them as they are buying in bulk and the relation gives the tyre firms something called brand association.
Replacement
The scene in replacement segment is quite reverse as the bargaining power for the replacement segment is moderate due to the fact that the buyers are not that strong as compared to OEMs. The demand in buses and truck segment is always high because of Indian poor road conditions apart from this the purchase is made in small units.
3) Threat of substitute
It is moderate or as the industry is facing opposition from retreading sector all over the globe. This cheaper option, around 20-25% of the original tyre cost, is present in developed countries since some decade back. And this is heading towards strong position here in India too.
4) Threat of new entrants
The threat of new entrant is moderate or can be described as low because the industry is highly capital intensive and the level of technological expertise required is also highly specific. But if we see from domestic (Indian) industry's point of view, this better can be defined as high. The reason being, global tyre industry is already seeing mergers and acquisitions in order to restructure. And as of now India and China going to be the hub of activities as far as tyre industry is concerned due to low production cost as well as other relevant benefits. So for any of the global big shot Indian company will be a good option to go for.
5) Industry rivalry
High, because gradually the overseas players are expanding their wings over Indian tyre industry and also a limited and every player is moving towards automated technology, like ERP and SCM. Apart from the aforementioned reason, the industry is seeing high competitive scenario at
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present because of various reasons like rising input costs, low realizations from growing OEM segment where the vehicle manufacturers are not ready to share the burden of tyre firms, the portion of replacement pie continuously taken away by the retreading sector which is slowly but firmly rising its head and that to in high realization segment of Bus-Truck tyres and last but not the least the unorganized sector is always there to give head ache to these established players like CEAT, JK, Apollo and MRF etc.
Market Share and Other Details:
Name Last PriceMarket Cap. Sales
Turnover Net Profit Total Assets(Rs. cr.)
MRF 41,007.60 17,391.91 13,197.58 897.89 6,332.64Apollo Tyres 181.25 9,226.07 8,937.82 645.08 4,067.30Ceat 1,100.70 4,452.34 5,591.66 298.97 2,209.71JK Tyre & Ind 109.5 2,483.61 6,125.23 253.3 3,056.59TVS Srichakra 2,559.50 1,959.82 1,895.99 103.79 452.19Goodyear 568 1,310.18 1,581.19 101.24 496.83
Company Name
Net Sales (Rs. Cr.)
Market Share
MRF 13,197.58 30.96%Apollo Tyres 8,937.82 20.97%JK Tyre & Ind 5,951.08 13.96%Ceat 5,591.66 13.12%Balkrishna Ind 3,779.91 8.87%TVS Srichakra 1,895.99 4.45%Goodyear 1,579.15 3.70%Falcon Tyres 1,198.66 2.81%Others 494.80 1.16%
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31%
21%14%
13%
9%4% 4% 3%1%
Indian Tyre Industry Market Share
MRF Apollo Tyres JK Tyre & Ind Ceat Balkrishna IndTVS Srichakra Goodyear Falcon Tyres Others
Critical Success FactorsQuality: If the quality of tyres is at any point doubted by the consumer it can be devastating for profits as tyres carry such a huge safety element.
Pricing: Introduction of cheaper brand tyres has placed greater pressure on prices. There have been continued rises in imports of cheaper tyres from China. If tyres are over the price range, most customers will turn away from leading tyre brands.
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Company Details and SWOT Analysis:
A. MRF TyresAbout the Company:
The company, MRF Ltd., originally started as a small manufacturing unit of balloons, latex cast squeaking toys and industrial gloves.
A young entrepreneur, K. M. Mammen Mappillai, opened a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai).
The company established its first office in 1949 at Chennai
It began the manufacturing of tyres in 1961.
Vision:
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The vision of MRF is to emerge as pre-eminent global players in the field of polymers and make INDIA a global super power in terms of technology and life.
Mission:
The mission of MRF is that zero defect, zero break down, zero accidents, zero pollution, and there by zero losses with their new performance standards.
Objective:
The main quality objective of the company is to “attain global standards through the continuous improvement in the quality of products and services and also to maintain market leadership.
Goal:
The main goal is to optimistic and continue to make investments in our existing plants to increase overall revenue and share. Their products continue to be the preferred choice of the customer even though many options are available in the market. They are the first Indian company to supply aircraft tyres to the Indian defence, joining the league of select global companies who have the expertise to manufacture these tyres. Operations continue to be profitable and plans are afoot to increase its revenue further.
Marketing Strategies:
Analysis of the 4P’s:
Product: The basic definition of a product is anything that can be offered to a market to satisfy a want or need. MRF differentiates itself from the competition, on its two pillars of High Quality and Endurance.
Place: 7 plants located in various places in South India. 2,500 outlets in India and exports to over 65 countries worldwide. Its distribution channels include:
Factories Divisional And Regional Distribution Centres Carrying And Forwarding Agents Dealers
Price: MRF has been a leader in the Passenger Car tyre segment. By virtue of their market share, they have traditionally been price makers. The rest of the tyre industry has followed the pricing cues set by these leaders. Mark-up pricing is the common pricing method followed across the tyre industry.
Promotion: Excellent brand recognition in all categories of vehicles in the tyre market. Sports celebrities and event endorsements- a major vehicle for promoting their brand.
Operational Strategies:
MRF previously handled many new product launches. However, given the importance of the product and public expectations, this time MRF decided to team up with VISTA supply chain
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management systems to deliver the product. When the new product is launch the capability to predict the volume of product and time scale for delivery is the key for success. The major components of New Tyres (XFS200) are manufactured in Asian Region and the product is assembled in Japan and Thailand. The accessories for new product are manufactured in Eastern European countries. Product Supply to North and South America: The VISTA flown assembled product from Japan and Thailand and accessories from Eastern Europe to Kentucky.
In Kentucky product and accessories are packaged together. The packaged product is distributed to retailers in North America by road network and air freight. The Latin American region was covered with air freight from Kentucky. In addition if online orders are mailed directly by air-mail. Product Supply to North and Europe and Africa: The assembled product was air shipped to Bucharest, Romania and is packaged with accessories. The packaged product is air-shipped to retailers in Europe. Also there is warehouse located in the Brussels to handle the online orders. The Bucharest centers also handled the shipments to Europe. Product Supply to Asia Pacific Region: The accessories are flown to Thailand and packaged with product. The retailers in Asia Pacific region was delivered from Thailand. While the product was enroot the VISTA system informed the retailers about the delivered times. So that retailers can adjust to not miss sales opportunity.
Results Due to implementation of synchronized supply chain management resulted in sales targets set by management. The key to success is distributed warehousing and distribution centers and integrated tracking system.
The major results are: a) The synchronized system significantly reduced MRF supply chain by (40%). b) This also resulted in increased speed to end customers. c) The increased service to the retailers. d) The product has been launched at the same time globally without having in delays reaching retailers and end customers.
Human Resources:
The Company has a dedicated team to cater to the growing talent requirements. We have a robust graduate engineer recruitment process which has helped us attract some bright youngsters from the professional campuses in the country. They were put through a well-designed training programme, consisting of both classroom sessions and on the job training in our manufacturing units before being placed in supervisory roles. Lateral hires are taken through an orientation programme to equip them to settle down in their roles quickly. First line managers had undergone a leadership development programme covering technical, managerial and leadership skills. An advance supervisory development programme has been initiated to build capability among the first line supervisors and engineers in order to equip them to take up future responsibilities.
Future plan of action:
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R&D efforts are taken to develop passenger radial tyres for various new cars introduced by the multinational car companies for the Indian market. Efforts are also on to develop tyres for high end cars with stringent performance requirements such as lower rolling resistance, superior traction, higher speed capabilities, lower noise levels and puncture resistant.
SWOT Analysis:
Strengths
Established brand name (key in the replacement market) Extensive distribution network. Good R&D initiative Customer focus
Weakness
Cost and Pricing Pressure High Capital Intensive Volatility in industrial relations.
Opportunities
Existing & potential growth of automobile industry Governments focus on development of infrastructure Potential change in the tyre patterns of commercial vehicles from bias to radial patterns
Threats
Volatility of prices of rubber & crude oil Steep inflow of inferior Chinese tyres Low liquidity and high interest costs Price wars.
B. Apollo TyresAbout the Company:
Apollo Tyres Ltd, with its corporate headquarters in Gurgaon, India, is in the business of manufacture and sale of tyres since its inception in 1972. Over the years, the company has grown manifold, establishing its footprint across the globe.
The company has manufacturing units in India and The Netherlands. It is also setting up a new manufacturing facility in Hungary, with a planned investment of €475 million. The company markets its products under its two global brands - Apollo and Vredestein, and its products are available in over 100 countries through a vast network of branded, exclusive and multi-product outlets.
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At the end of its financial year on March 31, 2015, Apollo Tyres had clocked a turnover of US$ 2.08 billion, backed by a global workforce of approximately 16000 employees.
Today, the company owns 5 key brands — Apollo, Kaizen, Maloya, Regal and Vredestein.
Vision:
A significant player in the global tyre industry and a brand of choice, providing customer delight and continuously enhancing stakeholder value.
Objective:
Apollo Tyres believes that to truly move up the value chain, it is critical to use fewer natural resources to produce more. For a growing organization, with a long-term focus and commitment, it is critical to safeguard resources for the future even as it creates value today. At Apollo, emphasis is laid on using natural resources cautiously and with care.
Goal:
As an organization, Apollo Tyres is committed towards creating values for its stakeholder. And the crucial link here is building a sustainable business, driven by strategic growth and responsible actions.
Finance and Future:
1. Raw material price volatility
Natural rubber is an agricultural commodity and subject to price volatility and production concerns.
Most other raw materials are crude linked and are affected by the movement in crude prices. Any increase in crude oil prices may impact prices of some of the raw materials.
Both natural rubber and crude prices are controlled by external environment and little can be done to control the raw material price movement internally.
2. Ability to pass on increasing cost in a timely manner
Demand supply situation must remain in favour of the industry to enable it to undertake price increases
.This is further impacted by competitive activities and a general reluctance as seen in the past, particularly in India, to make quick and significant price hikes.
3. Continued economic growth
Demand in the tyre industry is dependent on economic growth and/or infrastructure development. Any slowdown in the economic growth across regions impacts the industry fortunes.
In Europe, the company’s winter tyre sales are subject to seasonal requirements, which can be adversely impacted in case of a mild winter season.
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4. Radialisation levels in India
Slower increase in radialisation level in truck tyre segment, than expected, may impact Indian operations. Excess capacity may result in competitive pressures and decline in profit.
At the same time, an unexpected quicker increase in the level of radialisation can result in faster redundancy of cross ply capacities and create a need for fresh investments.
5. Future Growth
Lower profitability due to some of the above factors impacts the ability to invest in future growth
Increased competition from global players like Michelin, Bridgestone and Continental in India.
Human Resources:
Development in Human Resources & Industrial Relations
One of the key elements of Apollo Tyres’ strategy is profitable growth. The organisation knows that profitable growth is solely dependent on its employees’ performance in diverse areas including sales, marketing, R&D, manufacturing, logistics and across every function in the organisation. The company has continuously endeavoured to build a high performance culture and the Human Resources function plays a key role in enabling this. The HR at Apollo Tyres has always remained a strategic partner in the growth and globalisation journey of the company.
For HR, the previous fiscal year was a year of change and consolidation. The year saw a change in HR leadership with Martha Desmond joining in as the Chief Human Resources Officer. Based out of Onkar S Kanwar and Neeraj Kanwar with Viktor Orbán, Prime Minister of Hungary during the foundation stone laying ceremony held in Hungary London, Martha has a rich global exposure in all aspects of HR including Global Talent Management, Total Rewards and Global Mobility.
In order to further augment Apollo’s fast paced growth journey, several key new positions were created worldwide. To homogenise the company’s manufacturing standards worldwide, the Chief Manufacturing Officer joined Apollo Tyres. Quality has always been an epicentre of our product differentiation. To spearhead the Global Quality Standards journey, a Chief Quality Officer also came onboard. Technology will be the key differentiator in outpacing our competitors. Focussing on this priority, Apollo welcomed a Chief Technology Officer to the company.
Global mobility of employees is enabling them achieve their career and personal aspiration of development and growth and enhancing the company’s value proposition. The HR department, thereby, has become a fulcrum propelling people development and job enrichment. Championing the cause of employees, it is HR’s endeavour to ease resettlement and reduce challenges in the movement, so that employees are ready to take on their enhanced responsibilities globally.
Operations:
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The operations has traversed a long distance in the past decade. Over the years, its focus has shifted to a wider ambit of ‘complaint management’. The approach not only addresses basic aspects like claim redressal, product testing, mass customer campaigns but also seeks to eliminate any scope for complaint in its products and services. Teams in the operations regularly conduct product and safety awareness workshops and health assistance programmes and also encourage customers to share their experiences through a dedicated mechanism.
SWOT Analysis:
Strengths
Apollo Tyres has the advantage of a diversified market base across geographies and is therefore, not dependent on a single domestic market. Furthermore, the company is working to establish and grow operations in other large international markets as well.
The company is powered by strong global product brands in its markets – Apollo and Vredestein.
Apollo Tyres enjoys an extensive distribution network for its key brands across its key home markets.
In Europe, the company’s brand ‘Vredestein’ has an established presence and enjoys premium positioning in ultra-high performance (UHP), winter and all season passenger car tyre segments.
The company is a leading player in the Indian commercial vehicle segment – which accounts for the bulk of the industry’s revenue. Since the company assumed an early lead, Apollo is best positioned to maintain its leadership position in the truck-bus radial segment and drive growth through the same.
Weaknesses
India has a large and growing 2-3 wheeler tyre segment. However, Apollo does not manufacture tyres for this category and has continued to focus on other product segments.
At times in the past, the company has been unable to timely pass on raw material cost escalations to consumers, due to intense competition and various market dynamics. This has a direct impact on the margins.
The company is currently not present in the European OEM market for regular passenger car tyres which to a certain extent drives the replacement market sales.
Opportunities
In India, Apollo Tyres enjoys early mover advantage in the truck-bus radial segment and has a healthy lead over its competition in terms of capacity and market share. This implies healthy growth prospects with increasing radialisation.
The company’s Apollo branded passenger vehicle tyres are being sold in Europe and this could develop into a sizable market for the same, leveraging its already existing network in Europe.
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With the announcement of Apollo’s Greenfield plant in Hungary, the company is positioned to grow in the European market through an added cost competitive manufacturing facility.
The company continues to increase its focus to new geographies like South America, Middle East and South East Asia. These would be growth avenues for the future.
The company can convert excess bias capacity into industrial tyres capacity and tap into a new product segment.
The company is talking to auto majors for OEM fitments in Europe. This would establish the brand even more strongly and drive significant growth in European market.
The company would look to introduce products and make an entry into the European Truck, Bus & OHT segments.
Threats
Economic downturn or slowdown in the key markets – Europe and India – can lead to decreased volumes and capacity utilisation.
Increased competition from global players like Michelin, Bridgestone, Continental in India.
Increased competition from truck radial imports from China resulting in a quicker than expected decline in volumes within the truck-bus cross ply segment, creating redundant capacities requiring investment to convert into other product segments.
Continued threat of raw material price volatility translating into pressure on margins during a rapid rise in raw material prices.
Weak currency resulting in pressure on margins, since the company is a net importer. Growing influence of budget tyres, mainly tier 2 and 3 brands from established European
manufacturer
C. GOOD YEAR COMPANYAbout the Company:
Goodyear is one of the world’s largest tyre companies. It employs about 68,000 people and manufactures its products in 50 facilities in 22 countries around the world.
Its two Innovation Centers in Akron, Ohio and Colmar-Berg, Luxembourg strive to develop state-of-the-art products and services that set the technology and performance standard for the industry.
About Goodyear India:
Goodyear’s presence in India is over 90 years old, with two plants, one each in Ballabgarh and Aurangabad. In the passenger car segment, Goodyear India supplies tyres to many of the leading Original Equipment Manufacturers. Goodyear India has also been a pioneer in introducing tubeless radial tyres in this segment.
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In the farm segment, in India, Goodyear tyres are supplied to all the major tractor companies. In 2010/11, Goodyear India was awarded the Super brand status
Vision:
Become a market-focused tire company providing superior products and services to end-users and to our channel partners, leading to superior returns for our shareholders.
Mission:
Constant improvement in our products and services to exceed the expectations of our customers and people.
Objective:
The tire industry is cyclical and one of the objectives of our long-term approach is remaining profitable and creating value through the inevitable highs and lows of the economic cycle.
Goal:
To successfully execute the strategy and deliver another year of record segment operating income.
Goodyear Announces Growth Strategies, Investment Plans:
New Business Model Key to Unlocking Market Opportunities High-Value-Added Segments, Emerging Markets Offer Profitable Growth Relocating and Expanding Chinese Plant, Closing Australian Plant Multi-Year Investments to Modernize Facilities, Expand Emerging Market Production Cost Savings Ahead of Plan, Target Increased
In order to drive future growth and address the volatile economic environment, we remain focused on our key strategies:
• Continuing to focus on market-back product development;
• Taking a selective approach to the market, targeting profitable segments where we have competitive advantages;
• Improving our manufacturing efficiency and creating an advantaged supply chain focused on reducing our total delivered costs, optimizing working capital levels and delivering best in industry customer service;
• Focusing on cash flow to provide funding for our capital allocation plan described below; and • Building top talent and teams
Finance:
We expect that our full-year tire unit volume for 2015 will be up 1% to 2% compared to 2014. We also expect cost savings to more than offset general inflation in 2015. Based on current spot
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rates, we expect foreign currency translation to negatively affect segment operating income by approximately $180 million in 2015 compared to 2014.
Based on current raw material spot prices, for the full year of 2015, we expect our raw material costs will be approximately 14% lower than 2014, and we expect the benefit of lower raw material costs to more than offset declines in price and product mix. However, natural and synthetic rubber prices and other commodity prices have experienced significant volatility, and this estimate could change significantly based on fluctuations in the cost of these and other key raw materials.
SWOT Analysis:
Strengths
Dedicated Independent dealers. Brand Recognition Strong Track record in launching new products. Strong brand image among price oriented buyer.
Weakness
Michelin has stronger value oriented and quality oriented buyers and has stronger customer loyalty.
Low profit and high indebtedness. Limited marketing channels. Knowledge levels of distributors. Availability of Good Year products at unauthorized products at lower prices.
Opportunities
New technological breakthrough. Absence of wet condition tyres. Absence of high durability/distance tyres.
Threats
Possibility of competitors launching products in the same segment. Further erosion of market share to foreign competition.
D. CEAT TyresAbout the Company:
Ceat Ltd. is a part of the RPG conglomerate.
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The company offers the widest range of tyres to leading Original Equipment Manufacturers across the world. They manufacture a range of tyres catering to various segments. The company operates two plants in Maharashtra.
The company has a robust national network consisting of 34 regional offices and over 3,500 dealers. The company has their presence in 110 countries.
Products are known for their superior quality & durability and are recognized as being ‘born tough’. Presently focusing on catering to the fast growing passenger car and two wheeler industry.
Vision:
“CEAT will at all times provide total customer satisfaction through products and services of highest quality and reliability”.
Mission:
“To nurture an exciting and challenging work environment with fairness & transparency”.
Objective:
To continuously focus on new product launches and has launched over a 100 new products in FY 2013-14.
Goal:
To outperform the industry and to emerged as one of the fastest growing tyre companies in the industry.
Products:
Motorcycle & Scooter Tyres Auto-Rickshaw Tyres Heavy Duty tyres for Trucks & Buses Inner Tubes Tyre Flaps
Quality Policy:
CEAT is the first tyre company in India to get the ISO/TS 16949 certification which is a combination of ISO 9000 and QS 9000.
It ensures:
PDCA cycle of process approach.
Trim Supply chain by preventing defects and reducing waste
No multiple certification audits
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Customer Satisfaction
Operation:
CEAT produces over 6 million tyres a year CEAT earns around 65% of its revenue from the T&B segment It has a robust national network consisting of 33 regional offices and over 3,500 dealers
Marketing:
International cricket rating system. Has a dedicated Customer Service department. Tie up with Yahoo India. E-mail newsletters. Planning to start SMS promotion. Has a robust network consisting of 36 regional offices, over 3,500 dealers.
Distribution:
Ceat produces Tyres for 3 different markets
OEM Replacement tyres Exports
Tyres which are sold to OEM’s follow the B2B sales process hence they do not require an elaborate distribution network. Also tyres that are exported use the distribution network of some other company. Hence the most challenging Sales and Distribution network is developed for the Replacement Market.
CEAT has one of the largest distribution network for tyres in India. It has divided the Indian sub-continent into 33 regions and has set up a Regional Office for each region. Carrying and forwarding agents (C&FAs) are attached to them.
Often the larger regions have 2 or 3 or more C&FA’s to cover the region properly. The total number of C&FA’s across the country is 112. The basic operating structure of the Ceat Ltd. comprises of the following entities
1. Factory 2. DDC 3. RDC 4. C&FA 5. Dealers
Human Resource:
A safe and happy workplace makes the employees feel good about being there. Each one is given importance and provided the security that gives them the motivation and incentive to stay. This is usually achieved through internal surveys to find out whether they are satisfied and if not what they think need to be changed.
SWOT Analysis:
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Strengths
Right products, quality, reliability. 100% vendors are ISO Certified. Superior product performance. Products have required accreditations. High degree of Customer satisfaction. Brand Image.
Weakness
Not very popular in International market. Delivery staff needs training. Customer service staff needs training.
Opportunities
Profit margins will be good. Could extend to overseas. Could seek better supplier deals. An applied research center to create opportunities for developing techniques to provide
added value services.
Threats
Vulnerable to reactive attack by its competitors. Lack of infrastructure in rural areas could constrain investment. Sales depend on car sales. High Volume/Low cost market is intensively competitive.
E. JK TyresAbout the Company:
JK Tyre and Industries is a mega corporate entity that is emblematic of excellence, diversification and pioneering new technologies. A part of JK Organization which ranks among the top private groups private groups in India, JK Tyre and Industries is committed to self-reliance and follows an ethic that views customer satisfaction as an index of achievement.
Over the years, the company has expanded and diversified its business portfolio. It has developed into a multi-product, multi-location corporate entity comprising of following business divisions:
The advent of JK Organization on the industrial landscape of India almost synchronizes with the beginning of an era of industrial awareness - an endeavour for self-reliance and the setting up of a dynamic Indian industry.
Vision:
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To be amongst the most admired companies in India, committed to excellence.
Mission:
Be a customer obsessed company No.1 Tyre brand in India Deliver enhanced value at all stakeholders Most profitable Tyre Company in India Enhance Global presence through acquisition.
Objective:
It is a future-focused organization providing consumers today with the tyres of tomorrow.
Goal:
To be a multi-location company delivering products to customers in the shortest time and the lowest delivered cost.
Marketing Strategy:
Strategic thinking is key to the evolution of successful marketing strategies of JK tyre. This involves the following analyses:
Understanding markets: Strategic perspective of the market requires skillful analysis of the trend and how they affect the market size and demand for the firm’s product.
Finding market niches: Price, service, convenience and technology are some of the niches in Indian market.
Product and service planning: Analysis of the customer’s promotion of the brand, both of the firm and competitors, besides an analysis of the situation in which the customer uses the product.
Distribution: Structural changes in inventory management, mobile distribution are some of the key factors that are going to affect the distribution process in the Indian market.
Managing for result: With pressure on costs, prices, and margins, marketers will have to make effective utilization of every rupee spent in marketing.
Human Resource:
“To be amongst top 25 best employers in India” Contributing substantially to Short Term and Long Term Business Results by aligning
our HR initiatives Facilitating each one of us to deliver 125% (and more) of our capacity and capability An Enabling Climate for attracting, retaining and nurturing Talent contributing to
Organizational Excellence with an innovative mindset
Future:
State of the Art R&D Center in Mysore HASETRI, Tech Center under one roof
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Central Test Centre – Enhanced with new high end test capabilities Construction under progress
SWOT Analysis:
Strengths
Strong brand image Being quality oriented rather than quantity oriented Large product width & line (product mix) Economies of scale due to optimum capacity utilization Very large distribution channel Collaboration with Vikrant Tyres, known for their technological superiority, bringing
together performance, economy, durability & comfort. Strong Financial position.
Weakness
Less Brand awareness. Less concerned about small car segment.
Opportunities
An enthusiastic workforce and growing middle class population. High growth potential for its exports, especially in Europe.
Threats
Entry of new player with newer and better technologies in small car tyre segment. So many close competitors like Apollo, Birla, Ceat, Modi, Kaizen etc.
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F. TVS SrichakraAbout the company:
TVS Srichakra Ltd., one of India’s leading two & three-wheeler tyre manufacturers. Being a part of TVS Auto Ancillary Group (Turn over of USD 6.0 billion) founded by T.V. Sundaram Iyengar, we continue to honour the value system and the rich heritage of our parent company.
Over 30 years, we’ve leveraged our expertise to ensure your every ride is as safe as it is sensible. With state-of-the-art manufacturing units at Madurai (Tamil Nadu) and Rudrapur (Uttrakhand), spread over 2.9 lakh sq. meters, we manufacture a prolific range of tyres: * Two & Three-wheeler tyres * Industrial pneumatic tyres * Farm and implement tyres * Skid steer tyres * Multipurpose tyres * Floatation tyres. Today, TVS Tyres cruises across the globe as well, extending its presence through export to USA, Europe, South America, Africa and Australia.
Mission:
"To remain in the prime position in the field of automobile distribution business by extending dedicated service to its clientele"
Objective:
To place at the service of the public all over technical equipment and intelligence in automobile and allied industries at a truly national cost that commensurate with the interest of the employees and shareholders.
Goal:
To provide the greatest satisfaction possible to our customers and employees within our competitive economy through proper personal practices. To be a good member of the community and the nations.
Steps taken by the Company for utilizing the alternate sources of energy:
Company has generated 67, 28,834 units through Wind energy during the year 2014-15.
Introduction of new process and product for improving process / product quality and introduction of products for OEM and AM.
Company was able to develop a whole range of new products for OEM, Replacement Market and Export Market, in the shortest development cycle time.
Expansion:
Continuous strong growth rates in the two wheeler industry have also made TVS to expand its business and add capacities. And it has taken sufficient proactive steps to increase / plan the capacity to meet with the increase in demand over the next few years.
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Growth:
TVS was able to increase its market share in the Original Equipment Manufacturer (OEM) segment and further consolidate the leadership position. In the After-Market segment, the Company was able to gain market share and increase its visibility. TVS was able to sustain its volumes in Export segment in spite of a sluggish demand from European countries.
Business strategy:
TVS holds the market leadership position in the OEM segment and plans to hold onto that position. In the Aftermarket segment it has been gaining share and plans to further grow its share this year too. To support this growth, TVS has plans to continue its investment in brand building. TVS also plans to invest time and resources towards product innovation for release of high performance tyres to the market and strives to provide the best two wheeler conveyance solution in the industry while maintaining low cost of manufacturing.
Sustainable Development:
The Company in cognizance of various business risks that it faces has proactively taken steps to mitigate these risks. To achieve distributed and diversified segmental revenue mix, significant efforts are underway to increase the after-market and export business. In order to increase the after-market business the Company has taken initiatives for brand building and improves the top of the mind recall quotient. A separate vertical has been created for brand management with induction of professionals. The share of tubeless tyres in two-wheeler market has significantly increased in the FY 2015 and the Company believes this trend to accelerate in the coming years. TVS is fully geared up to cater to this surge in demand and it is keeping pace with the trends and has one of the best offering in terms of the tubeless products. Lastly, Company is consistently monitoring the power and human resources situation, including that arising out of the proposed capacity expansions, and taking timely measures to deal with these issues.
Finance:
During the year, the Company was able to retain the benefits of the falling material prices, which was achieved through strong procurement strategies. Strong growth in the After-market as well as rupee weakening against Euro for most part of the year resulted in a better realization. These actions along with more effective controls on material consumption resulted in a lower material cost compared to the previous year
SWOT Analysis:
Strengths:
Company is in niche segment with majority of tyre majors in 4-wheeler segment It has a very strong and established company being largest automobile distribution
company in India Company adheres to ISO 9001:2008, 14001:2004 and ISO/TS 1649 One of the biggest manufacturer rolling out more than 11 million tyres annually
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Has a strong workforce of over 5000
Weakness:
The brand has limited brand recall as compared to other global competitors Distribution network is not as penetrative as other Indian giants
Opportunities:
Excellent opportunity to capture the market with complete integration from tyre manufacturing to making motorcycles and selling them too, hence customer is always there for buying tyres
With proper promotion it has growth opportunities in nearby developing countries like Bangladesh, Sri Lanka
Growth opportunities in Farm equipment
Threats:
Stiff competition from national and international brands Shrinking scooter’s market and ever increasing prices of fuel
Volatility in prices and availability of raw material as India’s rubber production is less than its demand
Government Policies w.r.t export duties, import duties, tax levied on automobile industries and economic condition of nation as it determines the sale of automobiles
Introduction of other transport facilities like metro, monorails and local trains keeping pollution hazards caused by combustion of automobile fuels
Ratio AnalysisParticulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraInvestment Valuation Ratios Mar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14Face Value 10 1 10 10 10 10Dividend Per Share 50 0.75 10 10 5 16
Interpretation:
Face value: It is referred to as par value or nominal value, is the value shown on the face of a security certificate, including currency. The concept most commonly applies to stocks and bonds, so it is particularly important to bond and preferred stock investors.
Dividend Per Share: DPS is the sum of declared dividends for every ordinary share issued. It is the total dividends paid out over an entire year (including interim dividends but not including special dividends) divided by the number of outstanding ordinary shares issued. As we can see above that MRF has the highest DPS and Apollo the lowest, therefore shareholders’ looking for long term income would buy MRF shares.
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Particulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraProfitability Ratios Mar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14Operating Profit Margin(%) 14.6 12.61 9.72 11.54 11.01 7.32Profit Before Interest And Tax Margin(%)
11.34 9.67 7.76 9.96 8.42 5.9
Gross Profit Margin(%) 11.4 9.76 7.92 10 8.45 5.91Cash Profit Margin(%) 9.95 8.66 8.05 6.44 6.08 4.25Net Profit Margin(%) 6.8 5.08 6.41 4.73 2.26 2.83Return On Capital Employed(%) 24.79 25.61 31.75 28.32 16.98 21.37Return On Net Worth(%) 19.87 16.23 20.48 26.24 16.1 23.29
Interpretation:
Operating Profit Margin: Operating margin ratio shows whether the fixed costs are too high for the production or sales volume. High or increasing operating margin is preferred because if the operating margin is increasing, the company is earning more per rupees of sales. Therefore MRF is earning more followed by Apollo, Ceat, JK Tyre, Goodyear and TVS.
PBIT Margin: It is a measure of an organization's profit which is found as profits before interest and tax (PBIT) divided by net revenue. It helps to identify the organization yearly growth. The higher PBIT margin, as in the case of MRF above, reflects the more efficient cost management or the more profitable business.
Gross Profit Margin: The gross profit margin ratio expresses the gross profit as a proportion of sales. The gross profit margin ratio is used as one indicator of a business's financial health. It shows how efficiently a business is using its materials and labor in the production process and gives an indication of the pricing, cost structure, and production efficiency of your business. The higher the gross profit margin ratio the better like MRF and TVS is having the lowest indicating production inefficiencies.
Cash Profit Margin: It is a measure of how efficiently a company converts its sales rupees to cash. Since expenses and purchases of assets are paid from cash, this is an extremely useful and important profitability ratio. The higher percentage (MRF) indicates the more cash is available from sales.
Net profit margin: It is an indicator of how efficient a company is and how well it controls its costs. MRF and Goodyear are the more effective in converting revenue into actual profit.
ROCE: The prime objective of making investments in any business is to obtain satisfactory return on capital invested. Hence, the return on capital employed is used as a measure of success of a business in realizing this objective. It is the best measure of profitability in order to assess the overall performance of the business. Hence this indicates how well the management of Goodyear and Ceat has used the investment made by owners and creditors into the business.
RONW: This ratio gives you an idea of the returns generated by investing in the company. Higher RONW of Ceat and TVS indicates the returns you can earn on your investment. This ratio indicates the return on stockholder's total equity.
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Particulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraLiquidity And Solvency Ratios Mar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14
Current Ratio 0.99 0.81 1.61 0.71 0.65 0.91Quick Ratio 0.82 0.36 1.29 0.73 0.89 0.98Debt Equity Ratio 0.4 0.33 -- 1.03 2.64 1.3
Interpretation:
Current Ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. The higher the ratio, the more liquid the company is. A current ratio between 1 and 1.5 is considered standard. Goodyear’s current ratio is in this range, hence it is considered to have good short-term financial strength. The current ratio is much below 1 for Ceat and JK tyre, then the company may have problems meeting its short-term obligations.
Quick Ratio: An indication of a company's ability to meet short-term debt obligations. Ideally, quick ratio should be 1:1.
The quick ratio is higher for Goodyear indicating the company is keeping too much cash on hand or have a problem collecting its accounts receivable. Quick ratio is lower for Apollo indicating that the company relies too much on inventory or other assets to pay its short-term liabilities.
Debt Equity Ratio: The debt to equity ratio shows the percentage of company financing that comes from creditors and investors. The higher debt to equity ratio of JK tyre indicates that more creditor financing (bank loans) is used than investor financing (shareholders) and vice versa in the case of Apollo.
Particulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraDebt Coverage Ratios Mar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14Interest Cover 6.78 3.8 46.02 3.29 2.09 2.26
Interpretation:
Interest Coverage Ratio: Interest Coverage Ratio indicates the capacity of an organization to pay its interest obligations. An interest cover of 2 for JK tyre and TVS implies that they have sufficient profitability to bear twice the amount of its current finance cost. The very high interest cover of Goodyear suggests the fact that the company is not capitalizing on the relatively cheaper source of finance.
Particulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraManagement Efficiency Ratios Mar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14
Inventory Turnover Ratio 7.33 6.79 12.8 7.46 8.57 8.09Debtors Turnover Ratio 8.09 33.92 11.38 7.92 5.66 7.38Fixed Assets Turnover Ratio 2.09 1.83 3.33 2.52 1.55 4.6
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Interpretation:
Inventory Turnover Ratio: Inventory Turnover Ratio measures the number of times, on average, the inventory is sold and replaced during the fiscal year. Low inventory turnover ratio of Apollo is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies either poor sales or excess inventory.
A high inventory turnover ratio of Goodyear indicates better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may lead to a loss in business.
Debtors Turnover Ratio: Receivables Turnover Ratio measures the number of times receivables are collected, on average, during the fiscal year. A high receivables turnover ratio of Apollo implies either that the company operates on a cash basis or that its extension of credit and collection of accounts receivable are efficient. A low receivables turnover ratio of JK tyre implies that the company should re-assess its credit policies in order to ensure the timely collection of credit sales.
Fixed Asset Turnover: Fixed assets turnover ratio measures how successfully a company is utilizing its fixed assets in generating revenue. It calculates the rupees of revenue earned per one rupees of investment in fixed assets. The higher fixed asset turnover ratio of Goodyear is generally better.
Particulars MRF Apollo Goodyear Ceat JK Tyre TVS SrichakraMar '14 Mar '14 Mar '14 Mar '14 Mar '14 Mar '14
Earnings Per Share 2,117.09 8.78 43.89 70.58 32.8 61.96Book Value 10,651.94 54.08 214.21 268.97 203.62 265.96
Interpretation:
EPS: EPS figure is very important for actual and potential common stockholders because the increase in the value of stock in future largely depends on the earnings of the company. The higher EPS of MRF is a sign of higher earnings, strong financial position and, therefore, a reliable company to invest money.
Book Value: A company's common stock equity as it appears on a balance sheet, equal to total assets minus liabilities, preferred stock, and intangible assets such as goodwill. This is how much the company would have left over in assets if it went out of business immediately.
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Comparative Analysis of Balance Sheet:
Sources Of FundsTotal Share Capital 0.00% 0.00% 5.02% 0.00% 0.00% 0.00%Equity Share Capital 0.00% 0.00% 5.02% 0.00% 0.00% 0.00%Reserves 23.96% 17.50% 31.37% 13.43% 20.33% 18.47%Networth 23.94% 17.04% 29.53% 14.35% 19.41% 17.46%Secured Loans 10.39% -31.65% 18.50% 1.57% -3.46% 0.00%Unsecured Loans 151.31% -80.93% 55.24% -16.04% 5035.00% 0.00%Total Debt 27.04% -52.37% 24.06% -0.54% 19.18% 0.00%Total Liabilities 24.81% -13.88% 26.69% 3.19% 19.28% 17.46%
Goodyear MRF Apollo Ceat JK Tyre TVS
Interpretation:
There is an increase in the total share capital of Ceat when compared to the previous year. There is no change in the share capital for the other companies.
Ceat has the highest percentage change in the value of reserves indicating more transfer to reserves.
MRF, Ceat, and TVS has an increase in the value of secured and unsecured loans and on the other hand Apollo and JK tyre has reduced the loan amounts through repayment.
Apollo and JK tyre has reduced its debt obligation by 52.37% and 0.54% respectively & on the other hand, MRF, Ceat & TVS tyres has increased its debt obligation.
When the Net worth of the companies are compared, Ceat is the highest with 29.53%.
Goodyear Application Of FundsGross Block 15.58% 9.60% 1.83% 3.75% 22.06% 12.00%Less: Accum. Depreciation 15.71% 18.34% 10.52% 10.20% 19.48% 10.03%Net Block 15.46% 5.94% -1.91% -0.30% 23.68% 14.24%Capital Work in Progress 74.50% -85.95% 204.12% 162.11% -34.04% -46.29%Investments 20.06% 6.33% 178.10% 4.27% -0.10% 0.00%Inventories 0.25% 14.53% 35.16% -5.45% -18.38% 24.61%Sundry Debtors 9.79% -11.93% 12.60% 29.42% 42.88% -32.17%Cash and Bank Balance 113.92% 43.40% 26.56% 87.81% -82.31% 15.30%Total Current Assets 14.49% 12.74% 23.11% 16.95% -0.73% 3.38%Loans and Advances 28.67% 19.83% -15.29% -1.73% -10.09% -0.49%Total CA, Loans & Advances 15.69% 14.06% 16.70% 13.06% -2.31% 3.15%Current Liabilities 7.75% 53.69% -7.11% 18.18% -24.41% -10.60%Provisions 17.67% 49.03% 11.84% -2.77% 93.33% 3.71%Total CL & Provisions 8.82% 53.14% -6.14% 16.49% -13.13% -9.00%Net Current Assets 41.76% -206.85% -4833.57% 1.59% 27.01% 32.32%Total Assets 24.81% -13.88% 26.69% 3.19% 19.29% 17.46%
MRF Apollo Ceat JK Tyre TVS
Interpretation:
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TVS has the highest gross block change of 22.06% indicating capital expenditure for Plant and Machinery.
MRF, Ceat, and JK tyre has increased their production (WIP) and Apollo, TVS and Goodyear has reduced their production when compared to last year.
MRF is maintaining a minimal inventory whereas Apollo, Goodyear, Ceat are having higher inventory, JK tyre and TVS are having a shortage.
TVS’s cash balances has reduced by 82.3% which can be due to purchases or payments. MRF and other companies are maintaining good balances.
The highest in terms of the total assets when compared to all the companies is Ceat Tyres with 26.63%
Observations:Based on the objectives that we set, following are the conclusions:
There must have some significant influences of different brands of tires well as different regions on its sales.
Apollo, JK & CEAT needs to focus on its Inventory Tracking system MRF has to speed up its Order Processing system. Past Experiences & Price are the most important factors play in mind of a customer
before buying a tire followed by Brand Name & After Sales Service.& overall, MRF is the market leader at present followed by Apollo. Robust growth rate in all vehicular segments over last 5 years. Improved capacity utilization by all major manufacturers (>80%) Decrease in custom and excise duties to nullify increase in raw material costs and
increases OPM Low labour cost: partially offset by low productivity. Improved credit profile and loan serviceability.
The Indian tyre industry is expected to show a muted 2 to 3 percent growth in revenues in FY 2014-15 over the current estimate for FY 2013-14. Indications of Industry growth forecasts for the FY 2015-16 looks a bit subdued. The two wheeler industry is expected to grow at the rate of
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5-6%, with the growth of the scooter segment overshadowing the Motorcycle segment. However, the yesteryear sales of vehicles will continue to drive the After Market segment growth and is estimated to be at 10% over 14-15.
Sluggishness in the OEM automotive industry is expected to continue. However, the demand in the domestic replacement market is expected to be comparatively stronger supported by a large vehicle user base that has been accumulated over the last 3-4 years of strong automobile sales.
Raw material prices are expected to be stable thereby assisting operating margins of tyre manufacturers. However, with stable raw material prices and a subdued demand scenario, there might be pricing pressure that can impact operating margins negatively. The Company will continue to focus on profitable product categories, market segments and key international geographies.
Data Sources:http://www.apollotyres.com/uploads/annual-report-for-the-financial-year-2014-15.pdfhttp://www.ceat.com/investorcontent/CEAT%20ANNUAL%20REPORT-2014.pdfhttp://www.jktyre.com/Annual/Annual%20Report%202014-15.pdfhttps://corporate.goodyear.com/documents/annualreports/GT2014_AR.pdfhttp://www.tvstyres.com/pdf/TVS%20Srichakra%20AR%202015.pdfhttp://www.mrftyres.com/financial-resultshttp://www.academia.edu/6270533/Analysis_of_Indian_Tyre_Industry
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