A case study on

Scooter India limited

PRESENTED TO : Prof. Harsha Jariwala V.M.P.I.MG.N.UKHERVA .

PRESENTED BY :1.Riyaz 2.Vishal3.Mukesh4.Savan

Content

History of company

Scooter India was est. by GOI in 1972, as a PSU.

SIL is the joint agreement between GOI and automobile product of India ltd (API) innocenti.

The case is around 1986 ,company was incurring huge losses from its beginning.

Table 1GOI have two following alternatives :

Item Plant with entirely new equipment offered by PIAGGIO

Plant offered by Innocenti

1.Total fixed assets RS.15.91 cr RS.10.90 cr

2.Foreign exchange elements

6.56 2.90

3.Working capital requirement

5.00 5.00

4.Production cost /scooter

RS.2022 RS.1989

5.ex-factory price at assume level 12.5% gross return on total fixed investment

RS.2321 Rs.2235

Proposal for the 3 wheeler

In jan. 1973 proposal made by innocenti for sale of world right for three wheeler .

SIL approached GOI for the same .

OPPORTUNITY IN PROPOSAL:1.Light transport vehicle with load of 600 kgms. 2.Greater export potential in developed country 3.Reduction in production cost by integrating two

and three wheeler production 4.Attractive price of technical documentation and

equipment .5.More intensive use of plant and equipment

available for the two wheeler production .6.The additional investment of RS.47 Lakhs would

result in plant being able to add a product line valued at RS.16.5 crores and additional profit of RS 1.5 crore /annum

This proposal was agreed by GOI subject to some owned condition .

1. Factor responsible for company's poor performance The SIL making losses ever since its inception .By examined P&L account it showes RS

6604.77 crore .

The major factor for same are as follows :1.Low production rate2.Transparency in dealing - dealing with innocenti - dealing with API for DPR

Financial analysis

debt/equity ratio analysis

0

20

40

60

80

100

120

140

1979-80

1980-81

1981-82

1982-83

1983-84

1984-85

year

deb

t/eq

uit

y

debt/equity

3. Debt/Equity ratio

Cont…..From exhibit 4 we can see that debt is increasing

in respect of equity.Equity remain same for all the year. It is 50 lakhs.Major reason in increase is losses incured by the

company.Because of losses company can not pay aloan

taken from financial institute rather they have to go for funding by borrowing.

So debt/equity ratio increasing every year,so company reputation decreases so funding from equity is not possible.

4. Profitability ratioCompany continuously witnessed losses from

1980-85.

profitability ratio

-2000

-1000

0

1000

2000

3000

4000

5000

year

rs i

n l

akh

s

year

expences

loss

profitAction plan