CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION
Today India is in the midst of rapid economic growth. Governments continued emphasis on building infrastructure has given a tremendous fillip to the development of road infrastructure and transport. Obviously, the numbers of vehicles on road have a marked increase. As direct fallout of this scenario the tyre industry has had the good fortune of receiving increased orders from Original Equipment Manufactures (OEM) and replacement markets alike. The key milestone in the history of tyres was the invention of the wheel by Sumerians 500 years ago and it has been refined over ages. Centuries back pieces of rubber placed at four corners of the vehicles were used as tyres. The earliest tyres were bands of iron (latter steel), placed on wooden wheels, used on carts and wagons. The tyre would heated in a forge fire, placed over the wheel and quenched, causing the metal to contract and fit tightly on the wheel, but the whole scenario started changing when Charles Goodyear invented vulcanized rubber in 1844 which was later used for the tyres. The practical tyre was made by the Scot. John Boyd Dunlop; in 1887 Pneumatic tyres are made of a flexible Elastomer material, such as rubber, with reinforcing materials such as fabric and wire. Tyre companies were first started in the early 20 th century, and grew in tandem with the auto industry. Today, over 1 billion tyres are produced annually, in over 400 tyres factories with the three top tyre makers commanding a 60% global market share. The Indian Tyre Industry is an integral part of the Auto Sector and its fortunes are interdependent on those of the Automobile players. For the year 2010-11 the industry has clocked a turnover of almost Rs. 30,000 Cr. of which 90-95% has come from the

domestic market. While there are around 40 tyre manufacturers in India, the top 10 tyre players account for around 90-95% of the total tyre production in India. Indian tyre manufacturing companies are re-engineering their business and looking at strategic tieups world wide. The future is expected to see many strategic alliances among the domestic and global players. They include the OEM segment with vehicle manufacturers looking for fresh tie-ups or strengthening of existing partnerships. The tyre industry has evolved from the more basic cross ply products to the more sophisticated radial tyres. Radial tyres have shown significant increase in usage every year. Most of the automobile segments have shifted to radial tyres and the usage of cross-ply is restricted to trucks and buses only. APOLLO TYRES LIMITED Apollo Tyres Ltd is one of the largest tyre manufacturing companies across the world. The company started its production of tyres way back in the year 1977. It holds 2nd position in India and 14th position in the world. The company currently has 9 plants in India, South Africa and Zimbabwe. Apollo Tyres exports its products to Africa, the Middle East, South America, Asia-Pacific and Europe. ATL became the first Indian tyre company to complete a foreign acquisition in April 2006 when it bought 100% stake in Dunlop Tyres International (Pty) Ltd (Dunlop South Africa) in an all-cash deal for about Rs 2.9 b illion (US$62 million). The Apollo Tyres Ltd
(ATL) range comprises tyres for Trucks, Light Trucks, Passenger Cars, Farm vehicles and Jeeps. Apollo has also successfully forayed into Tyre Plus products like its Alloy Wheels range called Wheels and Retreading material called Dura Treads in a bid to become a total tyre solution provider to its customers. ATL is an OEM supplier to vehicle manufacturers such as Tata Motors, Mahindra and Mahindra, Maruti, Ashok Leyland, TAFE, Eicher, Punjab Tractors and others. Its products are also sold to institutional buyers like State transport undertakings and government agencies. The company runs four manufacturing operations across the country - Perambra, Vadodara and Ranjangaon near Pune, besides the Kalamassery plant of PTL Enterprise Ltd (formerly Premier

Tyres). Dunlops acquisition has enlarged Apollos manufacturing capacities to include facilities in Durban and Ladysmith in South Africa and Bulawayo and Harare in Zimbabwe.

Working Capital Management is significant in financial management due to the fact that it plays a vital role in keeping the wheel of the business running. Every business requires capital, without which it cannot be promoted. It holds exceptional importance in the case of a manufacturing company. It also covers various concepts like inventory management, cash management, credit policy etc. This study is undertaken to find out the efficiency and effectiveness of the working capital management in the company and to provide useful feedbacks.

1.2 Statement of the problem

A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, Current Assets and Current Liabilities, in respect to each other are referred to as Working Capital Management. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. The two main aspects of working capital management are ratio analysis and management of individual components of working capital. Ratio analysis will lead management to identify areas of focus such as inventory management, cash management, accounts receivable and payable management. The term working capital refers to the amount of capital which is readily available to an Organization. It is a measure of both a company's efficiency and its short-term financial health. That is, working capital is the difference between resources in cash or readily

convertible into cash (Current Assets) and organizational commitments for which cash will soon be required (Current Liabilities). Current Assets are resources which are in cash or will soon be converted into cash in the ordinary course of business. Current Liabilities are commitments which will soon require cash settlement in the ordinary course of business. This study mainly addresses on the working capital management of the company and also analyses the efficiency of the working capital of firm. The study tries to compare the working capital management in Apollo Tyres and other competitors like MRF Tyres and JK Tyres in Indian market to know the efficiency and shortcomings of the system. The study in depth looks into the various working capital ratios maintained by the firm, the overall financial performance of the company and also the Sources of funds for operation. Ratio analysis is the most commonly used technique which practically deals with cash and every aspects of the working capital analysis. The ratios can facilitate comparison, interpretation of each every aspects of the working capital analysis.

1.3 Objectives
1. To determine the amount of working capital requirement and to calculate various ratios relating to working capital. 2. To make an item wise study of the components of the working capital. 3. To make an overall study on the financial position and the firms efficiency in maintain funds and working capital performance. 4. To give recommendations and suggestions based on the analysis results.

1.4 Methodology
This study assesses the overall working capital management of the company taking into account the financial data for the accounting period of last 5 years. Various secondary sources like annual report of the company, journals, theoretical texts, publications in the web, etc. will be utilized to undertake the study. The study is performed majorly with the help of ratio analysis.

1.5 Chapterisation schema

The study will be presented in the following chapterisation schema. 1. Introduction: This chapter deals with the Introduction, Statement of the problem, Objectives of the study, Methodology, Chapterisation and Limitations. 2. Literature Review: This chapter gives a broad and descriptive outline of the different studies conducted by experts / other scholars on this topic. 3. Profile of the Industry: This chapter describes the Evolution, Features, Prospects and SWOT Analysis of the tyre manufacturing and marketing industry. 4. Profile of the Organization: This chapter gives a brief history of the organization, its Mandate/Aims/Objectives, Departmental Profile, Review of Present Performance/ Product performance analysis, and a SWOT Analysis 5. Analysis and Interpretation: This chapter concentrates on the analysis of collected data from various sources. 6. Findings, Conclusions and Suggestions: This chapter deals with the outcomes of the analysis carried out and concludes the project with the suggestions and recommendations.

1.6 Limitations
a) The study is based on secondary data drawn from the secondary sources connected to the topic. So errors are possible. b) The study only covers the accounting period of preceding five years and current year was excluded on account of non availability of data. So the current position of the firm was not taken into consideration. c) Due to the busy working hours interaction with the most of the company officials will not be possible. d) Certain confidential information regarding the organization will not available, and the analysis and interpretations of the data were subject to that limitation. e) Details regarding other firms are not reliable as there is no direct contact. Because limited data is only available through sites.