Preliminaries:

 Use short bond paper, margin 1” in all sides, use century gothic 10.5 and 1.15 as
spacing. Use a Cover Page
Format of Case Analysis:
1. Objective of the case analysis
2. Discuss the facts of the case
3. What is the problem identified
4. Give possible solutions to be suggested (at least 2). Discuss.
5. What is the final recommendation?

Note: All should be in a narrative form and not on a bullet type presentation, (you can use
bulleting but not as your main way to present your answer, just a portion of your presentation
can be allowed). You can use charts, graphs, or tables to make your presentation or
discussion more presentable.

Grading System: Majority of the points will be on how you can digest the facts to present what
is the problem especially on working capital management; and on the quality of your
recommendation. Take note that the presentation of your answer will also have a bearing on
your score. Tip: On what the terms used are--- just google it! Goodluck and Merry Christmas!

A Case Study on Working Capital of Bajaj Auto Limited.

Brief Background of the Company

Bajaj Auto Limited Is a flagship of Bajaj Group which is among the top 10 business
houses in India. Bajaj Auto is the world’s third-largest manufacturer of motorcycles and the
second-largest in India. It is the world’s three-wheeler manufacturer.
Bajaj Auto came into existence on November 29, 1945 as M/s Bachraj Trading
Corporation Private Limited. It started of by selling imported two- and three-wheelers in India.
In 1959, it obtained a license to manufacture two-wheelers and three-wheelers and it
became a public limited company in 1960. In 1970, it rolled out its 100,000 th vehicle. In 1977,
it sold 100,000 vehicles in a financial year. In 1985, it started producing at Waluj near
Aurangabad.
It was founded by Jamnalal Bajaj in Rajasthan in the 1930s. It is based in Pune, Mumbai,
with plants in Chakan (Pune), Waluj (near Aurangabad) and Pantnagar in Uttarakhand. The
oldest plant at Akurdi (Pune) now houses the R&D centre ‘Ahead’.
On March 2013, its market capitalization was INR 520 billion (US$9.57 billion), making it
India’s 23rd largest publicly traded company by market value. With the launch of motorcycles
in 1986, the company has changed its image from a scooter manufacturer to a two-wheeler
manufacturer.
According to the authors of Globality: Competing with Everyone from Everywhere for
Everything, Bajaj has operations in 50 countries by creating a line of bikes targeted to the
preferences of entry-level buyers.
Bajaj Auto Ltd., incorporated in the year 2007, is a Large Cap company (having a
market cap of Rs 58,491.2 Cr.) operating auto sector.
Bajaj Auto Ltd. Key Products/ Revenue Segment include Automobile- Vehicles which
contributed Rs 18800.53 Cr to Sales Value (88.85% of Total Sales), Auto Spare Parts (Trading)
which contributed Rs 355.94 Cr to Sales Value (1.58% of Total Sales), Auto Spare Parts which
contributed Rs 241.97 Cr to Sales Value (0.25% of Total Sales), Royalty income which
contributed Rs 24.57 Cr to Sales Value (0.11% of Total Sales), Other Operating Revenue which
contributed Rs 0.52 to Sales Value (0.00% of Total Sales), for the year ended March 31, 2014.
 For the quarter ended December 31. 2014, the company has reported a Standalone
Sales of Rs. 5520.01 Cr., down -5.27% from last quarter Sales of Rs. 5826.85 Cr. And up 9.86%
from last year same quarter Sales of Rs. 5024..76 Cr. Company has reported net profit after
tax of Rs. 861.24 Cr. In latest quarter.
Bajaj Auto with its strong brand image and other competency features maintained
dominant position in India. Year on year the company increased production size and
attained economies of scale.

Working Capital
Working Capital of Bajaj Auto Ltd. in March of each year is given below:
Current Assets 2010 2011 2012 2013 2014
Inventories 446.21 547.28 678.53 636.28 639.72
Accounts Receivable 272.84 362.76 423.20 767.58 796.21
Cash and Cash Equivalents 100.20 155.45 446.49 558.86 495.48
Loans and Advances 2,291.29 3,891.66 1,744.82 1,987.44 2,116.46
Other Current Assets 1.21 401.04 1,208.36 - -
Total Current Assets 3,111.75 5,358.19 4,501.40 3,950.16 4,047.87
Current Liabilities 2,218.06 2,624.35 2,925.53 2,762.93 3,108.15
Contingent Provisions 2,248.72 3,925.72 2,174.89 1,742.47 1,973.69
Total Current Liabilities 4,466.78 6,550.07 5,100.42 4,505.40 5,081.84
Net Current Assets (1,355.03) (1,191.88) (599.02) (555.24) (1,033.97)

On observing the working capital of Bajaj Auto Ltd. From March 2010-2014 it is evident that
company had negative working capital throughout the period which means their current
liabilities are more than their current assets. A large amount has been kept as provisions such
as provision for gratuity, welfare schemes, warranties, taxes and proposed dividends etc.
 Current liabilities include dues to micro and small enterprises, current maturities of long
term borrowing, annuity payable to employees opted for VRS, advance received
from customers, unclaimed dividends, employees benefits and taxes.
 Credit period for 45 days is extended by suppliers or vendors mand payments.
 Company makes long term and short term investments in bonds, debentures, units of
mutual funds, commercial papers and certificate of deposits
 Inventories include raw material, work in progress and finished goods.

Ratios 2010 2011 2012 2013 2014

Current Ratio 0.69 0.80 0.88 0.88 0.80
Quick Ratio 0.55 0.71 0.71 0.74 0.67
Inventory Turnover Ratio 28.87 32.80 30.97 31.43 31.50
Receivable days 37.40 51.77 49.66 33.59 25.31
Debtors Turnover Ratio 9.01 6.31 6.98 10.28 13.49
Inventory days 11.82 10.46 10.93 11.36 11.01