Jaypee Business School

A constituent of Jaypee Institute of Information Technology University A-10, Sector 62, Noida (UP) India 201 307 www.jbs.ac.in

PROJECT
ON

PCR (passenger car radial) (JK tyres and industries ltd.)

Corporate Internship Report

Internship Report submitted as a partial requirement for the award of the two year Master of Business Administration Programme MBA 2010-12 Name: PRASHANT AGRAWAL Enrollment no. 10609039 Corporate Internship Supervisor Name: Mr. MANISH GANGRADE (AREA MANAGER ) Contact details: +91-9321617045 Mailing Address: Manish@jkmail.com JBS-Faculty Supervisor: Dr. Naseem Abidi Start Date for Internship: 9th May 2011 End Date for Internship: 24th June 2011

JK TYRES

Self Certification by the Intern

I hereby certify that I, PRASHANT AGRAWAL have successfully completed my internship with JK TYRES AND INDUSTRIES LTD. in the month of JUNE, 2011 from 9th may to 24th June. This is also to certify that this report is an original product and no unfair means like copying etc have been used for its completion.

Name: PRASHANT AGRAWAL Signature: Date:

JK TYRES

JK TYRES

ACKNOWLEDGEMENT

Behind every fruitful endeavor lie the advice, guidance and inspiration of all people directly or indirectly involved with the report. I wish to express my gratitude to all the people involved in the completion of the report. They have been a constant of support for me. I would also like to thanks JK tyre and industries limited who accepted me in spite of my inexperience in the field and gave me the opportunity to work with them.

The feeling of esteem and euphoria on the completion of this Summer Internship Project will be worthless without thanking for the immense help and guidance received from MR. MANISH GANGRADE ( Area manager Nagpur office), I am indeed very thankful to him, for there unending support right from the inception of this work. They continuously spared their precious time and provided me right guidance at every stage. I sincerely thank them for providing me with guidance, support and encouragement which has enabled me to complete the project successfully. I would also like to express my gratitude towards my faculty supervisor Dr. Naseem Abidi for giving me directions and guidance at the time when most needed and for helping me during my internship.

I would also like to thank all the faculty members of Jaypee Business School, for their full support in making the project enriching and informative and providing requisite facility in due course of the internship. Their constructive criticism of approach to the problem and the result obtained during the course of this work has helped me to a great extent in bringing work to its present shape.

PRASHANT AGRAWAL (10609039)

JK TYRES

TABLE OF CONTENTS

1. Executive summary 2. Introduction 3. Company Profile 4. Industry analysis 5. Financial Analysis 6. Project report 7. Suggestions and Conclusions 8. Key Learning 9. Annexure 10. References

6 7 8 11 25 36 51 55 56 63

JK TYRES

EXECUTIVE SUMMARY
In todays business world it is very important to have the information about the positive and negative points of the competitors of that particular industry. By use this information company can make and execute the further planning and strategies. It is also important to know why and what customers prefer so that we can plan for the next step to meet their expectations. This project is in concern with the impact of the foreign players in the domestic market like Bridgestone, Michelin and Goodyear. This report is the part of the MBA programme and report has been prepared from 8th of June to 21st of July 2011. TITLE Analysis of the market share of foreign tyre manufacturers in passenger tyre segment and why they are leading in domestic market

JK TYRES

INTRODUCTION AND OBJECTIVE

This project is all about the study of the market of passenger tyre segment of the Indian tyre industry. This report tells about the market share of the different tyre manufacturers in this segment and also focuses on the main reason behind why the most of the market prefers foreign manufacturers tyres. This report helps us to know the facts that why are we lagging in this segment even after providing the wide range of passenger tyres . JK tyres is one of the leading brand in tyres for T&B segment and LCV etc. OBJECTIVES. To know the size of the PCR segment of Indian tyre industry. To know the market share of the different tyre manufacturers. To know the customer preferences of PCRs. To know the overall market share of the foreign manufacturers of tyres in PCRs. To find out the reason why foreign manufacturers has a big market share in PCR segment.

JK TYRES

COMPANY PROFILE
JK Tyre & Industries Ltd is one of the leading automotive tyre manufacturers in India. The company is engaged in manufacturing of automobile tyres, tubes and flaps. They manufactures Radial and Bias 4-wheeler tyres for trucks, buses passenger cars, LCVs, tractors etc. They sell their products under the brand name 'JK Tyre'. They have four plants located in Rajasthan, Madhya Pradesh and Karnataka. The company has 134 sales, service and stock points located throughout the country. They have over 3,500 dealerships across India. The company's customer base covers virtually the entire Original Equipment Manufacturers in India together with Replacement Market for four wheeler vehicles, Defence and State Transport Units. Besides India, they have a worldwide customer base in over 45 countries across all six continents. JK Tyre & Industries Ltd was incorporated in the year 1951 as a private limited under the name JK Industries Pvt Ltd. Until March 31, 1970, the company was engaged in the managing agency business. Thereafter the company decided to undertake manufacturing activities and obtained a letter of intent in February 1972 for the manufacture of automobile tyres and tubes. The company name was changed into JK Industries LTD with effect from May 24, 1974 consequent upon conversion of the company into a public limited company. In the year 1974, the company entered into a technical collaboration with General Tire International Co, USA, a subsidiary of General Tire & Rubber Co, USA for technical services and sales agreement for the supply of technical knowhow engineering and documentation for operational facilities. In the year 1989, the company introduced several new patterns and sizes of tyres including a semi-lug Nylon Truck tyre. In the year 1991, the company set up Banmore Tyre Plant with a capacity of 5.7 lakh tyres per annum. They launched radial tyres for tractors. In the

JK TYRES

year 1992, the company's international division expanded their activities by opening their office in Moscow. In addition, they set up a Research and Development center at HASETRI. In the year 1993, they introduced new radial tyres namely, Brute and Ultima and in the next year, they launched 'Jet Track-39' to meet the need of the heavy load market. In June 1997, the company acquired 51% stake in Vikrant Tyres Ltd from Karnataka Government. They launched India's first H-Rated tyre. During the year 1998-99, as per the Scheme of Arrangement between the company and JK Drugs & Pharmaceuticals Ltd, the pharmaceutical undertaking of the company was transferred to and vested in JK Drugs & Pharmaceuticals Ltd with effect from appointed date July 1, 1996. During the year 2002-03, as per the Scheme of Arrangement and Amalgamation between the company, JK Agri, JK Sugar and Vikrant Tyres Ltd, the agri-genetics undertaking of the company was transferred to JK Agri, the sugar undertaking was transferred to JK Sugar and Vikrant Tyre Ltd was amalgamated with the company. During the year 2004-05, the expansion of capacity of Truck/ Bus Radials by 50% was completed. In addition, the expansion of the passenger radial capacity was completed. In December 2006, as per the Scheme of Arrangement and De-merger between the company and Netflier Technologies Ltd (name since changed to Netflier Finco Ltd), the business of holding and dealing in investments and some other assets and properties of the company and liabilities and obligations thereof stood transferred to and vested in Netflier Finco Ltd. In addition, Hansdeep Investment Ltd, Hidrive Finance Ltd, Panchanan Investment Ltd and Radial Finance Ltd ceased to be the subsidiaries of the company. During the year 2006-07, the company introduced a new tyre, offering high mileage 'Jet One' and launched new Semi-Lug and Rib pattern Truck Radial tyres. They also diversified into Special Application Tyres and commenced

JK TYRES

their exports. In order to capture the brand 'JK Tyre' and their value in the name of the company, they changed their name to JK Tyre & Industries Ltd with effect from April 2, 2007. The company entered into an arrangement with BEML for supply of OTR tyres on a long-term basis. In June 2008, the company acquired the controlling interest in Empresas Tornel, S A de C V (Tornel), a company incorporated under the laws of Mexico, by acquiring 100% of their equity capital for a consideration of USD 28.75 million. Tornel has three tyre manufacturing plants in Mexico with a combined capacity of 6.6 million tyres per annum During the year 2008-09, the company doubled the capacity of Truck/Bus Radial plant to 8.00 lakh tyres from 3.67 lakh tyres per annum at an estimated project cost of Rs. 315 crore. This has further strengthened JK Tyre's commanding position in the fast growing Truck/Bus segment.

10

JK TYRES

1.INDUSTRY ANALYSIS

11

JK TYRES

INDIAN TYRE INDUSTRY

Background Tyres and tubes, the strategic rubber products and basic supplements to the automotive vehicles are of utmost importance to the country's economy. The tyre industry sector is providing direct employment to more than 50,000 people and indirect employment to lakhs of people. This industry sector is now being considered as a core industry sector.

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.

Transportation industry and tyre industry go hand in hand as the two are interdependent. Transportation industry has experienced 10% growth rate year after year with an absolute level of 870 billion ton freight. With an extensive road network of 3.2 million km, road accounts for over 85% of all freight movement in India. Technology generation in the Indian tyre industry has witnessed a fair amount of expertise and versatility to absorb, adapt and modify international technology to suit Indian conditions. This is reflected in the swift technology progression from cotton (reinforcement) carcass to highperformance radial tyres in a span of four decades. Globalization has led to the linking of the economies of all the nations and therefore major Indian players in the tyre industry are pursuing global strategies to enhance their competitiveness in world markets. The present section broadly
12 JK TYRES

undertakes an overview of the Indian tyre industry through an examination of its growth trends with respect to production, exports and acquisition of technological capabilities.

Key Features

At present there are more than 40 listed companies in the tyre sector in India. Major players are MRF, JK Tyres, and Apollo Tyres & CEAT, which account for 63 per cent of the organized tyre market. The other key players include Modi Rubber, Kesoram Industriesand Goodyear India, with 11 per cent, 7 per cent and 6 per cent share respectively. Dunlop , Falcon, Tyre Corporation of India Limited (TCIL), TVSSrichakra, Metro Tyres and Balkrishna Tyres are some of the other significant players in the industry.

While the tyre industry is largely dominated by the organized sector, the unorganized sector is predominant with respect to bicycle tyres.\

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. Interestingly, world-wide, the proportion of natural to synthetic rubber in tyres is 30:70.

The sector is raw-material intensive, with raw material accounting for 70% of the total costs of production

Current level of radialization includes 95% for all passenger car tyres, 12% for light commercial vehicles and 3% for heavy vehicles (truck and bus)

13

JK TYRES

Restrictions were placed on import of used /retreaded tyres since April 2006 Import of new tyres & tubes is freely allowed, except for radial tyres in the truck/bus segment which has been placed in the restricted list since November 2008

The major factors affecting the demand for tyres include the level of industrial activity, availability and cost of credit, transportation volumes and network of roads, execution of vehicle loading rules, radialization, retreading and exports. PORTERS FIVE FORCES

Entry Barriers: High The entry barriers are high for the tyre industry. It is a highly capital intensive industry. A plant with an annual capacity of 1.5 million cross-ply tyres costs between Rs.4,000 and Rs. 5,000 million. A similar plant producing radial tyres costs Rs. 8,000 million.

14

JK TYRES

Bargaining Power of the Buyers: High The OEMs have total control over prices. In fact, the OEMs faced with declining profitability have also reduced the number of component suppliers to make the supply chain more efficient. Inter Firm Rivalry: Low The tyre industry in India is fairly concentrated, with the top eight companies accounting for more than 80% of the total production of tyres. Threat of Substitutes: Low but Increasing, Over 1,10,000 passenger car tyres were imported. This constitutes over 2% of total radial passenger car tyre production in the country. However, with the reduction of peak custom duty, the import of tyres is likely to increase. Bargaining Power of the Suppliers: High The tyre industry consumes nearly 50% of the natural rubber produced in the country. The price of natural rubber is controlled by Rubber Control Board and the domestic prices of natural rubber have registered significant increase in recent times.

15

JK TYRES

Evolutionary Phases of Tyre manufacturing in India

Table 1: Evolutionary phases of the Tyre industry in India Phase Period Characteristics No domestic production. Demand met through imports. Key players included Dunlop (U.K), Firestone & Goodyear (USA) Domestic production begins by erstwhile trading companies: Dunlop, Firestone, Goodyear and India Tyre & Rubber Company Policy Regime

(incepti on) 1920-35 Phase I (develo pment) 1936-60 Phase II

Liberal imports

Imposition of tariff & nontariff barriers on imports

(restric tion) 1961-74 .Phase III

Indian companies-MRF, Premier & Incheck- enter manufacturing sector with foreign technology; licensing of additional production capacity

Regulation on capacity expansion and repatriation of profits of foreign companies; enforcement of export obligation on MNC; protection from external competition

.Phase IV

1975-91

Entry of large Indian business houses like Singhania & Modi & technical collaborations with MNCs, introduction of radial tyres, vertical integration and exponential growth in tyre production & exports External trade liberalization & reduction in import duty; re-entry of MNCs either independently or in collaboration with Indian capital

Delicensing of production, placing of imports under OGL with tariff & nontariff barriers

(moder nizatio n) Phase V

1992 onwards

Progressive reduction in import duty; liberalized imports

16

JK TYRES

1.1 INDUSTRY SIZE AND TRENDS OF GROWTH

Financial Year 2010-2011 (Est.) Turnover of Indian Tyre Industry Tyre Production (Tonnage) Tyre Production All Categories (Nos.) Tyre Export from India (Value) : Number of tyre companies: Industry Concentration Radialisation Level - Current (as a % of total tyre production) Rs. 25,000 Crores 13.50 lakh M.T. 971 Lakh Rs. 3625 crores 36 10 Large tyre companies account for over 95% of total tyre production. Passenger Car tyres: 98% Light Commercial Vehicles: 18% Heavy Vehicles ( Truck & Bus ): 12%

ICRA estimates the total installed domestic tyre capacity to increase by more than 47% from 122 million tyres in 2009-10 to around 180 million tyres by 2012-13 In line with demand trends, the TBR segment is expected .to attract the highest share of investments (over 50%) over the next three years followed by the PCR segment. Given the strong demand expectations from the domestic auto industry and the possibility of some delays in project implementation, we expect utilisation levels to remain high over the medium term, especially in the TBR segment. This incremental domestic capacity is, however, expected to reduce imports, especially in the TBR segments, over the medium-to-long term. However, coupled with the expected margin pressure from raw material inflation, these expansion projects are likely to result in depressed cash flows, higher leverage and subdued RoCE over the next few years.

17

JK TYRES

With over 39 tyre manufacturers and 60 manufacturing plants, the Indian tyre industry enjoyed a turnover of about Rs. 25,000 Crores in 2009-10. India has the technical capability to manufacture the entire gamut of tyres for catering to its domestic requirements but still imports about Rs. 1,430 crores worth of tyres, largely low cost passenger car tyres and T&B tyres from China due to capacity constraints and cost advantage. India also exports Rs. 3,000 crore of tyres, largely CV tyres, to over 60 countries. The ten largest tyre companies (MRF India Limited, Apollo Tyres Limited, JK Tyre & Industries Limited, CEAT Limited, Balakrishnan Industries Limited, Goodyear India Limited, TVS Srichakra Limited, Falcon Tyres Limited, Kesoram Industries Limited (Birla Tyres)) in India, account for over 85-90% of the industry by value. MRF India Limited (MRF) is the largest tyre manufacturer in India with a market share (value) of about 3032%, followed by Apollo with about 20-22% and JK tyres with about 15-16%.

18

JK TYRES

Major Tyre Projects Completed/Scheduled for Completion during 2010-2011

Comp.

Project

Product

Capacit y 26.7 7.0 50 40 1.7 200 6000 8000 60 5 85 80 4 25 2 25 2 400 6000

Unit

MRF CEAT

APOOLO FALCON KEZORAM

JK

BRIDGESTON E

Medak trichy vadodara Vadodara Nasik Ambeanat h orangadam orangadam Mysore Uttranchal Haridwar Balasore Haridwar Tamil nadu Tamilnadu Tamilnadu Tamilnadu Karnataka Pithampur pithampur pune pune Bhuj guwahatii Chennai

Pcr+2w PCR PCR+UV TBR TBR SPECIALIT Y TYRES TBR PCR 2W 2W/3W TBR PCR TYRES TBR PH-1 PCR PH-1 TBR PH-2 PCR PH-2 TBR TBR RADIAL TYRE TBR PCR SPEC. OTR TBR

Lac/annum Lac/annum Tons/day Tons/day Lac/annum Tons/day No/day No/day Lac/annum Lac/annum Tons/day Tons/day Lac/annum Lac/annum Lac/annum Lac/annum Lac/annum No/day No/day

Investme nt (in crore) 472 900 600

Expecte d comp. dt Sep11 Jan11 Oct10 Oct10 Dec12 Apr11 Dec10 Jul11 May12 Sep11 Sep11 Mar13 Mar12

140 2300 300 570 350 450 1000 1000

500 315 180 260 2600

Mar13 Jan11 Dec10 Mar11 Jun13 Aug13 Dec11 Dec12 Dec11

BALKRSIHNA DUNLOP MICHELIN

110000 50

Tons/annu m Tons/day

1200 450 4000

19

JK TYRES

Growth of Indian tyre industry

CATEGORY Truck & Bus Passenger Car Jeep Light Comml. Veh. (L.C.V.) Tractor Front Tractor Rear Tractor Trailer A.D.V. Scooter Motor Cycle Moped Industrial O.T.R. Aero TOTAL

2003 - 04 10821 9959 1440 3271 1148 842 415 295 9274 16688 168 295 74 0 54690

2004 - 05 11092 11862 1462 3945 1311 1096 408 197 9992 18127 124 377 89 0 60082

2005 - 06 11941 13605 1272 4529 1383 1134 596 325 9519 21053 55 514 106 0 66032

2006 - 07 12367 14264 1368 4820 1754 1296 823 381 9643 26079 0* 635 115 0 73545

2007 - 08 13137 16437 1467 5320 1814 1234 886 409 11604 27921 0* 733 141 0 81103

2008 09 12839 16571 1469 5298 1842 1315 758 281 10882 30148 0 568 136 0 82107

2009 - 10 14811 20047 1402 5739 2386 1634 903 294 13558 35664 0 538 161 0 97137

(Production in india in 000 no.s)

The Indian Tyre industry is expected to show a healthy growth rate of 9-10% over the next five years, according to a study by Credit Analysis and Research Limited (CARE). While the truck and bus tyres are set to register a compounded annual growth rate (CAGR) of 8%, the light commercial vehicles (LCV) segment is expected to show a CAGR of about 14 %.

20

JK TYRES

MAJOR PLAYERS IN INDIAN TYRE INDUSTRY-

21

JK TYRES

1.2 Competitive analysis of major players of Indian tyre industry

market share
2%

19%

19% JK 19% apollo 27% ceat13% MRF 19%

19% 27%

birla 19% others 2%

13%

1.3 POSITION OF THE COMPANY

In terms of sales JK stood at the second position after Apollo with 19% of total market share of Indian tyre industry.

22

JK TYRES

Percentage share of the various companies in different tyre segments by production

comp Apollo Birla Bridgestone Ceat Falcon Goodyear Jk Metro modi Mrf tvs others

T&b 21 18 0 13 0 0 22 0 4 21 0 1

Pass. 24 1 19 2 0 13 14 0 0 24 0 3

lcv 23 8 0 13 0 0 18 0 0 27 0 11

Tractor rear 16 8 0 7 1 35 7 0 0 25 0 1

Tractor front 10 6 0 8 4 22 6 0 0 26 0 17

Tractor trailor 7 0 0 9 0 0 5 0 0 8 0 71

otr 1 6 0 25 0 4 28 0 0 27 0 9

2w/3w 0 0 0 9 14 0 0 2 0 29 22 23

Motor cycle 0 7 0 8 19 0 0 2 0 27 24 13

JK stood at the 3rd position after MRF and Apollo.

1.4 Corporate : Vision & Mission

VISION To be amongst the most admired companies in India, committed to excellence MISSION

Be a Customer Obsessed Company - Customer First 24x7 No.1 Tyre Brand in India Most profitable Tyre Company in India Motivated and Committed team for excellence in performance Be a Green Company Deliver Enhanced Value to all stakeholders Enhance global presence through Acquisition / JV / Strategic Partnerships

23

JK TYRES

1.5 portfolio analysis-

Indulge in the business of tyre manufacturing.

Indulge in the business of paper manufacturing.

Indulge in the business of cement manufacturing.

Indulge in the business of sugar manufacturing.

Indulge in the business of insurance manufacturing.

24

JK TYRES

2. FINANCIAL ANALYSIS

25

JK TYRES

RATIOS

The following Liquidity ratios, Activity ratios and Profitability ratios are explained under

1. Liquidity ratios a. Current ratio b. Quick ratio c. Inventory turnover ratio

2. Profitability ratios a. Net Profit Margin b. Gross Profit Margin c. Return on long term funds

3. Coverage & Leverage ratios d. Debt to Equity e. Owners fund as % of total source f. Fixed asset turnover ratio

26

JK TYRES

2.2.1 Liquidity ratioLiquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. We will be here seeing three of the liquidity ratios for the company and analyzing them. Current Ratio

Current ratio is a financial ratio that measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12 months) by comparing firm's current assets to its current liabilities. Current ratio = current assets / current liability 2010 JK APOLLO 0.98 1.10 2009 1.18 1.30 2008 1.16 1.28

If current ratio is bellow 1 (current liabilities exceed current assets), then the company may have problems paying its bills on time. However, low values do not indicate a critical problem but should concern the management
2 1.5 1 0.5 0 2010 2009 2008 apollo jk tyres

As we can see that JKs current ratio is below 1 at 2010 it means they dont have enough current assets to meet its current liability. On the other hand Apollo performed well at every year having the current ratio above 1.

27

JK TYRES

Quick Ratio

The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The quick ratio is defined as follows: Quick Ratio is an indicator of company's short-term liquidity. It measures the ability to use its quick assets (cash and cash equivalents, marketable securities and accounts receivable) to pay its current liabilities. Quick ratio formula is: Quick ratio = {current assets (inventories- prepaid expenses)} / current liabilities 2010 JK TYRES APOLLO 0.60 0.74 2009 0.72 0.91 2008 0.61 0.82

1 0.8 0.6 0.4 0.2 0 2010 2009 2008 APOLLO JK TYRES

Both the companies are not performing well in the case of quick ratio because it should be in the ratio of 1:1. . A quick ratio higher than 1:1 indicates that the business can meet its current financial obligations with the available quick funds on hand, a quick ratio lower than 1:1 may indicate that the company relies too much on inventory or other assets to pay its short-term liabilities.

28

JK TYRES

Inventory turnover ratio- A ratio showing how many times a company's inventory is sold and replaced over a period. Formula for inventory turnover ratio isCost of goods sold/avg. inventory 2010 JK tyres Apollo 9.11 10.47 2009 14.03 11.77 2008 6.53 8.72

15 10 JK tyres 5 0 2010 2009 2008 Apollo

This ratio should be compared against industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.

Profitability Ratios

These ratios, much like the operational performance ratios, give users a good understanding of how well the company utilized its resources in generating profit and value. The long-term profitability of a company is vital for both the survivability of the

29

JK TYRES

company as well as the benefit received by shareholders. It is these ratios that can give insight into the all important profit. Net Profit Margin Often referred to simply as a company's profit margin, the so-called bottom line is the most often mentioned when discussing a company's profitability? While undeniably an important number, investors can easily see from a complete profit margin analysis that there are several income and expense operating elements in an income statement that determine a net profit margin. It behooves investors to take a comprehensive look at a company's profit margins on a systematic basis.

Net profit ratio = (net profit / net sales) * 100

2010 JK tyres Apollo 4.42% 8.19%

2009 0.38% 2.63%

2008 2.37% 5.89%

10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2010 2009 2008 JK tyres Apollo

Net profit margin measure how much profit company is earning in relation to its sales, above graph shows Apollo profit is increasing higher rate year on year bases in comparison with JK tyres.
30 JK TYRES

Gross Profit Margin

By subtracting selling, general and administrative (SG&A), or operating, expenses from a company's gross profit number, we get operating income. Management has much more control over operating expenses than its cost of sales outlays. Thus, investors need to scrutinize the operating profit margin carefully. Positive and negative trends in this ratio are, for the most part, directly attributable to management decisions. A company's operating income figure is often the preferred metric (deemed to be more reliable) of investment analysts, versus its net income figure, for making inter-company comparisons and financial projections. Gross profit margin = (Gross profit / net sales) * 100 2010 JK tyres Apollo 10.14% 13.76% 2009 4.72% 6.31% 2008 6.58% 10.85%

15.00% 10.00% JK tyres 5.00% 0.00% 2010 2009 2008 apollo

Gross profit margins are fluctuating due to the change in the selling prize and the cost. It also affected because of wrong evaluation of stocks.

31

JK TYRES

Return on long term funds- It tells about the return of the company on the total capital employed or long term funds. Having a high return shows that company is operating in a good condition. 2010 JK tyres Apollo 30.48% 26.75% 2009 21.94% 13.95% 2008 18.55% 29.74%

40.00% 30.00% 20.00% 10.00% 0.00% 2010 2009 2008 JK tyres Apollo

We can see that for this ratio JK is performing well as compared to the Apollo. It means that the JK is operating in a very good condition.

2. Leverage Ratio

Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt.

32

JK TYRES

Debt to Equity Ratio

This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financed money versus owner's equity): Debt equity ratio = total debt / total equity 2010 JK tyres Apollo 0.537 1.24 2009 0.459 1.91 2008 0.356 1.71

2.5 2 1.5 1 0.5 0 2010 2009 2008 JK tyres Apollo

Generally, the higher this ratio, the more risky a creditor will perceive its exposure in the business, making it correspondingly harder to obtain credit. By this ratio we can see that JKs debt equity ratio is increasing year to year and Apollos debt equity ratio is high so Apollo is more risky than JK.

Owners fund as % of total source- owners fund in source shows that how much of this fund is involved in the total capital generated for company. It can be calculate as

33

JK TYRES

Owners fund/total fund*100 2010 JK tyres Apollo 44.63% 60.33% 2009 34.32% 66.04% 2008 36.85% 72.68%

80.00% 60.00% 40.00% 20.00% 0.00% 2010 2009 2008 jk tyres apollo

We can see that Apollo have more share of its owner whether JK has comparatively low.

Fixed asset turnover ratio-

A financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues.

34

JK TYRES

It can be calculated asNet sales/net property, plant and equipment 2010 JK tyres Apollo 1.44 2.10 2009 2.18 2.24 2008 1.16 2.38

2.5 2 1.5 1 0.5 0 2010 2009 2008 JK tyres apollo

This ratio is often used as a measure in manufacturing industries, where major purchases are made for PP&E to help increase output. When companies make these large purchases, prudent investors watch this ratio in following years to see how effective the investment in the fixed assets was.

35

JK TYRES

PROJECT REPORT

36

JK TYRES

DETAILED STUDY AND PROJECT REPORT

The tyre is a complex technical component of todays motor cars and must perform a variety of functions. It must cushion, dampen, assure good directional stability, and provide long-term service. Most important of all, however, it must be capable of transmitting strong longitudinal and lateral forces (during braking, accelerating and cornering man oeuvres) in order to assure optimal and reliable road holding quality. It must be able to do all of this even when the road provides little traction in wet or slippery conditions or when the road is covered with snow or ice. In certain cases, these wide ranging demands leave tyre engineers no choice but to settle for a Compromise between opposing characteristics. Vehicles with powerful engines require, for example, good grip particularly on wet roads. 'Radialisation' in India - Current Status & Future Trends "Rate of radialisation is actually an index of the status of road development, vehicle engineering and the economy in general". Notwithstanding the problem areas, constraints and limitations, the tyre companies have kept pace with the technological improvements that radialisation signifies and offer state-of-the-art product (tyres), comparable to the best in the world.

Radialisation can be aptly classified as the most important innovation in tyre technology. Despite its several advantages (additional mileage; fuel saving; improved driving) radialisation in India earlier did not catch on at a pace that was expected, since its introduction way back in 1978. This could be attributed due to several factors, viz. Indian

37

JK TYRES

roads generally not being suitable for ideal plying of radial tyres; (older) vehicles produced in India not having suitable geometry for fitment of radial tyres (and hence the general, and wrong, perception that radial tyres are not required for Indian vehicle; unwillingness of consumer to pay higher price for radial tyres etc.

However, the situation has radically changed in recent years, especially for the passenger car tyre segment where radialisation has crossed 98% mark and is expected to reach 100% in two to three years. In the Medium and Heavy Commercial vehical segment current level of radialisation is upto 12% and that in the LCV segment is estimated at 18%.

A few years back a beginning was made in Radialisation of truck and bus and LCV tyres and this process is gaining momentum.

Future of Radialisation The future of radialisation will be governed by the following factors:

Cost - Benefit Ratio Road Development Overload Control User Education Retreading Infrastructure.

CURB ON OVER-LOADING OF COMMERCIAL VEHICLES

38

JK TYRES

Supreme Court had in November 2005 passed an Order directing State Governments to ensure that commercial vehicles are loaded only as per norm prescribed under the Central Motor Vehicle Rules. On the other hand, a corresponding improvement in the tread compound can affect tyre life, rolling resistance and ride comfort (see diagram). One point, however, has absolute priority over all other tyre design objectives, and thats safety. The project which I have get in jk tyres is Analysis of the market share of foreign tyre manufacturers in passenger tyre segment and why they are leading in domestic market. To perform this project I have plan and arrange the whole procedures in a proper steps. My first step was to visit to the many car users and ask them about the tyres which they use in their car. For this I have prepared a questionnaire and ask them to feel it. By this survey I have get some information about their knowledge and their preferences of tyres for their cars.

Most of the car users are not aware about the differentiation of tyres and companies but I have get some parameters on which we can rate the tyres of different companies. Those parameters are OE (original equipment) tyres. Original equipment tyres are those tyres which company direct supplies to the car manufacturers for using it in their new cars. OE represents 30 % of tyre market. Customer survey tells that most of the car users prefer to put the same tyres as a replacement one. Replacement tyres are those tyres which

39

JK TYRES

customer use after changing its existing OE tyres . It represents around 65 % of tyre market.

share

OE 70% replacement 20% govt. 10%

DURABILITY- It is also one of the major factor considered while talking about tyres.
It is obvious that if customer is paying prize for tyres , they would consider most durable products . Generally prize of a pair of PCR tyres is approximately 7000/- which is not very small amount. After paying this much amount customer need those tyres that has long life. Survey tells that most of the economic class car users gives their first priority to

40

JK TYRES

long life of tyres instead of comfort or other factores. Even they think that all the tyres are equally safe but long life influences their choice.

COMFORT- while driving a car comfort is the major factor which taken into
consideration and tyres are the very major part which affects the all over comfort ability of any car. All those car users who has car more than 6 lacks prefer comfort as one of the most essential feature while asking questions. Today all the companies and customers need zero noise car which direct related to the comfort of the car. While driving cars tyres gives first cuisine so that jerk can be minimize. Customers are even ready to pay little more if some brand provide them more comfort as compare to others.

PRIZE- While purchasing any product every customer things about prize. It is the most
major factor rated by end users. All the Indian manufacturers of tyres taken this factor as a very major one while making tyres. Every middle class family who has a car below 5 lacks want to use their car and its tyres. Every company has a difference prize list although can be use in same car. After paying that amount every car user things that the \person should get worthy proucts.

TECHNICAL FEATURES - Some technical reason also taken into

consideration-

Air pressure- Maintain correct air pressure at all times to ensure safety of your tyre.
This also leads to reduced footprint or contact patch gives a safe and smooth ride.

41

JK TYRES

 Wheel balancing- Unbalanced wheel can cause vibration and uneven tread wear
leading to premature wear of tyre as well as that of suspension and steering parts of the vehicle.

Wheel alignment- Alignment is the adjustment of the front and real tyrsuspension
parts. It ensures that car drives straight down the road and handles better. Tyre life and fuel economy is enhanced with correct wheel alignment. This are the all reason which a customer thinks while talking about tyres. By this survey we found some heads which we can put forward at our next step which is dealer survey. In that second step we can rate the companies according to dealers point of view. And we can find out the basic reasons why the company is lagging or why other is leading in this segment. While dealer visit, they told many interesting things, they told me about revolution of radial tyres in PCR segment called redialisation. And they told about types of tyres and many knowledgeable things. I ask them about the Indian tyre market and the current statistics in terms of market share. I request them to fill a questionnaire (which is attached to the annexure at the back side of the project ) which have all the questions about dealers introduction to their perception about market and industry. I ask them certain questions about market players and their strong and weak points. I told them to rate all the tyre manufacturers on those characteristics so that we can find out the reason which we are looking for. And ask them about their perception about foreign tyre manufacturers and why they are leading in this segment. And ask them about the future possibilities which tyre industry may face. I ask them to tell no. of tyre sold in their counter of different companies for every 10 sold tyres. This question helps me to find out the actual market share of the different companies in Indian

42

JK TYRES

tyre industry. I have visited to the number of dealers and ask them the same question at the end I took average of all data and found that-

market share

10% 25% 14% bridgestone goodyear michelin Jk mrf 15% 18% others

18%

As by this data we can see that all the foreign manufacturers covers nearby 65% of market share in todays market which is very high even after having presence of good domestic organization with all same wide range.

43

JK TYRES

Then I asked them about the reasons of having as much market share of foreign manufacturers and request them to rate the companies according to the heads which we have found in customers survey.

OE market- In todays market having a good share of OE market is very important because OE represent approx 70% of market share and today Bridgestone cover most of the market share and all the customers prefer to use same tyres at the time of replacement. In OE market companies follow the contracts with vehicle manufacturers and land them those amounts of tyres witch is mentioned in the contract.

Bridgestone

Michelin

Goodyear

MRF

JK TYRES

44

JK TYRES

SUPPLY- Dealers told me about the main and very basic problem of domestic manufacturers
i.e. supply of tyres. As an example total supply of JKtyres for PCR segment is approximately 5 lacks and according to demand it should have more than 10 lacks. So due to more concentration on T&B segment and LCV segment they losses the market share in PCR. According to the supply of tyres in the market dealers rated all the companies in descending order.

BRIDGESTONE

MRF

GOODYEAR

MICHELINE

JK TYRES

45

JK TYRES

PRODUCT LIFE- Durable products are most desirable. Tyres are not very general product,
customer have to pay a good amount for a single pair of tyres. Average life of tyre is 4-5 year but life of tyre is contradictory of comfort ability. Most comfortable tyres are less durable. All the upper class segment having a car of more than 6 lack prefer comfort instead of durability. I ask them to rank different companies according to the durability.

JK TYRES

MRF

GOODYEAR

BRIDGESTONE

MICHELINE

46

JK TYRES

COMFORT- In todays market comfort is one of the major reasons according to dealers.
Customer preferences are shifting to comfort . now a days customers are ready to pay little more to have comfort. All the car users want zero noise in their cars. In a long route comfort is the first preference of every car user, they said. So according to the dealers ranking of companies on the basis of comfort-

MICHELIN

BRIDESTONE

GOODYEAR

MRF

JK TYRES

According to the ranking we can see that Indian tyres are not that much comfortable, after asking this question dealers replied that Indian manufacturers thinks more about lower class car users so they prefer prize and safety more than comfort.

47

JK TYRES

SAFTY- It is the major issue which takes into consideration by dealers. Safty depends upon the
technical design of tyres. All the companies have their different rib designs which is totally responsible for the safety features of the tyres. According to the dealers and technicians every company has different safty levels.

GOOD YEAR

JK TYRES

MRF

MICHELINE

BRIDGESTONE

48

JK TYRES

PRIZE- according to the prize list ranking of the companies to most expensive to less
expensive are-

MICHELIN

BRIDGESTONE

GOODYEAR

MRF

JK TYRES

These are all the ranking which I have found from the dealers after analyzing this information we can see the perfect reasons for having a good market share of the foreign tyre manufacturers.

49

JK TYRES

FRIDAY CAMPAIGN- Besides all this dealer and customer visits I have also participated in Friday campaign. Friday campaign is a task designed by JK people for Maharashtra region. This campaign is especially for T&B segment. In this campaign we have visited many transporters and suggest them feasible tyres according to their use. Mainly in this campaign we were promoting a brand of JK tyres named JET XTRA. According to the company JET XTRA is one of the best tyre for trucks and buses, but the company is not getting expected response from this region for this brand.

50

JK TYRES

Conclusion and RecommendationAccording to the recent data PCR segment covers 20% share of whole tyre market. PCR segment is one of the very big segments to be undertaken. I have concluded the actual market share of the main players of this segment. Which clearly showing that the foreign players of tyre industry for PCR segment are actually leading the market with a big gap. And it is very difficult for the domestic rivals to meet that level. According to my report-

COMPANY
BRIDGESTONE GOODYEAR MICHELIN JK TYRES MRF OTHERS

MARKET SHARE
25% 18% 18% 15% 14% 10%

This table showing the market share of different giants in this segment. We can see that Bridgestone enjoying around 25% of market share which is tremendously very high. Goodyear and Michelin again a foreign manufacturing company enjoying 18% of market share each followed by JK and MRF. There is a very huge difference between domestic and foreign companies share. In this report I am trying to find out those reasons which are responsible for this condition. It is very important to know for the company that where they are losing.

51

JK TYRES

According to this project analysis there are various reasons which are responsible for this condition in PCR segment. They are showing that these are the areas where domestic company has to work. OE MARKET- As it is already discussed that OE segment is very important for these companies. Having a good position in OE segment helps company to build a good image. Most of the consumers prefer OE used brand as their replacement tyres. Again all the foreign tyre manufacturers covers more than the 60% share of the oE market. JK also has a good brand image so that they also should work in this market.

BRIDGESTONE

MICHELIN

GOODYEAR

MRF

JK

Bridgestone is the OE market leader followed by the Michelin and Goodyear. According to the ranking given by the dealers JK is at worst position for OE market of this segment. They should try to get the dealings and contracts with passenger car leaders so that they can increase their demand for OE market.

52

JK TYRES

SUPPLY FACTOR- This is also one of the major area where JK has to work. They are not giving required attention for this segment. They are able to supply only half of the quantity demanded. They are also poor in the supply planning for the market. Mostly dealers faces the problem of shortage at the time of requirement and when the consumers shift to the other brand then JK ask for lot to the dealers. It creates vacuum in the market.

BRIDGESTONE

MRF

GOODYEAR

MICHELIN

JK

This is the ranking given by the dealers as their experience for supply of PCR tyres. We can see that again Bridgestone is on the top following by MRF and Goodyear, JK again performing worst as a tyre supplier. Company should analyze the market condition, requirement and time before taking the supply decision.

53

JK TYRES

COMFORT FACTOR- Today in the Indian market customers are ready to pay more for comfort. Indian companies are still working with the old concepts of providing goods at cheap prize. All the foreign manufacturers prefer comfort as the basic feature required in the tyre.

MICHELIN

BRIDGESTONE

GOODYEAR

MRF

JK

This ranking shows that JKs response is not good as much the comfort level concern. Company have to go beyond the thinking of cheap prize goods. Thinking of the customers are changing day by day and at todays scenario comfort seems to be more important than prize. So company should take action in this area if they want to increase their business in this segment.

54

JK TYRES

KEY LEARNINGS-

How to deal with the dealers in the market?

Various features of the tyre industry and how it operates?

How to report and deal with the top managers?

What is target pressure and how to handle it?

How to manage the subordinates and how to assigned work.

55

JK TYRES

ANNEXUTR

56

JK TYRES

BALANCE SHEET OF JK TYRESSOURCES OF FUND

(RS IN CRORE) Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus

2010 41.06 652.36

2009 41.06 534.77

2008 30.79 503.13

2007 30.79 560.93

2006 37.46 745.14

Loan funds
Secured loans Unsecured loans Total 433.33 426.85 1,553.60 850.31 251.49 1,677.63 686.82 228.13 1,448.87 724.77 219.10 1,535.59 671.28 159.22 1,613.10

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 2,561.90 1,209.13 1,352.77 132.02 90.24 2,270.38 1,101.50 1,168.88 240.19 89.75 2,156.07 957.27 1,198.80 20.34 62.60 2,084.22 860.03 1,224.19 22.51 61.46 1,938.72 764.74 1,173.98 61.63 250.04

Net current assets

Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 1,223.14 1,244.57 -21.43 1,553.60 1,116.45 942.85 173.60 5.21 1,677.63 1,122.59 963.68 158.91 8.22 1,448.87 1,029.94 811.67 218.27 9.16 1,535.59 826.85 712.34 114.51 12.94 1,613.10

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs) 89.27 1.33 215.53 410.59 89.23 0.62 117.41 410.59 62.55 0.31 78.94 307.95 61.46 0.09 84.74 307.95 216.47 72.82 131.32 374.59

57

JK TYRES

BALANCE SHEET OF APOLLO TYRESSources of funds

Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 50.41 1,673.07 50.41 1,302.18 48.85 4.57 1,176.84 46.41 11.72 917.56 38.34 592.37

2010

2009

2008

2007

2006

Loan funds
Secured loans Unsecured loans Total 875.95 257.02 2,856.44 462.39 233.13 2,048.11 223.15 237.51 1,690.91 473.76 144.94 1,594.39 381.00 369.00 1,380.71

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 2,414.17 3.12 803.95 1,607.10 536.04 559.38 1,838.00 3.12 694.66 1,140.22 281.41 297.45 1,569.66 3.16 598.66 967.84 94.41 302.71 1,492.51 3.16 541.66 947.70 80.46 258.11 1,310.61 3.31 469.94 837.36 77.93 0.53

Net current assets

Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 1,751.35 1,597.44 153.91 2,856.44 1,435.58 1,106.70 328.88 0.15 2,048.11 1,472.83 1,147.14 325.69 0.26 1,690.91 1,278.76 970.76 308.00 0.12 1,594.39 1,204.58 739.95 464.63 0.26 1,380.71

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs) 559.18 0.09 921.46 5040.25 297.26 0.03 682.36 5040.25 302.53 0.07 444.96 4884.45 257.97 0.11 119.29 464.02 0.25 1.07 106.63 383.38

58

JK TYRES

QUESTIONNAIRE FOR END USERS-

CUSTOMRES NAMECONTACT NO.-

1. DO YOU OWN A CAR?

YES ( )

NO ( )

2. NAME OF THE CAR .

3. AFTER HOW MANY YEARS YOU CHANGE YOUR CARS TYRE?

A. EVERY YEAR

B. EVERY 3 YEAR

C. EVERY 5 YEAR
59

D. MORE THAN 5 YEAR

JK TYRES

4. WHICH BRAND DO YOU PREFER?

A. BRIDGESTONE

B. GOODYEAR

C. MICHELIN

D. JK

E. MRF

F. OTHERS

5. WHY?

6. WHILE BUYING TYRES FOR YOUR CAR WHICH FEATURES DO YOU PREFER MOST?

60

JK TYRES

QUESTIONNAIRE FOR DEALERS-

NAME OF THE STORE-

OWNERS NAME-

CONTACT NO.-

1. HOW MANY PAIRS OF TYRE YOU SELL FROM YOUR COUNTER EVERY MONTH?

2. WHICH BRAND OF TYRE CUSTOMER PREFERS THE MOST?

3. WHY?

61

JK TYRES

4. WHICH COMPANY PROVIDES YOU BETTER OPPORTUNITIES AND DEALINGS?

5. HOW?

6. WHAT IS MAIN FEATURES OF TYRES CUSTOMER ALWAYS KEEPS IN MIND WHILE BUYING THE TYRES?

7. ACCORDING TO YOU WHICH COMPANIES OF PCR TYRE MANUFACTURER GIVING BEST SUITABLE PRODUCT FOR INDIAN TYRE INDUSTRY?

62

JK TYRES

REFERENCES-

http://indiatransportportal.com/2010/09/india-tyre-industry-analysis-rncos/ http://www.icra.in/Files/Articles/Tyre%20Industry%20Note%20Final%20April%205,2011.pdf http://www.jktyre.com/ http://money.rediff.com/companies/jk-tyre-and-industries-ltd/10680007/balance-sheet http://www.jkorg.in/index.php?option=com_content&view=article&id=90&Itemid=97

Other references Annual report of jk tyres. Annual report of Apollo tyres.

63

JK TYRES

64

JK TYRES