A

Summer Training Project Report

At

On

WORKING CAPITAL MANAGEMENT

Submitted

In partial fulfillment of the requirement

Of

MASTER BUSINESS ADMINISTRATION

Department of Management Studies

Bhagat Phool Singh Mahila Vishwavidalaya

2017-2018

Submitted To:

Department Of Management Studies

Submitted By:

Shweta
16022033
MBA 3rdsem

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DECLARATION

I, Shweta goel, roll no. 16022033, student of MBA-Financial Management (2017-2018) at, Bhagat Pool Singh
Mahila Vishwavidalaya, Sonipat hereby declare that the Summer Training Report entitled “CRITICAL ANALYSIS
OF WORKING CAPITAL MANAGEMENT AT HERO.” is an original work and the same has not been submitted to
any other Institute for the award of any other degree.

SHWETA GOEL

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ACKNOWLEDGEMENT

At the outset, I am grateful to HERO for giving me the opportunity to do my summer internship with them. A
sense of gratitude is not enough to express my sincere thanks towards my project guide, Mr.Narender
(FINANCE MANAGER, HERO) who guided me with his insights and knowledge. He took active interest in my
project and was always there to give me his word of guidance.

I’m also thankful to Mr. Sunny, Ms. Sweety for their valuable suggestions. They motivated me to serve my
best effort to complete my summer training for 6 weeks in the company.

I duly acknowledge with gratitude the help and cooperation received from the entire staff @ HERO

SHWETA GOEL

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EXECUTIVE SUMMARY
The Automobile sector of today is one of the key sectors of the country contributing majorly to the economy
of India. The Automobile industry is one of India’s most vibrant and growing industries. This industry accounts
for 22 percent of the biggest job creators, both directly and indirectly. It is estimated that every job created in
an auto company leads to three to five indirect ancillary jobs.
India is presently the world’s Third largest exporter of two- wheelers after china and Japan. Two- wheelers
sale are projected to rise from 19.9 million in FY 2016 to 34 million by FY 2020. According to a report by
standard Chartered Bank, India is likely to overtake Thailand in global auto – export market share by the year
2020. Strong growth in demand due to rising income, growing middle class, and a young population is likely to
propel India among the world’s top five auto manufacturers by 2015. Automobiles export volumes increased
at a compound Annual Growth Rate (CAGR) of 26 percent in FY 2017.
The automobile sector is compartmentalized in four different sectors which are as follows:
 Two – wheelers which comprise of mopeds, scooters, motorcycles and electric two- wheelers
 Passenger vehicles which include passenger cars, utility vehicles and multi – purpose vehicles.
 Commercial vehicles that are light and medium – heavy vehicles.
Three wheelers that are passenger carriers and good carriers.
The automobiles industry is one of the key drivers that boost the economic growth of the country. Since the
de- licensing of the sector of 1991and the subsequent opening up of 100 percent Foreign Direct Investment
(FDI) through automatic route. Indian automobile vikas sehgal, Global Head of automotive industry,
Rothschild, the Indian automobile market, which includes cars, trucks and auto parts, is pegged at 3.5 million
units by the end of 2015-2016. Rothschild I a UK based global financial advisory firm. India’s car market is
evolving at a great pace.
Two wheelers dominate market share; in FY 2016, the segment accounted for 82 percent and FY 2017 is 85.7
percent of the total automotive production in India. The overall growth in domestic sales during – may 2017
more as compare to last year.
The top players in the Indian automobile industry have played a key role in the growth and development of
the automobile industry in India companies like Bajaj Auto, Hindustan Motors, Maruti Suzuki, Hero, Honda and
TVS motors with their ever expansive car dealings networks, promotional, convenient customer care services
have marked India among the leading automobile industries.
The government aim to develop India as a global manufacturing as well as a research development (R&D) hub.
It has set up national automotive Testing and R&D Infrastructure Project (NATRIP) centers as well as a national
automobiles Board to act as a facilator between the governments in the industry. There are a wide range of
jobs available in the automobile industry. According to the confederation of Indian Industry, the automobiles
sector currently employees over 80 lakh people. An extension in production in the automobiles industry is
forecasted, it is likely to raise to Rs. 7,50,000 corers by 2017.
Economic value added (EVA) is value based performance measure that give performance measure that gives
importance on value creation by the management for the owners. Economic value is added in financial
performance measure that comes closer than any other to capturing the true economic profits of an
enterprise. Thus, in modern economics and finance area, EVA holds as important part that has less debate
among practitioners.
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Basically, the theory of economic value Added rest on two principles assertions:
 A company is not a truly profitable unless it earns a return on invested capital that exceeds that opportunity
cost of capital.
 Wealth is created when a firm’s managers make positive NPV investment decisions for the shareholders
The formula for calculating EVA is as follows:

EVA = Net operating profit After Taxes (NOPAT) – (capital x cost of capital)

It is an indicator of the market value of service center’s owner’s equity, a measure especially important to
closely held companies, which don’t have the benefit of a published stock price. For publicly traded
companies, EVA correlates very closely with stock price.

The present research was study under the title: “ A study of economic value added based Performance
Measurement of Selected Automobiles companies in India”.

The present research has the following objective:

 To examine whether Indian Automobiles Industry has been able to generate value for its shareholders.
 To compute the performance of the company by applying traditional performance indicator like ROI and new
corporate performance measure EVA.
 To study overall performance of Indian Automobile industry.
 To make suggestion for improving EVA.
 To make suggestion for improving financial performance on basis of analysis through EVA.
To test the hypothesis following are the variables used in this study like, Return on investment (net worth),
Return on capital Employed, Weighted Average cost of capital ,Economic value added and cost of Debt & Cost
of Equity.

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Index

S.NO. CONTENTS PAGE

NO.
1. Introduction 9-15
1.1 Meaning Of Working Capital
1.2 Objectives Of Working Capital
1.3 Significant Of Working Capital
1.4 Conceptualizations
2. Company Overview 16-27
2.1 Introduction
2.2 History
2.3 Vision
2.4 Mission
2.5 Strategy
2.6 Brand
2.7 Manufacturing
2.8 Distributors
2.9 SWOT Analysis
2.10 Privacy Policy
2.11 Security
2.12 Suppressing Personal Information

3. Reviews Of Literature 28-32

3.1 Basic Reviews
3.2 Main Reviews
4. Objectives 33-35
4.1 Main Objectives
4.2 Other Objectives

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5. Research Methodology 36-42
5.1 Meaning Of Research
5.2 Techniques Of Research
5.3 Types Of Research
5.4Research Area
5.5Research Designs
5.6 Sample Size
5.8 Sample Area
6. Data Collection And Data Analysis & Interpretation 43-46
6.1 Data Collection
6.2 Data Analysis & Interpretation
7. Conclusions 47-48
8. Limitations Of The Project 49-50
9. Recommendation 51-61
10. Bibliography 61-62

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1. Introduction
1.1 Meaning Of Working Capital
1.2 Objectives Of Working Capital
1.3 Significance Of Working Capital
1.4 Conceptualization

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1. INTRODUCTION

1.1 MEANING OF WORKING CAPITAL

Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a
business, organization or other entity, including governmental entity. Along with fixed assets such as plant and
equipment, working capital is considered a part of operating capital. Net working capital is calculated as
current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation
techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has
a working capital deficiency, also called a working capital deficit. A company can be endowed with assets and
profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is
required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both
maturing short-term debt and upcoming operational expenses. The management of working capital involves
managing inventories, accounts receivable and payable, and cash.

Current assets and current liabilities include three accounts which are of special importance. These accounts
represent the areas of the business where managers have the most direct impact:

• Accounts receivable (current asset)

• inventory (current assets), and

• accounts payable (current liability)

The current portion of debt (payable within 12 months) is critical, because it represents a short-term claim to
current assets and is often secured by long term assets. Common types of short-term debt are bank loans and
lines of credit. An increase in working capital indicates that the business has either increased current assets
(that it has increased its receivables or other current assets) or has decreased current liabilities, for example
has paid off some short-term creditors.

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Implications on M&A: The common commercial definition of working capital for the purpose of a working
capital adjustment in an M&A transaction (i.e. for a working capital adjustment mechanism in a sale and
purchase agreement) is equal to:

Current Assets – Current Liabilities excluding deferred tax assets/liabilities, excess cash, surplus assets and/or
deposit balances.
Cash balance items often attract a one-for-one purchase price adjustment.

Working capital management

Decisions relating to working capital and short term financing are referred to as working capital management.
These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The
goal of working capital management is to ensure that the firm is able to continue its operations and that it has
sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.

A popular measure of working capital management is the cash conversion cycle, that is, the time span
between the expenditure for the purchases of raw materials and the collection of sales of finished goods for
example, found that the longer the time lag, the larger the investment in working capital. A long cash
conversion cycle might increase profitability because it leads to higher sales. However, corporate profitability
might decrease with the cash conversion cycle, if the costs of higher investment in working capital rise faster
than the benefits of holding more inventories and/or granting more trade credit to customers.

For many firms the current assets account for over half of their total assets. The management of working
capital may have both negative and positive impact of the firm’s profitability, which in turn, has negative and
positive impact on the shareholders’ wealth. The present study seeks to explore in detail these effects. Firms
may have an optimal level of working capital that maximizes their value. Large inventory and generous trade
credit policy may lead to high sales. The larger inventory also reduces the risk of a stock-out. Trade credit may
stimulate sales because it allows a firm to access product quality before paying. Another component of
working capital is accounts payables. It is believed that delaying payment of accounts payable to suppliers
allows firms to access the quality of bough products and can be expensive if a firm is offered a discount for the

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early payment. By the same token, uncollected accounts receivables can lead to cash inflow problems for the
firm.

By definition, working capital management entails short term decisions - generally, relating to the next one
year period - which is "reversible". These decisions are therefore not taken on the same basis as Capital
Investment Decisions (NPV or related, as above) rather they will be based on cash flows and / or profitability.

• One measure of cash flow is provided by the cash conversion cycle - the net number of days from the outlay
of cash for raw material to receiving payment from the customer. As a management tool, this metric makes
explicit the inter-relatedness of decisions relating to inventories, accounts receivable and payable, and cash.
Because this number effectively corresponds to the time that the firm's cash is tied up in operations and
unavailable for other activities, management generally aims at a low net count.

• In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a
percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity
(ROE) shows this result for the firm's shareholders. Firm value is enhanced when, and if, the return on capital,
which results from working capital management, exceeds the cost of capital, which results from capital
investment decisions as above. ROC measures are therefore useful as a management tool, in that they link
short-term policy with long-term decision making. See Economic value added (EVA).

• Credit policy of the firm: Another factor affecting working capital management is credit policy of the firm. It
includes buying of raw material and selling of finished goods either in cash or on credit. This affects the cash
conversion cycle.

Management of working capital

Guided by the above criteria, management will use a combination of policies and techniques for the
management of working capital. The policies aim at managing the current assets (generally cash and cash
equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are
acceptable.

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• Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but
reduces cash holding costs.

• Inventory management. Identify the level of inventory which allows for uninterrupted production but
reduces the investment in raw materials - and minimizes reordering costs - and hence increases cash flow.
Besides this, the lead times in production should be lowered to reduce Work in Process (WIP) and similarly,
the Finished Goods should be kept on as low level as possible to avoid over production - see Supply chain
management; Just In Time (JIT); Economic order quantity (EOQ); Economic quantity.

• Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers,
such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and
hence Return on Capital (or vice versa).

• Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the
inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank
loan (or overdraft), or to "convert debtors to cash" through "factoring".

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1.2 OBJECTIVE

To study and analyses working capital management at Paisaworth.com which includes

1. Inventory management
2. Receivable management
3. Cash management

The aim is to learn how to manage working capital needs of the organization and to learn the different ways
through which theoretical learning is applied practically in the organization. The project is aimed to learn and
gain knowledge of the day to day working of the organization as to how does the different decision are taken
and on what basis. The project will help in gaining the knowledge of different steps of raising the short term
funds and their effective management so as to ensure adequate availability of funds. The various analyses will
help the management to assess the efficiency of the working capital management of the company.

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1.3 SIGNIFICANCE

Financial Analysis is the process of identifying the financial strengths and weaknesses of the firm by properly
establishing relationships between the items of the balance sheet and the profit & loss account. Financial
analysis can be undertaken by management of the firm, viz. Owners, creditors, investors and others. Ratio
analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two
mathematical expressions and as “the relationship between two or more things”.

Ratios help to summarize large quantities of financial data and to make qualitative judgments about the firm’s
financial performance. WORKING CAPITAL MANAGEMENT deals with the management of current assets. The
management of current assets is similar to that of fixed assets in the sense that in both cases firm analyses
their effect on their return and risk profile. The management of fixed assets and current assets, however,
differ in three aspects. First, in managing fixed assets, time is a very important factor; consequently,
discounting and compounding techniques play a significant role in capital budgeting. Second, the large holding
of current assets, especially cash, strengthens the firm's liquidity position (and reduces risk). Third, levels of
fixed as well as current assets depend upon expected sales, but it is only current assets that can be adjusted
with sales fluctuations in the short run.

Thus with such importance attached, a due diligence should be given to proper management of the working
capital.

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1.4CONCEPTUALIZATION

There are two concepts of working capital- gross and net.

Gross Working Capital refers to the firm's investment in current assets. Current assets are the assets which
can be converted into cash within an accounting year and include cash, short-term securities, debtors,
(accounts receivable or book debts) bills receivables and stock (inventory).

Net Working Capital refers to the difference between current assets and current liabilities. Current liabilities
are those claims of outsiders which are expected to mature for payment within an accounting year and
include creditors (accounts payable), bills payable, and outstanding expenses. Net working capital can be
positive or negative. A positive net working capital will arise when current assets exceed current liabilities.

Net Working Capital (+) =Current Assets - Current Liabilities

Also, negative net working capital will arise when current liabilities exceed current assets.

Net Working Capital (-) = Current Liabilities - Current Assets

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2. Company
Overview
1.1 Introduction
1.2 History
1.3 Vision
1.4 Mission
1.5 Strategy
1.6 Brand
1.7 Manufacturing
1.8 Distributors
1.9 SWOT Analysis
1.9.1 Privacy Policy
1.9.2 Security
1.9.2.1 Suppressing Of Personal Information

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2. COMPANY OVERVIEW

2.1 INTRODUCTION

Hero Moto Corp Ltd. (formerly Hero Motors Ltd) is the world’s two wheeler manufacturer based in India.
world’s No. 1 Two wheeler company in terms of unit volume sales in calendar year. The company was a joint
venture between India’s Hero Group and Honda motor company, japan that began in 1984 later in 2011 it turn
into Hero motors Limited.
Today, every second motorcycle sold in the country is a Hero bike. Every 30 seconds, someone in India buys
Hero splendor which is India’s selling motor cycles.
A popular advertising campaign based on the slogan motorcycle’s fuel efficiency helped the company grow at
a double- digit pace since inception. The technology in the bikes of Hero almost 26 years.

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2.2 HISTORY
Hero Moto crop Ltd. (Formerly Hero Motors Ltd. ) is the world largest manufacturer of two- wheelers, based in
India. In 2001 the company achieved the coveted position of being the largest two- wheelers manufacturing
company in India and also, the world’s no . 1 ‘Two wheelers company in term of unit volume sales in a
calendar year. Hero Moto crop Ltd. Continues to maintain this position till date. Hero started in 1984 as a joint
venture between Hero cycles of India and Honda of Japan.
The joint venture between India’s Hero Group and Honda Motor Company, Japan has not created the world’s
single largest two wheeler company but also one of the successful joint ventures worldwide. In December
2010, the board of director of Hero Group has decided to terminate the joint venture between Hero Group of
India and Honda of Japan in a phased manner.
Under the joint venture Hero Group could not export to international markets (except sri lanka and Nepal) and
the termination would mean that hero group can export. Since the beginning, the Hero Group relied on their
Japanese partner Honda for the technology in their bikes. Honda will continue to provide technology to Hero
Motorbikes until 2017 as well as future models.

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2.3 VISION

The story of Hero began with a simple vision the vision of mobile and an empowered India, powered by its two
wheeler. Hero Moto crop ltd. Company’s new identity , reflects its communicate towards providing world
class mobility solutions with renewed focus on expanding company’s footprint In the global arena.

2.4 MISSION

Hero Motor crop’s mission is become a global enterprise fulfilling its customers’ needs and aspiration for
mobility, setting benchmarks in technology, styling and quality so that it converts its customers into its brand
advocates.

2.5 STRATEGY
Hero Motor crop’ key strategies are to build a robust product portfolio across categories, explore growth
opportunities globally , continuously improve its operational efficiency , aggressively expand its reach to
customers, continue to invest in brand building activities and ensure customer and shareholder delight.

2.6 BRAND
The new Hero is raising is posed to shine on the global company’s new identity a Hero Moto crop Ltd” is truly
effective its vision to strengthen from an mobility and technology creating global formatting, Building and
promoting new brand identity will be control to all imitative utilizing every opportunity and leveraging its
strong presence across sports, entertainment and ground level activation.

2.7 MANUFACTURING

Hero Moto crop two wheelers are manufactured across 3 globally benchmarks manufacturing facilities. Two of
these are based at gurgoan located in started of Haryana is northern India. The third and the latest
manufacturing plant are based at Haridwar, in the hell state of uttrakhand.

2.8 DISTRIBUTION
The company’s growth in the two wheeler in India is the result of an in India is the result of an intrinsic ability
to increase reached in new geographies and growth markets hero Moto crops extensive sales and services
network how spans over to 5000 customers tough points these comprise a mix of authorized dealership ,
services and spare parts outlets and dealer – appointed outlets across the country.

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2.9 SWOT ANALYSIS

1) 1. Hero Moto crop has huge brand equity & of

the biggest players in the two wheelers Indian
market.
2) 2. Excellent R & D of Hero Moto crop, wide
variety of products in every segment.
3) 3. Excellent distribution over 3000 dealership
& service centers.
STRENGTHS 4) 4. Good advertising &excellent branding &
marketing of Hero Moto crop.
5) 5. More than 5000 people are employed with
the organization.
6) 6. Sponsorship of many events related to
sports &racing has made Hero Moto crop a
strong band.
7) 7. The brand has received several awards &
recognisation for its work in the industry.
8) Ad campaigns through TV, bill boards, online
media etc. boost the brand image.
1) 1. Intense competition fromindian &inter
national players mean limited market share
growth of the hero Moto crop.
WEKNESSES 2) 2. Most of the products have similar features
& low on design and motivation.

1) 1. Two wheelers segment is lof the most

growing industries.
OPPORTUNITIES 2) 2. Export of Hero Moto crop bikes is limited
i.e. untapped international markets.
3) 3. Introduction of bikes in the premium
segment.
1) 1. Strong competition from India as well as
international brands.
2) 2. Dependence on govt. policies & raising fuel
THREATS prices can affect the business margins for Hero
Moto crops.
3) 3. Better public transport will affect two
wheeler sales.

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2.10 PRIVACY POLICY
At Travel Technologies (the operator of the Hero Platform), we are concerned about privacy issues and want
you to be familiar with how we collect use and disclose personal information (as defined below). This hero
plateform privacy policy describes our practices in connection with personal information that we may collect
through the platform as defined in the terms of use. This privacy policy does not address the collection, use of
disclosure the information through any other means other than the platform.
This privacy policy does not apply to the personal information we may have collected from you as a traveler or
consumer of products offered within the platform by providing personal information to us, you agree to the
terms & conditions of this privacy policy. If you don’t agree to the terms & conditions of this privacy policy do
not use the plateform.
Travel Technologies reserves the right to change this privacy policy at any time at its sole discretion. You are
responsible for regularly reviewing the privacy policy that is on a continuous basis put at your disposal by their
inclusion in the platform. If you don’t agree to the modify terms you should continued use to platform
following any such changes shall constitute your acceptance of such changes.
The terms of use are included in this privacy policy and will be applicable to all subjects not explicitly regulated
by this privacy policy.

2.10.1 What Types Of Information Do We Collect From You?

Personal Information is information that identifies you as individual to create your profile on the platform (or
Where your profile has been created on your behalf by someone else) we will require some information about
you such as name, surname and e-mail address. Additional information such as gender, birthday, nationality,
pictures etc. We will use this information to personalize your experience when using the platform.
Cookies: We collect Personal Information from you through the use of cookies. The personal Information we
may collect by using cookies refers to your behavior as a user of the platform and provides us with the
opportunity to personalize your navigation through the platform. We intend to use cookies for the temporary
storage of data in relation to your use of the platform to assist with navigation and storage of your branch
location.

2.10.2 Specific Conditions For Uploading Information To The Websites:

To create your company profile we will collect Information such as:
 Company details (name, address etc).
 Operating location details (address).
 Financial details (bank details).

The above information will only be shared on the platform where necessary, e.g. for a Travel Agent to
determined the location of one of your products or service. The location of one of your Product and Services.
Financial information will never be shared and its solely for internal use to automate direct debit and direct
credit transactions. Additional Non- personal Information is aggregated information or information about you

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n your company that doesn’t reveal your specific identity. To create Products and Services available for sale
through that platform you will upload specific data in relation to each product and service included:
 Product names and descriptions
 Images or videos
 Pricing , including Nett and Retail rates

We will use the above the information and share it with Agents using the platform only for the purpose of
viewing information about your products and services and to facilitates bookings. We may collect Additional
Non- Personal Information from you such as your Media Access control (MAC) address, computer, type, screen
resolution, operating systems (OS) version, Internet browser, and demographic data including your IP address.
Your IP Address is a number that is automatically assigned to the computer that you are using by your internet
service protocol (ISP). This number is identified and logged automatically in our Server log files whenever users
visit the websites, along with the times of such visits and the pages that were visited. Collecting IP Addresses is
standard practice on the Internet & is done automatically by many Web sites.

2.10.3 How Does Travel Technologies use Information Collected from You?
Personal Information:
We use cookies information and the information we collect from you when creating your profile to personalize
and facilitate your navigation through the platform. We will not use the content you upload for any purposes
other than providing Agents details about your products and Services and to facilitate bookings of these
products and Services.
For our internal business purposes, such as data analysis, audits, developing new features for the platform,
enhancing our websites, improving our services, identifying usage trends & determining the effectiveness of
certain features within the platform.
Non – Personal Information:
It doesn’t personally identity you, because we may use it for any Purposes. In addition, we reserve the right to
share non- personal information, which doesn’t personally identify you, with affiliates & other third parties for
any purpose. In some instances, we may combine any Non – Personal Information .If you don’t combine any
Non – Personal Information, the combined information will be treated by us as Personal Information her
under as long as it is so combined.

2.10.4 What Are Your Responsibilities?

By submitting any Personal Information you warrant that you hold all the necessary consents to do that,
Please don’t submit any sensitive Personal Information. When you post contents other materials you need to
ensure you hold the appropriate licenses to share that material on a public website.

2.10.5 How Is Personal Information Disclosed?

 To our affiliates so that they may use such Personal Information for the purposes described in this privacy
policy.
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 To our third party services providers who provide services such as website hosting, data analysis,
infrastructure provision, IT services, customer services, e-mail deliveries services& promotional activities.
 To identify you to any person to whom you send message reading platform – related content through the
platform.
 To an affiliates or other third party in the event of any reorganization, merger, sale, joint-venture, assignment,
transfer or other disposition of all or any portion of our business , assets or stock(including in connection with
any bankruptcy or similar proceedings).

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2.11 Security
We use reasonable organizational, technical and administrative measures to protect Personal Information
under our control. Unfortunately, no data transmission over the internet or data storage system can be
guaranteed to be 100% secure. Please don’t store or provide us with sensitive information. If you have that
believe your interaction with us no longer secure.( for example, if you feel that the security of any account you
might have with us has been compromised), you must immediately notify us of the problem by contracting us
at [email protected] or in accordance with the contracting section of the platform.

2.11.1 Changing Or Suppressing Personal Information

If you would like to review, correct , update suppress or otherwise limit our use of your Personal Information
that has been previously provided to us, you may contact us at [email protected] & for your protection we
will only implement such requests with respect to the Personal Information associated with the particular e-
mail address that you use to send us your request and we may need to verify your identity before
implementing your request. In each event, you must clearly indicate the information that you have wish to
have changed or suppressed. We will endeavor to comply with your request as soon as reasonably practicable.

2.11.2 Retention Period

We will retain your Personal Information for the period necessary to fulfill the purposes outlined in this
privacy unless a longer retention period is required or permitted by law .

2.11.3 Jurisdictional And Cross- Border Issues

We don’t represent or warrant that the platform or any part thereof, is appropriate or available for use in any
particular jurisdiction. Those who choose to access the platform do so on their own initiatives & at their own
risk, are responsible for complying with all local laws, rules and regulations. We may limit the platform’s
availability, in whole or in part, to any person, geographic areas or jurisdiction

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3. Reviews and Literatures
3.1 Basic Reviews
3.2 Main Reviews

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3. REVIEWS OF LITERATURE

3.1 Basic Review

Automobile Industry

Abhijeet Singh and Brijesh Kumar (2011)-

Hero Motors Ltd, is running a program called Good life Passport to Relationship Reward, with an
objective to create an innovative environment for interaction between Hero and its customers.
Members of this program are given a magnetic card in which all information is stored and this card is
swiped when using any service at a showroom or workshop and it works like a loyalty benefit card.

Abhijeet Singh (2011)-

Tata Motors uses a customer relationship management and dealer

Management system (CRM-DMS) which integrates one of the largest applications in the automobile
industry, linking more than 1200 dealers across India.CRM DOS has helped Tata Motors to improve
its inventory management, tax calculation and pricing. This system has also proved to be beneficial to
dealers because it has reduced their working capital cost.

Arvin Saxena(2010)-

Director and Board member (marketing and sales), Hyundai Motor India (HMIL) “No company in
automobile sector can fight competition on price. Companies need to have the right product,
distribution, CRM and after sales service network to grow.

Biswajit Mahantyand Virupaxi Bagodi (2006)-

The success of two wheeler manufacturers in India depends on the competitive advantage gained by
them through after sales service and providing and maintaining customer satisfaction in the face of
rapid changes in technology is a difficult task, which can be overcome by timely addition of capacity,
and upgrading of technical manpower and focusing on the CRM programs.

Biswajit Mahanty and Virupaxi Bagodi (2007)-

More than 55 million two-wheelers are moving on Indian roads. Accordingly, two-
wheeler service sector should have generated revenue amounting to INR 100,000 million per year,
but in reality, this has not been realised in the organised
service sector, the Indian two-wheeler service industry has not considered
servicing as a line of business and providing conveniently reliable services is most important in two-
wheeler services in India to capture the market.

29
Biswajit Mahanty and Virupaxi Bagodi(2008)-

It is an era of customer delight for the two wheeler industry and the conventional measures
implemented by the service organizations tend to be inadequate to
attract customers persistently.

Gordon Fullerton (2006)-

,
“Putting relationship in CRM”, that JEEP, a division of Daimler
Chrysler Automobile Company, has served a classic example of CRM program that provides a
considerable value to both the customers and the firm by developing a program exclusively for jeep
owners and fostered a community that is highly effectively committed to the product, the brand and
the customers.

30
3.2 Main reviews

Kevin Keller(2012)-

Caterpillar has become a leading firm by maximizing the total customer

value with the help of effective CRM , best after sales service in the industry and better trained dealer.
This allows the firm to command a premium price of 10% to 20% higher than competitors such as
Volvo,Komatsu etc.

Michael Cusumano, Steve Kahl and Fernaando Suarez (2008)

In their research paper “A theory of services in product industries”,has concluded that in many
product oriented industries,services have become increasingly important. In case of automobiles,
many automakers generate the vast majority of their profits from a service activity closely tied to their
product activity. The

automobile industry overall generates a large portion of its profits from other product-related service
activities such as insurance and repairs. The authorsargued that despite the seeming importance of
services, there is not much theory to help researchers or practitioners explain the conditions under
which services matter in product industries. The general view that emerges
from the services literature is that services tend to become important for manufacturing firms once
their industries reach a mature stage.

Milind Bade (2011)-

GM-Marketing, Bajaj Auto, has mentioned that Bajaj Auto Limited is currently trying to move the
industry from a commuter to a biker mindset and at present the focus of the company is on keeping
the sub brands and the mother brand different and the main motive behind establishing individual
brand is to create differentiation which would help Bajaj auto, as an organization to develop
relationship easily with its customers.
Mona J Fitzsimmons (2010)-

has concluded that the profitability of automobile manufacturers depends on exploiting value added
services for instance automobile manufacturers have discovered that financing and after sales
service can achieve significant profits.

Oyama(2012)-

Honda Motor wants to be number one in the Indian market and the company wanted 30% of Honda’s
global sales to come from Indian operations by 2020. HMSI have had issues related to production in
the past with most of its models having the longest waiting period in the country, this reduced in
Honda’s penetration in the rural market, which is less than a third of Hero Moto Corp.
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Pawan Chabra(2011)-

Nowadays every second bike sold in the premium segment is a pulsarand this shows the dominance
of Bajaj in the Indian market place, this was possible because thecompany has been regularly making
the alterations to make the motorbike look fresh at all times and Bajaj today holds over 50% market in
the premium segment (for FY 2014-2011) followed by a distant second largest player Honda
Motorcycle & scooter India with a 19% market share.
Pawan Chabra(2011)-
has mentioned that the death knell off Bajaj’s scooters business was sounded when the company
officially stopped the production of its flagship Chetak in December 2002, to get cracking on its
ambition of becoming a credible motorcycle brand manufacturer, the company invested big in R&D
and product development, but the company faced challenges in the sales and distribution because
their dealers had little idea how to sell motorcycles, so the entire dealership network was trained to
sell motorcycles.
Philip Kotler(2012)-
Harley –Davidson dealers ranging from the CEO to the sales staff, maintain personalized
relationships with customers through face to face and social media contact. Knowing customers as
individuals and conducting ongoing research to keep up with their changing expectations and
experiences which helps Harley –Davidson to define their customers needs better.
R K Garg (2011)-

CRM requires a seamless, single view of the customer with consistent cross channel interaction
models and it is recommend that companies bundle all internal CRM strategies into one
comprehensive multi-channel strategy. More over if the two wheeler manufacturer integrate CRM with
SCM, then product design and production planning can be aligned with the customer information
available, to increase customer loyalty.S.Saravan, N Panchanathan and S

Pragadeeswaran(2009)-

concluded in their research paper“Markets and Consumers-Consumer Behavior Towards Showroom

Services of Two-Wheeler with reference to Cuddalore District” that students and employees are more
satisfied about showroom service and age of consumer is an important factor while choosing the
brand of bike and all the consumers give importance all factors relating to buying a vehicle.

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3. Objectives
3.1 Main Objectives
3.2 Other Objectives

33
4. OBJECTIVES

4.1 Main Objectives

Only in light of the hero’s objective can a screenplay be plotted, because in the end , the purist of that
objectives determined the course of the action and the lengths the hero will go to attain it , however straight
forward or devious the path may be.
Here are the three essential keys to the objective:
 There can be only one main objective if the firm is having to unity.
 The objective breeds opposition in order produce conflict.
 It is a leading factor in determining the attitude the audience has toward the hero.
 The main purpose of our study is to render a better understanding of the concept “Working Capital
Management “.
 To understand the planning and management of working capital HERO CYCLES LTD.
 To measure the financial soundness of the company by analyzing various ratios.
 To suggest ways for better management and control of working capital at the concern.

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4.2 Other Objectives
 Profitability
 Productivity
 Customer services
 Employee Retention
 Growth
 Change Management
 Competitive Analysis

35
5. Research Methodology
5.1 Meaning of Research Methodology
5.2 Techniques of Research
5.3 Types of Research
5.4 Research Area
5.5 Research Design
5.6 Sample Size
5.7 Sampling Types

36
5. RESEARCH METHODOLOGY

5.1 Meaning
To systematically solve the research problem. it may be understand as a science of studying how research is
done in other words, research & methodology in the specification of method of acquiring the formation
method to structure or solve the problem at hard.

37
5.2 Techniques

 Ratio analysis
 Operating cycles

Ratio Analysis

Ratio Analysis is a form of financial statement analysis that is use to obtain a quick indication of a firm’s
financial performance in several key areas. The ratios are categorized as short – term solvency ratios, debt
management ratios , assets management ratios, profitability ratios, market value ratios etc. Ratio Analysis is a
tool of possesses several important features. The data , Which are provided by financial statement are readily
available. The computation of ratios facilities the comparison of firms which differ in size. It’s also help in
improving performance.

Operating Cycles

Cash

Raw
Debtor
material

Finished Work in
goods progress

38
5.3 Types of Research

According of Research topics (Working Capital) it’s classified in two categorized:

39
On The Basis Of Concept

1) Gross Working Capital – It refers to all current assets. Thus the gross working capital is the capital invested in
total current assets of the company.total current assets of the company.
2) Net Working Capital- Net Working Capital is the difference between the current assets and the current
liabilities.
Net Working Capital = Current assets- current liabilities

On The Basis Of Time

1) Variable working capital can be further divided:

Seasonal Working Capital, Special Working Capital.

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5.4 Research Area

My research area is INDIA.

5.5 Research Design

It is an empirical study and will be an explorative research .

Period of Study

The time period of the proposed study is limited to five years from 2006-07 to 2010-11.

NSE and Nifty

The National Stock Exchange of India Ltd. (NSE), set up in the year 1993, is today the largest stock
exchange in India and a preferred exchange for trading in equity, debt and derivative instruments by
investors. NSE has set up a sophisticated electronic trading, clearing and settlement platform and its
infrastructure serves as a role model for the securities industry. The
standard set by NSE in terms of market practices; products and technology have become industry
benchmark and are being replicated by many other market participants. It provides a scree-based
automated trading system with a high degree of transparency and equal access to investor
irrespective of geographical location. The high level of information dissemination through the online
system has helped in integrating retail investors across the nation. The exchange has a
network in more than 350 cities and its trading members are connected to the central servers of the
exchange in Mumbai through as ophisticatedtelecommunication network comprising of over 2500
VSATs. NSE has around 850 trading members and provides trading in over 1000 equityshares
and 2500 debt securities. Besides this, NSE provides trading in various derivative products such as
index futures, index option, stock futures, stock options and interest rate futures.

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5.5 sample size

I have selected fifty NSE Nifty companies and their names are:

ABB Ltd.(Electrical equipment) ,ACC Ltd.(Cement and cement products) ,Ambuja Cements
Ltd.(Cement and Cement Products) ,Bajaj Auto Ltd.(Automobiles -2 and 3 Wheelers) ,Bharat Heavy
Electricals Ltd.(Electrical Equipment) ,Bharat Petroleum Corporation Ltd.(Refineries) ,Bharti Airtel
Ltd.(Telecommunication –Services) ,Cipla
Ltd.(Pharmaceuticals),Dr.Reddy'sLaboratoriesLtd.(Pharmaceuticals) ,GAIL (India) Ltd.(Gas)
,Glaxosmithkline Pharmaceuticals Ltd.(Pharmaceuticals) ,Grasim Industries Ltd.

Cement and Cement Products) ,HCL Technologies Ltd.(Computers –Software) ,HDFC Bank
Ltd.(Banks) ,Hero Motors Ltd.(Automobiles -2 and 3 Wheelers) ,Hindalco Industries Ltd.(Aluminium)
,Hindustan Petroleum Corporation Ltd.(Refineries) ,Hindustan UnileverLtd.(Diversified) ,Housing
Development Finance Corporation Ltd.(Finance–Housing) ,I T C Ltd.(Cigarettes) ,ICICI Bank
Ltd.(Banks) , Infosys Technologies Ltd.(Computers –Software) ,Larsen & Toubro Ltd.(Engineering) ,
Mahanagar Telephone Nigam Ltd.(Telecommunication–Services)

,Mahindra & Mahindra Ltd.(Automobiles-4 wheelers) ,Maruti Udyog Ltd.(Automobiles -4 wheelers)

,NTPC Ltd.(Power) ,National Aluminium Co. Ltd.(Aluminium) ,Oil & Natural Gas Corporation
Ltd.(Oil Exploration/Production) ,Punjab National Bank(Banks) ,Ranbaxy Laboratories
Ltd.(Pharmaceuticals) ,Reliance Communications Ltd.(Telecommunication –Services) ,Reliance
Energy Ltd.(Power) ,Reliance Industries Ltd.(Refineries) ,Reliance Petroleum Ltd.(Refineries) ,
Satyam Computer Services Ltd.(Computers –Software) ,Siemens Ltd.(Electrical Equipment) , State
Bank of India(Banks) ,Steel Authority of India Ltd.(Steel and Steel Products) ,Sterlite Industries (India)
Ltd.(Metals) ,Sun Pharmaceutical Industries Ltd.(Pharmaceuticals) ,Suzlon Energy Ltd.(Electrical
Equipment) ,Tata Consultancy Services Ltd.(Computers –Software) ,Tata Motors Ltd.(Automobiles -4
Wheelers) ,Tata Power Co. Ltd.(Power) ,Tata Steel Ltd.(Steel and Steel Products) ,Unitech
Ltd.(Construction) ,Videsh Sanchar Nigam Ltd.(Telecommunication –Services) ,Wipro
Ltd.(Computers –Software) ,Zee Entertainment EnterprisesLtd.(Media & Entertainment),

5.6 Sampling Type

The sampling type is Convenient Sampling.

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6. Data Collection, analysis & Interpretations
6.1 Data Collection
6.2 Data Analysis & Interpretations
6.3 Importance of the Study

43
6. Data collection and analysis & Interpretations

6.1 Data Collection

 Primary Data
 Secondary Data

Primary Data
Data collected by the investigator himself/ herself for a specific purpose. The will be collected through
questionnaire and personal interviews with the officers of the selected companies and investors. The
questionnaire will contain different question on interim reporting . It will also included the items of
information which will be required to be published in the annual report of a company.The main aim of
questionnaire will be to know the options of Indian investors views to officers of companies about the
disclosure of item of interim report.Direct contact with the prospective & present investors will be established
for analysis of ‘perceptions of investors’.The questionnaire will printed & distributed among different
binvestors across the country to obtain ideal answer for the research questions.

Secondary Data
This will be collected through published financial and annual reports of the selected companies and from the
websites of www.nseindia.com, www.sebi.com, www.moneycontrol.com .
The data thus collected will be tabulated, classified & grouped for the purpose of interpretation, analysis and
finding conclusions in order to analysis the data. The various financial techniques such as common size
analysis, comparative analysis & trend analysis will be used in the purposed study.

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6.2 Data Analysis & Interpretations

 Net Working Capital –

An analysis of the net working capital will be very help full for knowing the operational efficiency of company.
The following table provides the data relating to the net working capital.

Net Working Capital = Current assets – Current liabilities

Years Current Assets Current Liabilities Net Working Capital

 Ratio Analysis –

Ratio Analysis is a powerful tool of financial analysis. Alexander Hall first presented in 1991 in federal reserve
bulletin, Ratio Analysis is a processes of comparison of one figure against other , which makes a ratio and the
appraisal of the ratios of the ratio refers to make proper analysis about the strength and weakness of the firms
operations. The term ratios refer to the numerical or quantitative relationship between two accounting
figures. Ratio Analysis of financial statement stands for the process of determining and presenting the
relationship of items and group of items in the statement.

1. Liquidity Ratios
Liquidity refers to the ability of a firm to meet its current obligation as and when these become due. The
short- term obligation is met by realizing amounts from current, circulating assets.
2. Turnover Ratios
These are the ratios which indicate the speeds with which assets are converted or turned over sales.

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6.3 Importance of the study

The study will help to know the real picture of the BSE Sense Companies about interim financial
reporting. The importance of study is:-

 The companies will know the requirements of the investors and they will try to satisfy them. That will
help to them.
 In the aspect of investors the study is import and also. They will get awareness about the matter and
it will improve their ability. For the view of management the study will help in decisions making. The
Study is also important for creditors, government and public

46
7. Conclusions

47
7. Conclusions
In this section the major conclusions and suggestions emerging out of the present study conducted on working
capital management in automobile industry have been highlighted.
 The companies are not using real professional assistance and are not using scientific analysis effectively.
Although they have been emphasizing upon the coordination and joint decisions, in reality decision are made
independently. Decision are taken in short term perspective& its viability and the impact in long term for
expansion and replacement are not given due consideration.
 Most of the companies study the past trends of different components of working capital and try to make
decisions on their basis.
 The companies rely more on bank borrowing and don’t try to generate funds from internal sources. Besides
this, the cost effectiveness of each source of funds is not analyzed. The cost of different sources of funds is
also not compared.
 Cash Planning is not effective and they are finding it difficult to procure from operations leading to
overtrading. The companies are not clear in determining cash levels.
 The companies are becoming stricter regarding collection. But the credit terms of the companies are varying.
A major portion of current assets are blocked in advances.
 The investment in inventory is reducing showing clearly that the companies are now managing inventory more
efficiently than was done during previous year.

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8. Limitations of the Study

49
8. Limitations of the Study

The proposed Study Interim financial Reporting Practices in India (An Empirical study of selected
NSE NIFTY Companies) Suffers with a few draw backs like:

 The study could not cover all Companies due to shortage of resources and human limitations.

 Most of the information so obtained is based of secondary data. Hence, the limitation of reliability and
short comings of Secondary data affects the result of the study adversely.
 The Study also suffers with the General human limitation.
 There may be any sampling error because the sample if very small. So the shortcomings of small
samples may be affecting the conclusions.
 There is also the limit of time that is 5 years commencing 1st April 2006.
 The study could not cover all Companies due to shortage of resources and human limitations
 The information in this study is based on secondary data only and the time period of study is limited
to only 5 years i.e. 2005-06 to 2009-10.
 The study is confined to only one industry i.e.an Automobile Industry & that only in two-wheeler
segment.
 The study is confined to only two companies i.e. Hero Motors Limited & Bajaj Auto Limited, and the
size of both the companies were nearly the same.

50
9. Recommendations
9.1 Guidelines
9.2 Finding of the Study
9.3 Suggestions

51
9. Recommendations

9.1 Guidelines

52
9.2 FINDINGS OF THE STUDY

Based on secondary data:

 The empirical results reveal that the dividend payout policies of Dabur India ltd., Infosys and TCS Ltd.
are significant and strong positively correlated with leverage. Infosys and Tata consultancy services
ltd. are significant and strong positively correlated with provision for Taxation. NTPC ltd, HDFC bank
ltd. and TVS motors company ltd. are significant and strong positively correlated with Liquidity.

 Britannia Industries Limited, State Bank of India, TVS Motor Company Limited, Tata Steel Limited,
J.K cement Limited, DLF Limited(Delhi Land &Finance),J.M.Financial ltd. are partially correlated with
Leverage. Britannia Industries Limited, NTPC Limited, Dr. Reddy's Laboratories Ltd, State Bank of
India, Axis Bank, IDFC and JMC Projects (India) Ltd. are partially correlated with Provision for
taxation. Cipla Global Limited, Infosys, Axis Bank and Tata Steel Limited are partially correlated with
Growth. Dabur India Ltd., Power Grid Corporation of India Limited(POWERGRID), Tata Power and
Tata Steel Limited are partially correlated with Liquidity.

 Eicher Motors Limited, Hero Motocorp Ltd. and Mahindra & Mahindra Financial Services Limited are
weakly correlated with leverage. Tata Power, Sun Pharmaceutical Industries Limited, Wipro Limited,
HDFC Limited, Eicher Motors Limited, JSW Steel Ltd, J.K cement Limited, Ambuja Cements Limited
and DLF Limited(Delhi Land &Finance)are weakly correlated with Provision for taxation. Dabur India
Ltd., Nestle India Ltd., Tata Power, Dr. Reddy's Laboratories Ltd, Sun Pharmaceutical Industries
Limited, Bhushan Steel, J.K cement Limited, Ambuja Cements Limited and IDFC are weakly
correlated with Growth. Tata Power, Sun Pharmaceutical Industries Limited, Wipro Limited, State
Bank of India, JSW Steel Ltd, ACC Limited, Bhushan Steel, Ambuja Cements Limited, Ambuja
Cements Limited, DLF Limited(Delhi Land &Finance)and NBCC are weakly correlated with
Liquidity.267

 Nestle India Ltd., NTPC Limited, Power Grid Corporation of India Limited
(POWERGRID),NBCC, Tata Power, Dr. Reddy's Laboratories Ltd, Sun Pharmaceutical Industries
Limited, Wipro Limited, Axis Bank, HDFC Bank Limited, JSW Steel Ltd, Ambuja Cements Limited,
ACC Limited, IDFC and JMC Projects (India) Ltd. Are negatively correlated with leverage. Nestle
India Ltd., Power Grid Corporation of India Limited(POWERGRID), Cipla Global Limited, TVS Motor
Company Limited, Hero Motocorp Ltd., NBCC, ACC Limited,Bhushan Steel andJ.M.Financial ltd. are
negatively correlated with provision for taxation.

 Mahindra & Mahindra Financial Services Limited, Britannia Industries Limited, NTPC, Power Grid
Corporation of India Limited(POWERGRID), HDFC Bank Limited, State Bank of India, Eicher Motors
Limited, NBCC, Hero Motocorp Ltd., TVS Motor Company Limited, ACC Limited, JMC Projects (India)
Ltd. and DLF Limited(DelhiLand &Finance)are negatively correlated with Growth. Nestle India Ltd.,
Britannia Industries Limited, Cipla Global Limited, Dr. Reddy's Laboratories Ltd, Infosys, Tata
Consultancy Services Limited, Axis Bank, Hero Motocorp Ltd., Eicher Motors Limited, J.K cement
Limited, Infrastructure Development Finance Company, Mahindra& Mahindra Financial Services
Limited, JMC Projects (India) Ltd. And J.M. Financial ltd. is negatively correlated with Liquidity.

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 The study reveals that out of four variables (Liquidity, Leverage, for taxation and Growth)Liquidity has
least influence on dividend payout in Britannia Industries Limited, Infosys, Tata Consultancy Services
Limited, Dr. Reddy's Laboratories Ltd, Infrastructure Development Finance Company,JMC Projects
(India) Ltd., Mahindra & Mahindra Financial Services Limited, J.K cement Limited and Hero Motocorp
Ltd.. Liquidity is significantly influences to dividend payout in case of Dr. Reddy's Laboratories Ltd,
Infrastructure Development Finance Company and JMC Projects (India) Ltd.Dividend payout of
Britannia Industries Limited, Infosys, Tata Consultancy Services Limited,Mahindra & Mahindra
Financial Services Limited, J.K cement Limited and Hero Motocorp Ltd.are not significantly influenced
by liquidity.

 The study reveals that out of four variables(Liquidity, Leverage, Provision for taxation and
Growth)Leverage has least influence on dividend payoutin NTPC Limited, Power Grid Corporation of
India Limited(POWERGRID), Tata Power Sun Pharmaceutical Industries Limited, Wipro Limited,
HDFC Bank Limited, Axis Bank, JSW Steel Ltd and Ambuja Cements Limited. Leverage is
significantly influences to dividend payout in case of NTPC Limited and Ambuja CementsLimited.
Dividend payout of Power Grid Corporation of India Limited(POWERGRID), Tata Power, Sun
Pharmaceutical Industries Limited, Wipro Limited, HDFC Bank Limited, Axis Bank and JSW Steel Ltd
are not significantly influenced by leverage.

 The study reveals that out of four variables(Liquidity, Leverage, for taxation and Growth)Provision for
taxation has least influence on dividend payout in Nestle India Ltd., Cipla Global Limited, Tata Steel
Limited, Bhushan Steel,ACC Limited and,NBCC Provision for taxation is significantly influences to
dividend payout in case of Nestle India Ltd. and ACC Limited only. Dividend payout of Cipla Global
Limited, Tata Steel Limited, Bhushan Steel and,NBCC are not significantly influenced by provision for
taxation.

 The study reveals that out of four variables(Liquidity, Leverage, Provision for taxation and
Growth)Size and Growth has least influence on dividend payout in Dabur India Ltd.,Bank of
India,Eicher Motors Limited, TVS Motor Company Limited,J.M.Financial Ltd. And DLF Limited(Delhi
Land &Finance).And dividend payout of all companies whose least influence variable is Size and
Growth are not significantly influenced by Size and Growth.

 The empirical results reveal that Profitability is significantly influenced to dividend payout of Dabur
India Ltd., Power Grid Corporation of India Limited(POWERGRID), Tata Power, TVS Motor Company
Limited, Tata Steel Limited, Infrastructure Development Finance Company, Ambuja Cements Limited,
J.K cement Limited, and NBCC.From the data (Table 7.1, 7.5, 7.6, 7.17, 7.20,7.23, 7.247.25 and
7.29) it can be observed that dividend and profitability are positively related. It means each year a
steady increase in earnings has led to steady increase in dividends and Dividend payout of Nestle
India Ltd., Britannia Industries Limited, NTPC Limited, Cipla Global Limited, Sun Pharmaceutical
Industries Limited, Infosys, Tata Consultancy services Limited, Wipro Limited, HDFC Bank Limited,
State Bank of India, AxisBank, Eicher Motors Limited, Hero Motocorp Ltd., JSW Steel Ltd, Bhushan
Steel, , Mahindra & Mahindra Financial Services Limited,J.M.Financial, DLF Limited(Delhi Land
Finance)and JMC Projects (India) Ltd. are not significantly influenced by profitability.

 As per theory a high profitable companies pay higher dividend but in this study it is observed thateven
a higher profitable companies pay lower dividend and a company with low profit pay high dividend.
For example, companies like ACC LTD. pay DPY 31% in the year 2007-08 with 24.62% profitability
whereas in the year 2011-12 it has paid 53% DPY with profitability of 14.37%. Moreover it is also
observed that in case of Axis bank dividend payout ratio has declined in the year 2009-10 and 2010-

54
11 even though the profitability has increased in the year 2010-11 which depicted that rise in
profitability is not always associated with rise in dividend payout. Moreover it is also observed that in
Heromoto corp Ltd., Profitability remains stable inspite of drastic increase in dividend payout in the
year 2010-11.

 Appendixes shows that the companies selected to have continuous dividend payment record during
the selected time period for study purpose and general trend observed is that the dividends have
either remained constant or increased; instances of decline in dividends have been very rare.

 Fluctuation in dividend payment is high in case of J. M. Financial Ltd. TVS Motors Ltd., Heromotocorp
Ltd. Whereas the companies like NTPC Ltd., Powergrid, Tata power, TCS., HDFC Bank, State bank
of India, IDFC, Mahindra and Mahindra Financial Ltd. were manage to pay stable dividend.

 As per theory it is said that company’s dividend policy is affected by the factors like Liquidity,
Leverage, Provision for taxation and Size and Growth. But this study reveals that in some of the
companies there were higher fluctuations in dividend payout which are not due to these independent
variables. It is found by observing annual reports that company’s dividend payout policy is affected by
management decisions.

BASED ON PRIMARY DATA

 The empirical result reveals that Age-group is positively and significantly correlated with Dividend
decision and negatively correlated with Capital appreciation decision. This shows that with increased
age shareholders prefer to invest in those companies which gives stable dividends.

 The study reveals that there is significant impact of Age group on investment purpose of
shareholders. It also shows that with increased age, the purpose of shareholders for investment is for
receiving stable dividends and not for capital appreciation.

 By observing the responses of shareholders regarding stability of dividend policy, it can be observed
that most of the shareholders agreed with the statement that company should maintain stable
dividend policy. In which it is also observed that generally housewives, Old age persons and also a
service class people are more. The reason behind them is, they believe, for them dividend should
become a stable income. It is also observed that persons who are involved in business are not
agreed with the statement.

 It can be observed that majority of the respondents agreed with the statement that stock market
places more emphasis on dividend than on retained earnings and higher dividend increases the firm
value. This can be due to lack of proper knowledge about stock market.

 Most of the shareholders believes that dividend is a safer than retained earnings since they consider
dividend as a safer income of source.
.

 Regarding effect of current earnings on dividend policy, it can be observed that fifty percent of
shareholders are agreed with it whereas fifty percent of them are disagreed. The reason behind is
that some of the respondents believe, company can declare the dividend out of the reserves also.
55
 There is not much difference in opinion regarding dividend announcementfor accessing the value of
firms.

 Shareholders did not give their opinion regarding “clientele effect”.

 The study reveals that shareholders prefers to remain invested for long duration in those companies
which pay steady, consistent and high dividend and There by shows their loyalty with the companies.

 It is found that shareholders are always interested in making investment only in those companies
which pays steady, consistent and high dividends. Because of which, they are satisfied and prefers to
remain invested.

 By making an observation regarding views of dividend policies, it can be seen that majority of the
shareholders prefer to invest in companies in form of shares according to proportion of their income,
they preferred to receive dividend by way of cash and their preferable sector for investment is
BANKING sector followed by IT& SOFTWARE. It is also observed that shareholders preferable
duration for holding of shares is short-term and medium-term. Regarding consistency of dividend
received from the selected companies, majority of shareholders have given their positive views.

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9.3 SUGGESSTIONS

 Dividend policy is set largely at the discretion of the management. One of the major important factor
management has to consider is shareholders’ interest. By observing responses of the shareholders
regarding the dividend policy and shareholders’ beliefs regarding dividend policy and making
comparative analysis of dividend policies of selected companies, following suggestions can be made:

 Every year declaration of dividends is necessary. As shareholders’ are the owners of the company
and risk is directly associated with the ownership. As shareholders bear the risk, so they expect a fair
return in form of dividend.So it is suggested to the companies to provided fair dividends to the
shareholders for better investment options and goodwill of the company.

 Since reduction in dividend may create a negative impression in the mind of shareholders which will
affect the credit position of the company so it is suggested to the companies that dividend raised
should not be reduced.

 Management of each company sets its unique dividend policy which depends on a few “determinants”
or factors affecting dividend policy because Dividend policy of a company should depend on various
internal firms specific factors hence companies should design internal policies in such a way that best
interest of both the shareholders and the company are satisfied

 Dividend policy should be decided keeping in mind the growth needs of the firm. A high dividend
payout reduces firm’s access to retained earnings, the cheapest source of capital. For that reason
management may prefer lower dividend payout ratios, especially in growth firms as the retained funds
would be required for expansion purposes.

 It has been found that majority of old age people prefers to invest their income only in those
companies which provides fair dividends. However to them, it is suggested that rather than making
investment in only dividend paying firms, they should also focus on capital appreciating firms which in
turn would result in increasing their overall capital.

 Contrary to above point, it has been found that majority of youngsters prefers to invest their income
only in those companies which provides capital appreciation. However to them, it is suggested that
rather than making investment in only capital appreciating firms, they should also focus on dividend
paying firms which in turn would help them to receive consistent gain.

 Specific corrective actions are suggested to those companies whose dividend payout signals drastic
fluctuations.

 It was found that there were certain companies like Britannia Industries Limited, Dr. Reddy's
Laboratories Ltd, Infosys, TCS, Hero Motocorp Ltd., J.K cement Limited, Mahindra & Mahindra
FinancialServicesLimited,IDFC,JMCProjects(India) Ltd. whose Liquidity is having least correlation
with dividend payouts. However suggestion is made to such companies to increase their liquid
position by reducing long term investment.

 It was found that there were certain companies like NTPC Limited, Powergrid Ltd, Tata Power, Sun
Pharma Industries Ltd, Wipro, HDFC Bank Ltd, Axis Bank,
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JSW Steel Ltd, Ambuja Cement Ltd etc whose Leverage is having least correlation with dividend
payouts. Hence suggestion is made to such companies to reduce their borrowing and thereby they
can increase their dividend payouts.

 It was found that there were certain companies likeNestle India Ltd., Cipla Global Limited, Tata Steel
Limited, Bhushan steel, ACC Ltd, NBCC Ltd etc whose Provision for Taxation is having least
correlation with dividend payouts.Hence suggestion is made to such companies that whenever there
is a cut in taxation policy then it should have direct reflection in dividend payouts to the shareholders.

 It was found that there were certain companies like Dabur India Ltd., SBI, Eicher Motors Ltd, TVS
Motors Ltd, JM Financial Ltd, DLF etcwhose Size and Growth is having least correlation with dividend
payouts. Hence suggestion is made to such growth making companies to provide satisfied dividend
payouts to shareholders rather than only focusing on increasing capitals.

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10. Bibliography

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10. Bibliography

 M.Y. Khan & P.K. Jain, Financial Management (Text & Problems), Tata McGraw Hill Publishing Co.
Ltd., Fifth reprint 1995.

 Allen, Franklin and Roni Michaely,”Dividend Policy”, Working paper, The Wharton school, University
of Pennsylvania,1994

 Black,Fisher”The dividend Puzzle “The journal of portfolio Management Vol.2,No.3,1976,p.5

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