Analysis of Industry Film

8/6/2019 Analysis of Industry Film

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FINANCIAL PROJECT REPORT ON

Fiem Industries Limited

Automative lighting, signaling equipments and

rear view mirrors.

SUBMITTED TO: SUBMITTED BY:

MsBhavnaRanjanAbdul azeem E-24

Prateeksaini E-27

Tapishbohra E-48

Nikhil chopra E-53

Neerajanand E-25

Utsavgupta E-34


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INDEX

S. No. PARTICULARS PageNo.

1. ANALYSIS OF INDUSTRY 3

2. INTRODUCTION OF COMPANY 7

3. ORGANISATIONAL HIERARCHY 10

4. MISSION,VISION AND OPPURTUNITIES 12

5. CHAIRMANS MESSAGE,PRODUCTS AND CUSTOMERS 16

6. RATIO ANALYSIS 20

7. CASH FLOW STATEMENT ANALYSIS 40

10. COMMON SIZE STATEMENT 43

11. AWARDS AND ACHIEVEMENT 48

12. ANNEXURE 49

13. BIBLIOGRAPHY 52


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ANALYSIS OF INDUSTRY

(AUTO ANCILLARIES)


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yThe fortunes of the auto ancillary sector are closely linked to those of the

auto sector. Demand swings in any of the segments (cars, two-wheelers,commercial vehicles) have an impact on auto ancillary demand. Demand is

derived from original equipment manufacturers (OEM) as well as thereplacement market. Out of the total revenues, engine parts account for

31% of the total revenues of the industry.

yACMA, the Indian auto component industry body had an estimated 558players registered with it in FY09.

yMargins in the replacement market are higher than the OEM market. The

OEM market is very competitive and component manufacturers have tocompromise on margins to bag bulk orders. Moreover, delivery schedules

and quality standards have to be adhered to very strictly.

yIndian auto ancillary sector has traditionally suffered from poor quality.

While this still holds true for the unorganized sector, the organized sectorhas been resorting to increased automation to reduce the defect levels.

yLower labour costs givesIndian auto ancillary companiesan absolute costadvantage. To put things in perspective, ACMA numbers suggest that wage

cost accounts for 3% to 15% of revenues for Indian manufacturers ascompared to 20% to 40% for US players. India's strength in exports lies in

forgings, castings and plastics historically. But this is changing with morecomponent manufactures investing in upgradation of technology in recent

years.

Key Points

Supply Low for high technology products. Unorganized sector dominatesthe domestic component market due to excise benefits.Generally, excess supply persists.

Demand Linked to automobile demand. Export demand is linked to theincreasing acceptance towards outsourcing.

Barriers toentry

Capital, technology, OEM relationships, customer service,distribution network to meet replacement demand.

Bargainingpower of

suppliers

Low with OEMs. Relatively high in the replacement market

Bargainingpower ofcustomers

Companies operating in the export market face competition at aglobal level. At the domestic level, market structure is fragmentedfor a large number of ancillary products. Most companies adoptlow cost and differentiation strategies. In some products (likebatteries), only two or three companies control over 80% of the


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market.

Competition Will intensify, as global players will enter the market leading toconsolidation. Dereservation of SSI will result in access to capitaland technology

Financial Year '09ySimilar to the global economy, the Indian automobile industry was also witness to

a huge slowdown in the second half of FY09. Consequently, the passenger carand CV segment witnessed a decline of 3% combined for the full year asopposed to a growth of 10% in the first half of the fiscal.

yIn light of increased competition in the global market and over supply situation,bigger auto majors faced significant pressure on margins. Moreover, theimperative to invest in new product development increased. This resulted inselect global majors increasing budget for outsourcing of components in order tosave cost.

y

Capacity utilisation rates of the auto ancillary sector as a whole decreasedsignificantly in light of reduced exports and slowdown in the domestic markets,especially in the second half of FY09. The demand for M&HCVs and LCVsdecreased by 35% and 12% in FY09.

yThe industry players had to grapple with the twin devils of extreme volatility inrupee and input costs and as a consequence, tremendous pressure waswitnessed on margins.

Prospects

yThere has been a conscious effort by manufacturers to improve productivity ofthe suppliers in the past few years. Though the number of active vendors hasdeclined significantly for auto manufacturers, technology transfer and fresh fundinfusions have resulted in improved productivity in the remaining ones.

Relaxation of FDI norms for the small-scale sector could emerge as one of thekey growth drivers in the long run. The Indian automotive components industryhas lined up sizeable investment schedules for the next few years.

yThe automobile sector is cyclical and dependent on the growth of the economyand improvement in infrastructure. Factors like increased public spending,favorable interest rates and general improvement in per capita income pointtowards higher demand for automobiles in the future. Also, government'sinitiatives in the infrastructure sector such as the Golden Quadrilateral project andNHDP (National Highway Development Programme) are likely to give boost tofour-wheeler sales especially CVs. Just to put things in perspective, we expectCV segment to grow by 7% to 8%, 2-wheeler demand to increase by around 12%to 15% and passenger car sales growth at 10% to 12% over the medium to long

term. This is a positive for auto ancillary manufacturers.

yIn the long term, the growth of this sector will depend partly on pace ofindigenisation levels across all segments. The prospects look bright as mostcompanies are increasing the indigenous components, in an effort to reduce theircurrency losses and remain competitive. Also, the fact that auto manufacturerslike Ford, Hyundai and Maruti are exporting cars, make the prospects lookencouraging.


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yMargins are likely to come under pressure in the long term because ascompetition increases, manufacturers will find it difficult to increase prices and willtry to cut costs. The burden will eventually fall on auto ancillary players. In thenear future though, companies will need to have manufacturing lines that can beadapted for new models, have strong technology backing, an ability to export todeveloped markets, market dominance in specific products and a growth plan

driven by volumes and product innovations. Companies will have to focus onquality and abide by delivery schedules if they want to survive. As manufacturerssourcing components are keen to get components from fewer sources in future,this will lead to consolidation in the sector.

yThe growing number of Free and Preferential trade agreements being signed byIndia with countries like Thailand, Singapore and other ASEAN countries will hurtthe cost competitiveness of Indian companies as Indian players play significantlyhigher duties than their Asian counterparts. Therefore, Indian companies mightlose out on big orders if the duty structure is not rationalised.

Indian Automobile Industry constitutes a mix presence of Indian and Global Automobile players.Manufacturing advantages, strong domestic demand and export potential collectively encouragedfor a strong growth trajectory for Automobile Industry in the recent years. These growth drivers

encouraged the players to develop large capacities, infrastructure and market for their products.Indian auto component industry, which follows the moves of Automobile Industry, has also

grown significantly. The small players have turned into big business houses and niche players.Over the times, they have increased their acceptance in the global markets, opening new growth

areas. The growth story was getting good by each passing year and the Industry was also doingwell. However, year 2007-08 saw a negative growth in production of Automobiles. The main

reasons for this decline were high interest rates, limited access to retail finance, limited andcostly options of fund raising and low demand for vehicles. These all factors acted as vicious

effect on the growth of Industry. The year 2008-09 continued to be not a good year for theglobal economy. While developed economies like US and Europe are worst hit, the impact is

worldwide. In US, the bankruptcy by Banks, Financial Institutions and Automobile giants hadbecome frequent news. However, the governments of all countries acted very fast and provided

support in the form of bailout and stimulus packages. These supports not only helped theindustries to keep floating during turbulent times but also resulted in survival and confidence

booster of the economies. The Automobile Industry is among the worst hit industries by thisglobal financial and economic slowdown. In US, General Motors and Chrysler had filed Chaper-

11 bankruptcies, though for the better future. The growth in Indian Automobile industry also raninto rough whether for a while. Severe credit crunch, costly and limited access to funds,

sluggishness in demand and non-availability of consumer finance have collectively contributed

for the low single digit growth in Indian automobile industry in 2008-09. However, it seems thatthe worst is over and the Indian industry is heading for a revival and better growth. The signalsof the Ist quarter of current fiscal are encouraging. The stimulus packages by the Indian

Government and recovery sentiments in the economy have contributed positively. Theeconomies in the global prospective are also showing recovery. The badly affected Automobile

giants of developed economies are trying their level best to return to normalcy by support ofsovereign governments, restructuring, new strategies and other means.


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INTRODUCTION OFTHE COMPANY


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Fiem Industries limited is one of the leading manufacturers of automotive lighting & signaling

equipments and rear view mirrors. It major business comes from the two-wheeler segment of the

vehicle industry. It has a wide range of lighting systems and rear view mirrors, sheet metals parts

and plastic components for two and four wheeler our diversified products portfolio ranging from

rear view mirrors, head lamps, tail lamps, roof lamps, wheel covers, warning triangle, complete

rear fender assembly, frame assembly, mudguards and various sheet metal & plastic parts etc. is

capable of catering to the needs of almost all segments of automobile industry viz., four-

wheelers, LCVs, HTVs and tractors. Its existing plants are located at

1) Kundli (Sonepat, Haryana) (Unit I)

2) Hosur (Tamil Nadu) (Unit II & III) and

3) Mysore (Karnataka) (Unit IV).

Its upcoming units will be located Hosur (Tamil Nadu) (Unit V) and Nalagarh (Himachal

Pradesh) (UnitVI). The proximity of plants to our OEM customers offers logistic support is

savings to valued customers and further enables.

Upcoming unit Rai (Haryana) us to cut inventory carrying costs and shorten the delivery time.

The commitment to customer's satisfaction in terms of quality, just in time delivery and services

is amply reflected at in the repeat orders and awards from customers. We have had the

opportunity of been associated with some of our prestigious OEM customers since the start of

their operation in India. In its quest for continuous improvement, FIEM has acquired

certifications such as ISO 9002, QS 9002, QS 9000, ISO/ TS 16949:2002, & ISO 9001. It has

also acquired certification for conformity of production form RDW Netherlands. FIEM has also

been accredited with ISO14001-2004 Certification for Environment Management Systems.

FIEM employees are constantly being trained to meet the customer's specific requirements as perTQM. As a result of all these, FIEM has become a Tier I Supplier not only in India but also in

Europe and USA.

Team FIEM a highly skilled and experienced force aims at attainment of customer's Goals.

Achieving excellence is what Team FIEM strives for and is dedicated to maintaining highest

standards in manufacturing. Technology and delivery to the customers in an ever changing and

environment.

Its success is challenging a continuous focus on R&D and commitment of each and every FIEM

team member to deliver BEST IN CLASS quality and service to the customer. The focus on thefuture will take us to where we want to be - satisfy the needs of the modern day's Automobile

manufacturers. In our request offering better prospector in future, the focus will be on strength

and thoughts.

Faster product development cycle.

Low cost Manufacture.State of the Art Manufacturing Facilities.


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Comprehensive R&D , With Gen Nxt. software.Versatility in Designing & development of both 2 Wheeler and 4 Wheeler products.

Multi location plants offer ability to feed customers at different locations, and offer capability


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ORGANIZATIONAL

HIERARCHY


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BOARDOFDIRECTORSMr. J.K. Jain - Chairman & Managing DirectorMrs. Seema Jain -Whole Time DirectorMr. J.S.S. Rao -Whole Time DirectorMr. Pravin Kumar - Whole Time Director (up to 24.10.2008)Mr. Kashi Ram Yadav - Whole Time Director (w.e.f. 25.10.2008)Ms. Aanchal Jain -Whole Time DirectorMr. Rahul Jain - Non-Executive Director

Mr. C.D. Shah - Independent DirectorMr. Iqbal Singh - Independent DirectorMr. K.S. Lamba - Independent Director (up to 29.04.2009)Mr. Charoen Sachamuneewongse - Independent Director (w.e.f. 30.04.2009)Mr. P.S. Bhatia - Independent DirectorMr. C.S. Kothari - Independent DirectorMr. J.S. Chandhok - Independent DirectorCHIEFFINANCIALOFFICERMr. O.P. GuptaCOMPANY SECRETARY ANDCOMPLIANCEOFFICERArvind K. ChauhanAUDITCOMMITTEEMr. J.S. Chandhok - ChairmanMr. C.S. Kothari - MemberMr. P.S. Bhatia - Member

SHAREHOLDERS / INVESTORGRIEVANCECOMMITTEEMr. C.S. Kothari - ChairmanMr. J.S.S. Rao - Member (up to 24.10.2008)Mr. Kashi Ram Yadav - Member (w.e.f. 25.10.2008)Mr. Rahul Jain - MemberREMUNERATIONCOMMITTEEMr. C.S. Kothari - ChairmanMr. P.S. Bhatia - MemberMr. Iqbal Singh - MemberAUDITORSM/s Anil S. Gupta & Associates201, Vikram Tower, 16 Rajendra Place, New Delhi-110008REGISTEREDOFFICED-34, DSIDC Packaging ComplexKirti Nagar, New Delhi-110015CORPORATEOFFICE32 Mile Stone, G.T. RoadKundli, Sonepat, Haryana 131028Website: www.fiemindustries.com


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MISSION ,VISION

,OPPURTUNITIES

ANDTHREATS OF THE

COMPANY


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VISION

To be the most preferred supplier of Automotive Lighting, SignallingEquipments and Rear

View Mirrors for domestic as well as global OEMs providing advanced design solution,

quality products at lower costs by adapting Lean manufacturing process, Value Engineering

and total quality management

MISSION

To be a dominant player in Automotive Lighting, Signaling Equipments and Rear view

Mirrors. To Enhance Stakeholders value while conserving the environment and contributing to

welfare of the society at large.

QUALITY POLICY

We The Employees" of FIEM Industries Limited Unit give our customers Total

Satisfaction in terms of Quality, Cost and On Time Delivery. We will pursue continuousimprovement in Product Quality by upgrading the Technology and Training of Employees

OPPORTUNITIES AND THREATS

a) OpportunitiesThe global economic crisis has forced the Automobile majors indeveloped countries to keep

their costs in control and shift the focuson producing comparatively low cost vehicles. This allwill force themto procure the auto components from low cost countries like Indiaand will open

new growth opportunities for Indian Automotive Industry.

Further, Indian Automobile Industry has its own growth drivers likegrowing middle class population, low penetration of vehicles andincreasing trend of owning personal vehicles,cropping up of townshipsand growing rural economy. Political stability and thrust of the

UPAgovernment on Infrastructure development will also contribute towardseconomic growthand stability. These all will also result in growth ofthe Automotive Industry. Additionally,

Global and Indian Automobilecompanies are planning for expansion of Indian operations dueto hugepotential demand and low cost advantage.The Company is seeing big opportunities in

four wheeler segment ofthe Industry and this is one of the main thrust areas for futuregrowthof the Company.The management of the company is aware of all these

developmentsand increasing its capacities by setting up new manufacturing Unit (Unit-VII) inRai Industrial Area, Distt. Sonepat, Haryana.

b) Threats/Challenges:

At the Company level, the management doesnt see any major threat.Further, it is well aware

of the possible challenges and keep them as apart to be factored into business management andstrategy planning.At the Industry level, management feels that India has some


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structuraldisadvantages like higher power cost coupled with inadequate supply resulting inhigher transaction costs in comparison to developedcountries and competitor low cost

countries like China and Thailand.Further, there are some infrastructure issues like roads,ports, andrailways, which adversely impacts logistics efficiency. However, themanagement is

hopeful that thrust of the UPA government onInfrastructure development will address these

issues.

Segment-wise performance

The company is engaged in the business of automotive parts, which isgoverned by the same set

of risk and returns. Hence, the Companysbusiness falls with in one segment only. The mainproducts of theCompany are Automotive Lighting & Signaling Equipments, Rear ViewMirrors

including Prismatic Mirror and Sheet Metal Components.In FY 2008-09, the Company hasbeen able to register a growth of24% in Net Turnover in a challenging economic environment

andprevailing worldwide downturn.

Outlook

The year 2008-09 continued to be not a good year for the global economy. However, themanagement of the Company feels that theworst is over and the Indian industry is heading for

a revival and bettergrowth. The signals of the Ist quarter of current fiscal are encouraging. Thestimulus packages by the Indian Government and recoverysentiments in the economy have

contributed positively.The management hopes that Automotive Industry beingdirectlydependent on Automobile Industry will also perform better in thecurrent year and in

long-term.

Risk and Concerns

Severe credit crunch, costly and limited access to funds, sluggishnessin demand and non-availability of consumer finance have collectivelycontributed for the low single digit growth in

Indian automobile industryin 2008-09. However, these things are returning to normalcy withtherevival signs of the economy. It is a widely accepted phenomenon thatthe low interest rate

was a boon for the industry and played a vital rolein its development. If the growth potentialexist and untapped, theneffect of low interest rate and easy availability of finance have

positiveand dynamic cascading effect on all growth factors leading to overalldevelopment.


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CHAIRMAN

MESSAGE


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Message from The Chairman & Managing Director

Fiem is committed to offer advanced design solutions and adoption of state of the arttechnologies with lean manufacturing process to deliver world class quality products

for Automobiles to make driving safer.

Team Fiem aims at achieving Total Customer Satisfaction by offering zero defect products at competitive price. It pursues this goal with relentless Zeal & Dynamism

and constantly endeavors to add value to its Stakeholders and preservation ofenvironment.

J.K. JAIN


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PRODUCTS OF THE COMPANY

Head/Tail /Blinker Lamps And Rear View Mirrors

FHLA-2374

HEAD LAMP ROUND

TAFE

FHLA-2375

O.C.No.(FHT-166)HEAD LAMP ROUND

MASSEY FERGUSON

FHLA-2376

O.C.No.(FHT-168)

HEAD LAMP-N/M

TAFE

FWL-2377

O.C.No.(FHT-165)

PLOUGH LAMP

TAFE


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FWL-2378

PLOUGH LAMP

TAFE

FHLA-2379

O.C.No.(FHT-111)HEAD LAMP

TAFE/MAHINDRA

FTLA-2380

O.C.No.(FTT-310)

TAIL LAMP

TAFE

FTLA-2381TAIL LAMP

TAFE

FFCL-2382

O.C.No.(FBT-408)FRONT COMBINATION

LAMPTAFE

FOSRVM-2383

OUTSIDE REAR VIEWMIRROR

TAFE

Head/Tail /Blinker Lamps And Rear View Mirrors


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FRRA-2345R

FRRA-2345WADVANCE MORNING

TRIANGLE

RED/WHITE UNIVERSAL

FRRA-2346

O.C.No.(FRR-751)ADVANCE WARNING

TRIANGLE

UNIVERSAL

FRRA-2347

O.C.No.(FRR-752)ADVANCE WARNING

TRIANGLEUNIVERSAL

FRRA-2348

ADVANCE WARNINGTRIANGLE

TRACTORS

FRRA-2349

O.C.No.(FRR-718)REFLEX REFLECTOR

RED/AMBER/GREEN/CLEAR

FRRA-2152


ROUND UNIVERSAL

RED/AMBER/CLEAR


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FRRA-2350


SQUARE UNIVERSAL RED,

AMBER, WHITE

FRRA-2151


RECTANGULAR UNIVERSAL

RED/AMBER/CLEAR

We have been supplying to almost all major OEMs in the domestic market as well as

few global OEMs. Besides some global Tier I automotive lamp manufacturers.

Our OEM customers in the four-wheeler segment include the following:-

Punjab

Tractors

Ltd.

Hyundai

Motors India

Ltd.

Tata

Motors Ltd.

Inter-

nationalTractors

Ltd.

Swaraj

Mazda Ltd.

VST Tiller

& TractorsLtd.

Ashok

Leyland Ltd.

Tractors &

Farms Equip.

Ltd.

HMT

Tractors Ltd.

Escorts

Ltd.

Skoda Auto

India Pvt.

Ltd.

Force

Motors Ltd.


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RATIO ANALYSISWhat DoesRatio Analysis Mean?A tool used by individuals to conduct a quantitative analysis of information in a company'sfinancial statements. Ratios are calculated from current year numbers and are then compared to

previous years, other companies, the industry, or even the economy to judge the performance ofthe company. Ratio analysis is predominately used by proponents of fundamental analysis.

There are many ratios that can be calculated from the financial statements pertaining to a

company's performance, activity, financing and liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per share, asset turnover and working capital

In finance, ratio analysis is carried out to judge the liquidity of the organization. It helps theanalysts to find if a company is capable enough to pay its liabilities. Moreover it also helps to

show the operating efficiency and internal return of an organization. Keep in mind that the ratiois good or bad only if it is compared to the industryin which the organization is operating in.

Some of the important ratios are:

y Current Ratioy

Asset Test Ratioy Return on Assety Return on Investment

y Inventory turnover ratio


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paid out in a lawsuit settlement, are excluded from the operating margin calculation because theydon't represent a company's true operating performance.

OPERATING MARGIN (%)

YEAR 2007 2008 2009

FIEM

INDUSTRIES 12.19 12.08 9.81

BOSCH 17.73 16.19 17.73

ANALYSIS:-

If we talk about the operating margin ratio of FIEM INDUSTRIES, it is quite impressive i.e. 9.81%and means the companys profitability is quite good but if we compare the ratio with that ofBOSCH i.e. 13.52% then we can say that operating profit margin of FIEM INDUSTRIES is lessthan that of BOSCH and there is a scope of improvement in this ratio. This can either be becauseBOSCH is a bigger player in this industry and operating on a larger scale and they are enjoyingeconomies of scale. This is the major reason that their profitability ratios are better than that ofFIEM INDUSTRIES.

2)GROSS PROFIT RATIO (%)

Gross margin,Gross profit margin or Gross Profit Rate is the difference between the sales and

the production costs excluding overhead, payroll, taxation, and interest payments. Gross margin

can be defined as the amount of contribution to the business enterprise, after paying for direct-

fixed and direct-variable unit costs, required to cover overheads (fixed commitments) and

provide a buffer for unknown items. It expresses the relationship between gross profit and sales

revenue. It is a measure of how well each dollar of a company's revenue is utilized to cover the

costs of goods sold.

Gross profit margin= gross profit/net sales*100

GROSS PROFIT MARGIN(%)

YEAR 2007 2008 2009

FIEM

INDUSTRIES 9.14 7.76 5.79

BOSCH 11.82 9.68 7.23


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ANALYSIS:-

In this case FIEM INDUSTRIES has a net profit margin of 2.09 % and the net profit margin of

BOSCH is11.72%. The lower net profit ratio may even represent price war, which can be one

reason for lower profits and it also means that the company needs to control administrative

and office expenses. This is a major reason to worry for the company as the net profit margin

for FIEM INDUSTRIES is way behind that of BOSCH. And an immediate action must be initiated

in this respect.

4)CASH FLOW MARGIN (%)

The Cash Flow Margin measures the Cash Flow from Operations in relation to the Net Sales. It is cashthat a company needs to generate to pay its expenses and purchase assets, and how well a companycan convert sales into cash is crucial. Knowing that a company is continually improving its Cash FlowMargin is extremely valuable and is a key indicator of performance. Companies that end up generating anegative cash flow are losing money as they generate sales and any company cannot keep this up overan extended period of time. With a negative cash flow, the company will have to rely on cash reserves ortake on more debt as they continue the business.

Cash Flow Margin = Cash Flows from Operating Activities/Net Sales

CASH FLOW MARGIN (%)

YEAR 2007 2008 2009

FIEM

INDUSTRIES 9.19 9.11 6.82

BOSCH 14.69 14.57 12.73

ANALYS

IS:-

Cash flow margin of FIEM INDUSTRIES is 6.82% and that of BOSC is 12.73%.This ratio shows thattheir sales are converted into cash but not as fast as BOSH. This means that they are following liberalcredit policy with their debtors. They should try to follow strict credit policy so that they have morecash for their day to day expenses. A lower cash flow margin than industry is a negative sign for thecompany and means that they are taking more time to convert their sales into cash.


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5)RETURN ON NET WORTH (%)

This ratio expresses the net profit in terms of the equity shareholders funds. This ratio is animportant measure for equity shareholders funds since it indicates the return on the fundsemployed by them

Return on net worth= Net profit after interest and tax/net worth*100

Net worth= Equity capital + Reserves and surplus

RETURN ON NET WORTH (%)

YEAR 2007 2008 2009

FIEM

INDUSTRIES 14.66 9.41 5.64

BOSCH 23.76 20.47 17.44

ANALYSIS:-

Return on net worth for FIEM INDUSTRIES is 9.9%, which means the company is earning9.9% on the amount invested by shareholders. And the ratio for BOSCH is 9.99%. This meansthat the return on net worth for FIEM INDUSTRIES is in tandem with that of the industry. Theratio is approximately 10% which means the company s showing a healthy growth and they

need to cut costs in order to increase their profits.


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LEVERAGE RATIOS:-

1. Any ratio used to calculate the financial leverage of a company to get an idea of the company's

methods of financing or to measure its ability to meet financial obligations. There are several different

ratios, but the main factors looked at include debt, equity, assets and interest expenses.

2. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output

will affect operating income. Fixed and variable costs are the two types of operating costs; depending on

the company and the industry, the mix will differ.

1) DEBT/EQUITY RATIO

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders'equity. It indicates what proportion of equity and debt the company is using to finance its assets.

A high debt/equity ratio generally means that a company has been aggressive in financing its growth withdebt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to f inance increased operations (high debt to equity), the company could potentiallygenerate more earnings than it would have without this outside financing. If this were to increase earningsby a greater amount than the debt cost (interest), then the shareholders benefit as more earnings arebeing spread among the same amount of shareholders. However, the cost of this debt financingmay outweigh the return that the company generates on the debt through investment and businessactivities and become too much for the company to handle. This can lead to bankruptcy, which wouldleave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personalcomputer companies have a debt/equity of under 0.5.


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DEBT EQUITY RATIO

YEAR 2007 2008 2009

FIEM INDUSTRIES 0.32 0.48 0.60

BOSCH 0.09 0.08 0.08

ANALYSIS:-

As FIEM INDUSTRIES have a debt equity ratio of .60 which is a good number than its competitors

BOSCH which is not good at all. As it is a manufacturing company they need to improve their ratios

So a lot of debt is used to finance increased operations and company could generate good earnings

Rather financing from outside

2) LONG TERM DEBT TO CAPITALIZATION RATIO

A ratio showing the financial leverage of a firm, calculated by dividing long-term debt by the amount ofcapital available:

A variation of the traditional debt-to-equity ratio, this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount ofleverage utilized by a specific company and compare it to others to help analyze the company's riskexposure. Generally, companies that finance a greater portion of their capital via debt are consideredriskier than those with lower leverage ratios.

LONG TERM DEBT TO CAPITALIZATION RATIO

YEAR 2007 2008 2009

FIEM INDUSTRIES 12.08 9.81 9.36BOSCH 17.73 16.19 17.73

ANALYSIS:-


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LIQUIDITY RATIO:-

1)CURRENT RATIO

A liquidity ratio that measures a company's ability to pay short-term obligations.

The Current Ratio formula is:

Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities(debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio,the more capable the company is of paying its obligations. A ratio under 1 suggests that thecompany would be unable to pay off its obligations if they came due at that point.While this shows thecompany is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are

many ways to access financing - but it is definitely not a good sign.

The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn itsproduct into cash. Companies that have trouble getting paid on their receivables or have long inventoryturnover can run into liquidity problems because they are unable to alleviate their obligations.Because business operations differ in each industry, it is always more useful to compare companieswithin the same industry.

This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory andprepaids as assets that can be liquidated. The components of current ratio (current assets and currentliabilities) can be used to derive working capital (difference between current assets and current liabilities).Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio ofsales.

CURRENT RATIO

YEAR 2007 2008 2009


BOSCH 2.0 2.49 2.24


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ANALYSIS:-

THE ideal ratio for the current assets is 2:1 for the manufacturing company and in this we can see that

the FIEM industries current ratio is not ideal and in comparison with BOSCH as their ratio is very good

i.e. 2.24 :1 just close to ideal one

2)ACID-TEST RATIO

A stringent test that indicates whether a firm has enough short-term assets to cover its immediate

liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital

ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Calculated by:

Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with

extreme caution. Furthermore, if the acid-test ratio is much lower than the working capital ratio, it

means current assets are highly dependent on inventory. Retail stores are examples of this type of

business.

The term comes from the way gold miners would test whether their findings were real goldnuggets. Unlike other metals, gold does not corrode in acid; if the nugget didn't dissolve when

submerged in acid, it was said to have passed the acid test. If a company's financial statements pass

the figurative acid test, this indicates its financial integrity.


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ACID-TEST RATIOYEAR 2007 2008 2009


BOSCH 1.43 1.86 1.67

ANALYSIS:-

As we can see through the table that the FIEM INDUSTRIES have the ratio less than 1 and we should look

FIEM INDUSTRIES with a extreme caution and as we compare it with BOSCH has good ratio as comparedto FIEM INDUSTRIES and they are more than 1 which signifies that it is a good company.

3)INVENTORY TURNOVER RATIO

A ratio showing how many times a company's inventory is sold and replaced over a period. the

The days in the period can then be divided by the inventory turnover formula to calculate the days it takesto sell the inventory on hand or "inventory turnover days".

Although the first calculation is more frequently used, COGS (cost of goods sold) may be substitutedbecause sales are recorded at market value, while inventories are usually recorded at cost. Also, average


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inventory may be used instead of the ending inventory level to minimize seasonal factors.

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.

High inventory levels are unhealthy because they represent an investment with a rate of return of zero. Italso opens the company up to trouble should prices begin to fall.

INVENTORY TURNOVER RATIO

YEAR 2007 2008 2009


BOSCH 10.36 9.99 9.55

ANALYSIS:-

FIEM INDUSTRIES has a tock turnover of 9.29 which is not a very good indicator because the competitorBOSCH has very impressive numbers as compared to FIEM INDUSTRIES i.e. they have gross profitmargin of 9.55. This indicates that FIEM INDUSTRIES have more stock than BOSCH in that currentperiod

PAYOUT RATIOS:-

The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratioto determine what companies are doing with their earnings.

For example, a very low payout ratio indicates that a company is primarily focused on retaining itsearnings rather than paying out dividends.

The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, themore secure the dividend because smaller dividends are easier to pay out than larger dividends.


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1)DIVIDEND PAYOUT RATIOThe percentage of earnings paid to shareholders in dividends.

Calculated as:

The dividend payout ratio provides an idea of how well earnings support the dividend payments.More mature companies tend to have a higher payout ratio.

DIVIDEND PAYOUT RATIO

YEAR 2007 2008 2009


BOSCH 15.38 14.77 18.65

ANALYSIS:-

If we talk about FIEM INDUSTRIES the dividend payout ratio is 75.86 which mean that thiscompany is paying 75.86% of their earnings as dividend. On the other hand the ratio FORBOSCH is 18.65 which mean that they are distributing 18.65% of their earnings as dividend. Sowe can say that the dividend payout ratio for FIEM INDUSTRIES is quite impressive but it alsomeans that they do not set aside enough for future expansion and for any unforeseencontingency. For such a purpose they will have to issue fresh equity share capital or will have to

depend on outside liability.


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2)EARNING RETENTION RATIO

The percent of earnings credited to retained earnings. In other words, the proportion of netincome that is not paid out as dividend.

Calculated as:

The retention ratio is the opposite of the dividend payout ratio. In fact, it can also be calculated

as one minus the dividend payout ratio.

EARNING RETENTION RATIO

YEAR 2007 2008 2009


BOSCH 76.63 76.70 67.43

ANALYSIS:-

In FIEM INDUSTRY the earnings retention ratio is 43.39% which means that the company retains

43.39% of their earnings for expansion purpose and for other unforeseen expenses. On the other

hand BOSCH has earnings retention ratio of 67.43% which means that they are promoting growth

of the company and paying less dividend.


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INVESTMENT RATIOS:-

1) PRICEEARNING RATIO (P/ERATIO)

A valuation ratio of a company's current share price compared to its per-share earnings.

Calculated as:

In general, a high P/E suggests that investors are expecting higher earnings growth in the future

compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story

by itself. It's usually more useful to compare the P/E ratios of one company to other companies in

the same industry, to the market in general or against the company's own historical P/E. It would

not be useful for investors using the P/E ratio as a basis for their investment to compare the P/E

of a technology company (high P/E) to a utility company (low P/E) as each industry has much

different growth prospects.

The P/E is sometimes referred to as the "multiple", because it shows how much investors arewilling to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20,

the interpretation is that an investor is willing to pay $20 for $1 of current earnings.

PRICE EARNING RATIO

YEAR ON 18/10/2010

FIEM INDUSTRIES 15.55

BOSCH 25.04

ANALYSIS:-

This means that the investors are projecting higher earnings in BOSCH as compared to FIEM

INDUSTRIES. However a lower P/E ratio may also mean that the companys stock is

undervalued and can sometimes prove to be a good investment.


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2) PRICETOBOOK VALUERATIO (P/BRATIO)

A ratio used to compare a stock's market value to its book value. It is calculated by dividing the

current closing price of the stock by the latest quarter's book value per share.

Also known as the "price-equity ratio".

Calculated as:

A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that

something is fundamentally wrong with the company. As with most ratios, be aware that this

varies by industry. This ratio also gives some idea of whether you're paying too much for what

would be left if the company went bankrupt immediately.

PRICE EARNING RATIO

YEAR ON 18/10/2010

FIEM INDUSTRIES 1.84

BOSCH 5.66

ANALYSIS:-

The P/B ratio of FIEM INDUSTRIES is quite lower than that of BOSCH so we can say that FIEM

INDUSTRIES is undervalued as stock and can prove to be a good investment in the long run. And P/V

ratio of BOSCH is 5.66 which is fairly priced and the investors expect good performance form the

company in the coming years and hence the stock value is priced much above the BOOK VALUE.


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3) EARNING PERSHARE (EPS)

The portion of a company's profit allocated to each outstanding share of common stock. Earning per

share serves as an indicator of a company's profitability.

Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the

reporting term, because the number of shares outstanding can change over time. However, data

sources sometimes simplify the calculation by using the number of shares outstanding at the end of the

period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the

outstanding shares number.

EARNING PER SHARE

YEAR 2007 2008 2009


BOSCH 125.13 125.48 107.73


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ANALYSIS:-

Earning per share means the amount of earning on every share issued by the company. In FIEMINDUSTRIES we can see that earning is continuously declining year on year and same is the case withBOSCH.

4) DIVIDEND PERSHARE (DPS)

The the sum of dividends declared for every ordinary share issued. Dividend per share (DPS) is

the total dividends paid out over an entire year (including interim dividends but not includingspecial dividends) divided by the number of outstanding ordinary shares issued.

DPS can be calculated by using the following formula:

DIVIDEND PER SHARE

YEAR 2007 2008 2009


BOSCH 25 25 30

ANALYSIS:-

This ratio shows the amount of dividend paid by the company on every share. In FIEM INDUSTRIES the

amount of dividend paid is equal in all three years. This means that they are not paying much dividend

and retaining profits for the expansion purpose of the company.


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CASH FLOW STATEMENT ANALYSIS:

The statement of cash flows reveals how a company spends its money (cash outflows) and where the

money comes from (cash inflows).

The cash flow statement discloses how a company raised money and how it spent those funds during a

given period. It is also an analytical tool, measuring an enterprises ability to cover its expenses in thenear term. Generally speaking, if a company is consistently bringing in more cash than it spends, that

company is considered to be of good value.

1. CASH FROM OPERATING ACTIVITIES:

This is the key source of a company's cash generation. It is the cash that the company produces

internally as opposed to funds coming from outside investing and financing activities. In this

section of the cash flow statement, net income (income statement) is adjusted for non-cash

charges and the increases and decreases to working capital items - operating assets and

liabilities in the balance sheet's current position.

The net cash generated from the operating activities has increased over the past two years at an

astounding sum of Rs. 14,64,12,802.Which shows that over the years the companyhas beenable to generate more and more returns from its core business transactions.

This may serve as a better indicator than earnings, since noncash earnings cant be used to pay

off bills.

2. CASH FROM INVESTING ACTIVITIES:

For the most part, investing transactions generate cash outflows, such as capital expenditures for

plant, property and equipment, business acquisitions and the purchase of investment securities.

Inflows come from the sale of assets, businesses and investment securities. For investors, the

most important item in this category is capital expenditures (more on this later). It's generally

assumed that this use of cash is a prime necessity for ensuring the proper maintenance of, and

additions to, a company's physical assets to support its efficient operation and competitiveness.

The net cash used in investing activities has increased over the two years for the amount Rs.

(15,78,29,841) which shows that the company spent significant cash investing in projects it hopes

will lead to future growth.

3. CASH FROM FINANCING ACTIVITIES:

Debt and equity transactions dominate this category. Companies continuously borrow and repay

debt. The issuance of stock is much less frequent. Here again, for investors, particularly incomeinvestors, the most important item is cash dividends paid. It's cash, not profits, that is used to pay

dividends to shareholders.

The cash used in the financing activities has reduced over the two years for rs. 30007049.Which

is mainly because of the decrease in the long term borrowings of the company.


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COMPARATIVE

BALANCE SHEETAND INCOME

STATEMENT

ANALYSIS


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Comparative statements are financial statements that cover a different time frame, but are

formatted in a mannerthat makes comparing line items from one period to those of a different

period an easy process. This quality means that the comparative statement is a financial

statement that lends itself well to the process of comparative analysis. Many companies make

use of standardized formats in accounting functions that make the generation of a comparative

statement quick and easy.

ADVANTAGES OF COMPARATIVE STATEMENTThe benefits of a comparative statement are varied for a corporation. Because of the uniformformat of the statement, it is a simple process to compare the gross sales of a given product or all

products of the company with the gross sales generated in a previous month, quarter, or year.Comparing generated revenue from one period to a different period can add another dimension to

analyzing the effectiveness of the sales effort, as the process makes it possible to identify trendssuch as a drop in revenue in spite of an increase in units sold.

Along with being an excellent way to broaden the understanding of the success of the sales

effort, a comparative statement can also help address changes in production costs. By comparingline items that catalog the expense for raw materials in one quarter with another quarter where

the number of units produced is similar can make it possible to spot trends in expense increases,and thus help isolate the origin of those increases. This type ofdata can prove helpful to allowing

the company to find raw materials from another source before the increasedprice for materialscuts into the overallprofitability of the company.


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Fiem ltd Comparative balance sheet as on

march,31 2008 and 2009particulars 2008 2009 Absolute change Percentage

change

A. fixed assets 1,679,633,734 1,745,989,196 66355462 3.95

B. investments nil 200,000 200000

C. working capital 36,103,029 132,038,247 95935218 265.72

D. capital

employed(A+B+C)

1715736763 1878227443 162490680 9.47

E. less long term

debt

479,915,815 492,486,141 12570326 2.61

F. shareholders

fund

Represented by:

Share capital 119,622,260 119,622,260 nil nil

Reserves and

surplus

1,017,114,347 840,426,760 (176687587) (17.37)

G. Shareholders

fund


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Fiem ltd Comparative income statement for

the year ending on march,31 2008 and 2009

particulars 2008 2009 Absolute change Percentage

change

A. Gross sales 2,020,776,800 2,419,568,362 398791562 19.73

B. less: excise tax 247,797,658 226,675,275 (21122383) 8.5

C. Net sales (A-B) 1772979142 2192893087 419913945 23.68

D. Less: cogs and

other expenses

1,711,924,737 2,148,367,358 436442621 25.49

Net operating

profit

61054450 44525729 (16528721) 27.07

E. add: other

income

81232463 34339773 (46892690) 57.7

F. Less: non

operating

expenses

44,988,016 39,988,016 (5000000) 11.11

PBT 97298897 38877486 (58421411) 60.04

Income tax paid 48,893,722 32,747,797 (16145925) 33.02

G. PAT 48405175 6129689 (42275486) 87.33


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Fiem ltd Common size income statement for

the year ending on march, 31 2008 and 2009

particulars 2008 2009 2008% 2009%

A. Gross sales 2,020,776,800 2,419,568,362 113.97 110.33

B. less: excise tax 247,797,658 226,675,275 13.97 10.33

C. Net sales (A-B) 1772979142 2192893087 100 100

D. Less: cogs and

other expenses

1,711,924,737 2,148,367,358 96.55 97.9

Net operating

profit

61054450 44525729 3.44 2.03

E. add: other

income

81232463 34339773 4.58 1.56

F. Less: non

operating

expenses

44,988,016 39,988,016 2.53 1.82

PBT 97298897 38877486 5.48 1.77

Income tax paid 48,893,722 32,747,797 2.75 1.49

G. PAT 48405175 6129689 2.73 .27


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AWARDS AND

ACHIEVEMENTS1. Udyog Rattan Award by The Institute of Economic Studies (2005),2. RashtriyaSammanPurskar with Gold Medal by Indian Society

for Industry & Intellectual Development (2007),3. Automotive Lighting Equipment Man of the Year by Business

Sphere magazine (2007),4. Vikas Rattan Gold Award by Indian Organization for Business

Research & Development (2007),5. International Quality Excellence Award by International Business

Productivity Forum (2007).6. Life Time Achievement Award by India International Council

for Industries & Trade. (2007)7. National Business Leadership Award with Gold Medal by

Indian Society for Industry & Intellectual Development. (2008)8. RashtriyaGauravRatan Award by Indian Society for Industry

& Intellectual Development (2009).


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ANNEXURE1. a) The company has maintained proper records showing full particulars including quantitativedetails and situation of fixed assets.b) As explained to us, the company has a planned programme for physically verifying all fixed

assets once in three years which in our opinion, isreasonable having regard to the size and nature of assets. During the year, the fixed assets have

been physically verified by the management inaccordance with the programme and no material discrepancies were identified on such

verification.c) During the year, the company has not disposed off any substantial part of the fixed assets and

the going concern status of the company is notaffected.

2. a) The inventories have been physically verified by the management at regular intervals duringthe year. In our opinion, the frequency of verification

is reasonable.b) The procedures of physical verification of inventories followed by the management are

reasonable and adequate in relation to the size of thecompany and the nature of its business.

c) The company is maintaining proper records of inventory and there were no materialdiscrepancies noticed on physical verification of the

inventory as compared to the book records.3. a) In our opinion & according to the information & explanations given to us by the

management, the Company has not granted any loans, secured

or unsecured to companies, firms or other parties covered in the register maintained under Sec.301 the Companies Act 1956. Therefore, theprovisions of clause 4(iii) (b), (c) and (d) of the Companies (Auditors Report) Order 2003 (as

amended) are not applicable to the Company.b) As informed, the company has taken unsecured loan during the year from Two Parties covered

in register maintained under section 301 ofCompanies Act, 1956. The maximum amount of loan taken from such parties outstanding at any

time during the year was Rs 136.49 lacs and theyear end balance was Nil.c) In our opinion, the rate of interest wherever applicable and other terms and conditions on

which loans have been taken from other parties listed

in the register maintained under Section 301 of the Companies Act, 1956 are not, prima facie,prejudicial to the interest of the company.d) The Company is regular in repaying the principal amounts or interest wherever stipulated.

4. In our opinion and according to the information and explanations given to us, there areadequate internal control procedures commensurate with the

size of the company and the nature of its business with regard to purchase of inventory, fixedassets and with regard to the sale of goods & services.


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During the course of our audit, we have not observed any continuing failure to correct majorweaknesses in internal control system.

5. a) According to the information and explanations given to us, we are of the opinion that theparticulars of contracts or arrangements that need to

be entered into the register maintained under section 301 of the Companies Act. 1956 have been

so entered.b) In our opinion and according to the information and explanations given to us, the transactionsmade in pursuance of contracts or arrangements

entered in the register maintained under section 301 of the Companies Act, 1956 and exceedingthe value of rupees five lakhs in respect of any

party during the year have been made at prices which are reasonable having regard to prevailingmarket prices at the relevant time.

6. The company has not accepted any deposits from the public.7. In our opinion, the company has an internal audit system commensurate with the size and

nature of its business.8. We have broadly reviewed the books of account maintained by the company pursuant to the

rules made by the Central Government for the maintenanceof cost records under section 209(1) (d) of the companies Act 1956 and are of opinion that prima

facie, the prescribed accounts and records have beenmaintained.

9. a) According to the records of the company & also the information & explanations given to us,the company is generally regular in depositing with

appropriate authorities all undisputed statutory dues including provident fund, investor educationand protection fund, employees state insurance,

income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other materialstatutory dues applicable to it though there has

been a slight delay in a few cases.b) According to the information and explanations given to us, there are no undisputed amounts

payable in respect of provident fund, investoreducation and protection fund, employees state insurance, income tax, sales tax, wealth tax,

service tax, custom duty, excise duty, cess andother material statutory dues as at the year end for a period of more than six months from the

date they became payable.c) According to the records of the Company, the dues outstanding of income tax, sales-tax,

wealth tax, service tax, customs duty, excise duty and cess on account of any dispute are asfollows

10. The company has no accumulated losses and has not incurred any cash losses during the

financial year covered by our audit or in the immediatelypreceding financial year.

11. In our opinion and according to the information and explanations given to us, the companyhas not defaulted in repayment of dues to a financial

institution or banks.12. In our opinion and according to the information & explanations given to us, no loans or

advances have been granted by the Company on the basis ofsecurity by way of pledge of shares, debentures and other securities.


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13. In our opinion, the company is not a chit fund or a nidhi / mutual benefit fund / society.Therefore, the provisions of clause 4(xiii) of the Companies

(Auditors Report) Order 2003 (as amended) are not applicable to the company.14. In our Opinion, the company is not dealing or trading in shares, securities, debentures and

other investments. Accordingly, the provisions of clause

4(xiv) of the Companies (Auditors Report) Order 2003 (as amended) are not applicable to thecompany.15. In our opinion & according to the information & explanations given to us, no guarantees for

loans taken by others from banks or financial institutionshave been given by the company.

16. In our opinion & according to the information & explanations given to us, the term loanshave been applied for the purpose for which they were raised.

17. According to the information and explanations given to us by the Management and on anoverall examination of the balance sheet of the company, we

are of opinion that there are no funds raised on short term basis that have been used for long terminvestments.

18. The company has not made preferential allotment of shares to parties and company coveredin the register maintained under section 301 of the Act

during the year. Therefore, the provisions of clause 4(xviii) of the Companies (Auditors Report)Order 2003 (as amended) are not applicable to the

company.19. The company has not issued any debentures.

20. The company has not raised any money by way of public issue during the year.21. According to the information and explanations given to us, no fraud on or by the company

has been noticed or reported during the course of our audit.


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BIBLIOGRAPHYAUTHOR/ NAME OF THE BOOK/ PUBLICATION HOUSE/ EDITION/ Pg. No.

y JAIN P.K./ FINANCIAL MANAGEMENT/ TATA McGraw HILL/ 3rd/ 4.1 -4.78

y KHAN M.Y./ FINANCIAL MANAGEMENT/TATA McGraw/ 3rd / 4.1 4.78

y ANNUAL REPORTS OF 2008 AND 2009 OF FIEM INDUSTRIES

. INVESTOPEDIA.COM

. MONEY CONTROL.COM

. SBI CAP SEC.COM

. FIEM INDUSTRIES.COM

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