A REPORT ON

BUSINESS PLAN ON BEML COMPANY

Submitted by:
KAUSHIK
ARUN
RUDHRAMUNI
MOHAMMAD
SWETHA
PRADEEP
Submitted to:
Prof. CHETHAN
Faculty
BIET-MBA PROGRAMME
DAVANGERE

BIET, MBA PROGRAMME

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 ECONOMIC ANALYSYS

Economic analysis refers to

Business Opportunities in India:

The policy of liberalization pursued by the government after 1991, has transformed
the prospects for the Indian economy. Today India is one of the favored destinations for global
investments. The government has come up with several incentives like import of capital goods at
concessional customs duty (under condition it fulfills certain export obligations), liberalization
of external commercial borrowing norms, tax holiday to encourage investments. Sectors like
automobiles, chemicals, food processing, oil and natural gas, petrochemicals, power, services
and telecommunications have witnessed tremendous investments.

Business Opportunities in India

There are several factors which create favorable business opportunities in India.
• India is the largest democracy in the world. In terms of population it ranks second in the
world. India has a huge middle class, with improved purchasing power, due to the high
growth in the economy. Increasingly Indians have become more brand conscious,
resulting in increased growth for the retail sector.
• Presence of vibrant trade links with South Asian Association For Regional Cooperation
(SAARC) nations like Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.
• Improved infrastructure available for business ventures. India's competitive advantage in
Information Technology can be used to enhance productivity in Industries.
• Availability of huge pool of technical manpower has heralded the expansion of
manufacturing base across different industries.
• India is rich in natural resources and self sufficient in agriculture.
• A well established banking system consisting of public and private banks and other
financial institutions.
• The capital markets in India are one of the fastest growing markets in the world,
attracting huge investments from FII's.
• The economic reforms have brought in policy changes in terms of freedom of entry,
investment, location, usage of technology, import and export. These changes have
created an investment friendly environment.
• India is a well established democratic country, with free and fair judiciary.
• A considerable section of the population is proficient in English.
Investment in Indian Economy

The process of reforms as part of liberalization has resulted in greater investment in Indian
economy. Government policies have become investment friendly and paper work reduced. The
capital markets have also been able to receive huge inflow of funds. The Indian economy today
is ready to face the competition from overseas market and International investors see India has a
potential market for excellent return on investment.

Policy Changes

Industrial Policy
The Indian government has ushered in a policy of reforms to bring about accelerated economic
growth. The government has removed the requisition of industrial license except for certain
sectors, simplified the procedure for investment and opened the market for foreign technology.

Industrial Licensing

The following industries require Industrial license.

• Public Sector enterprises.
• Industries retained under compulsory licensing.
• Manufacturing of products reserved for small scale sector.
Foreign Investment Policy
Foreign investment policy is allowed in almost all sectors, except certain sectors like defense
and rail transport. International investors are given permission to set up 100 per cent subsidiaries
in India. No prior permission from RBI is required. The investment should be within the set
guidelines and within a given timeframe. This policy is applicable only for new investments and
not for purchase of equity from existing owners of equity. This procedure is also known as
"automatic approval route".

Foreign Investment Promotion Board (FIPB)

The government set up the FIPB to encourage inflows of FDI into the country, to simplify the
process for investment and to recommend initiatives to be taken for foreign investment.

Secretariat For Industrial Assistance (SIA)

The SIA reports to the Department Of Industrial Policy and Promotion in the Ministry Of
Commerce & Industry to establish a single window clearance for new business initiative,
investor facilitation, receiving and processing applications, make policy decisions with respect
to investment and technology and accumulate and publish data for a few industries.
Automatic Approval Route And FIPB Route
Any foreign investment into India is guided by the Foreign Direct Investment (FDI) policy of
the Government of India and the Foreign Exchange Management Act 1999(FEMA).Post reforms
the Government has done away with the prerequisites for approval from government for fresh
investments, though the policy still continues for investments in certain specified sectors.

To encourage investment and to coordinate with the industry for infrastructure development, a
new cell called the "Investment Promotion and Infrastructure Development Cell “has been setup.

New Ventures
All FDI investment by NRI's up to 100 per cent comes within the purview of Automatic Route,
except in those sectors where prior government permission is required. An investor can then
make an application to the FIPB and not make use of the automatic route.

Investments in public sector units, units located in Export Oriented Units (EOU).Export
Processing Zones (EPZ), Special Economic Zones (SEZ), Electronic Hardware Technology
Parks (EHTP) and Software Technology Parks (STP) would be eligible for the automatic route.

FIPB Route
For the following government approval for FDI/NRI/OCB through the FIPB would be
necessary:
• All application requiring an Industrial License.
• All application wherein the foreign collaborator has an already existing joint venture in
India, in the same or associated field.
• All proposals for purchase of shares in the existing Indian company.
Other Modes Of Foreign Direct Investments
• Global Depository Receipts (GDR), American Deposit Receipts (ADR)/Foreign
Currency Convertible Bonds (FCCB).
• Indian companies are authorized to generate equity capital in the International market by
issuing GDRs/ADRs/FCCBs. There are no caps on investment. An applicant company
should have a consistent performance for a minimum period of 3 years.
• There is no limit on the number of GDRs/ADRs/FCCBs a company can issue in a given
financial year.

State Level Project Implementation

The State level organizations present for assisting investment are:

• Investment Promotion Agencies (IPA).
• State Industrial Development Corporation (SIDC).
 • Small Scale Industries Development Corporation (SSIDC).
• State Financial Corporation (SFC).
• District Industries Centre (DIC).
• Single Window Service And Escort Service.

GDP of India:

The Indian economy is the 12th largest in

USD exchange rate terms. India is the second fastest growing economy in the world. India’s
GDP has touched US$1.25 trillion. The crossing of Indian GDP over a trillion dollar mark in
2007 puts India in the elite group of 12 countries with trillion dollar economy. The tremendous
growth rate has coincided with better macroeconomic stability. India has made remarkable
progress in information technology, high end services and knowledge process services.

However cause for concern would be this rapid growth has not been an inclusive in nature, in
the sense it has not been accompanied by a just and equitable distribution of wealth among all
sections of the population. This economic growth has been location specific and sector specific.
For e.g. it has not percolated to sectors were labor is intensive (agriculture) and in states were
poverty is acute (Bihar, Orissa, Madhya Pradesh and Uttar Pradesh).

Though India has the second highest growth rate in the world, its rank in terms of human
development index (which is broadly used has a measure of life expectancy, adult literacy and
standard of living) has gone down to 128 among 177 countries in 2007 compared to 126 in
2006.

Indian GDP –Trend Of Growth Rate

1960-1980 : 3.5%
1980-1990 : 5.4%
1990-2000 : 4.4%
2000-2009 : 6.4%

Contribution of Various Sectors in GDP

The contributions of various sectors in the Indian GDP for 1990-1991 are as follows:

Agriculture: - 32%
Industry: - 27%
Service Sector: - 41%
The contributions of various sectors in the Indian GDP for 2005-2006 are as follows:

Agriculture: - 20%
Industry: - 26%
Service Sector: - 54%

The contributions of various sectors in the Indian GDP for 2007-2008 are as follows:

Agriculture: - 17%
Industry: - 29%
Service Sector: - 54%

It is great news that today the service sector is contributing more than half of the Indian GDP. It
takes India one step closer to the developed economies of the world. Earlier it was agriculture
which mainly contributed to the Indian GDP.

The Indian government is still looking up to improve the GDP of the country and so several
steps have been taken to boost the economy. Policies of FDI, SEZs and NRI investment have
been framed to give a push to the economy and hence the GDP.

Reasons for India's GDP growth rate slowdown:

Interest rates have reached a 6-year high, and has reduced level of consumer
spending, and also investments. A global economy, which is becoming increasingly
complex, has affected India's chances for better export prospects. According to data
released by India's statistics office, year-on-year GDP growth rate stood at around 8.8
percent for first three months of 2009.

Does GDP data indicate a severe slowdown for India's economy?

After release of statistics office data, former Finance Minister, P. Chidambaram,

requested central bank policy makers not to lose focus on economic growth of India as they
try to counter inflationary pressures, which incidentally has long breached 8 percent.
However, these numbers cannot be taken indicative of a dramatic slowdown in Indian
economy, since nation is experiencing above-average GDP growth.
 Gainers and losers

Manufacturing sector growth has dropped down to about 5.8 percent in three months
leading to March 31, 2008. Farm production has also been affected, registering a figure of
about 2.9 percent. Gainer was construction sector, which experienced growth of nearly 12.6
percent. Construction sector grew in strength due to rapid rise in erection of new roads,
airports, and power plants.

GDP Statistics (2007 )

As per estimates published in CIA's World Factbook, the 2007 GDP figure stood at
around $2.966 trillion. Official exchange rate GDP figure was nearly $1.099 trillion. Real
growth rate was recored as 9 percent. GDP per capita was around $2,600. Agriculture
accounted for 17.8 percent of the total GDP. Industry contributed nearly 30 percent to
India's GDP. At 52.8 percent, services accounted for more than 52 percent of India's gross
domestic product.

Effects of recession on India

Indo-US bilateral trade has been upbeat, except for the nuclear deal that is facing a stormy
period. According to the Indian Finance Minister, USA will not go through the impending
recession. Even if it does, it is not likely to impact India. Having said that, in the last week of
January 2008, the actually story seems to be different. But trade and commerce, is affected.
Investors are aggrieved at the trading activity coming to a grinding halt frequently in the last
three months. Indian exports to the US are less than earlier and dependence is less as it is also
exporting to rich European nations, China and Japan. Asian markets have also felt the slump
when Dow Jones hit the low notes. How much can India withstand the impact?

In the first place, is the 2008 recession coming at all? If the rest of the world recession impacts
other nations, how can India remain insulated? The crisis of US recession is looming on its
policies in the Middle East and home turf. There is no immediate concern for Indians. The jobs
are not being threatened as yet. BPOs are still working 24 X 7 and jobs are being generated in
other sectors. Real estate has more or less stabilised in many cities and small towns.
Infrastructure activity has not slowed down either. The software professionals are returning
home and Indian students prefer to study in Australia, New Zealand and Britain.
Since US is one of the major super powers, a recession–mild or deeper will have eventual global
consequences? USA may cut their capital investments into the country if they have to control
recession at their end. The year 2008 has not started on a good note for the US economy. Till the
stocks don’t climb upwards chances are that investors will loose more money. Despite world
recession and India’s optimistic outlook, the results will not show at least in the next two years.
Is a recession coming to Indian shores? Highly unlikely. The rupee may have appreciated
against the shrinking dollar. But Indians are enjoying the new found material wealth and
flaunting it. The reigns have to be tighter at the US end till the economy becomes buoyant.

India can get affected by the BPO units becoming less aggressive. The American food chains
that have opened up will be impacted. There could be down sizing on staff and advertising. The
equity market will see a slide in a few months, if things go out of control. Consultants across the
world are hoping that they will be able to keep their clients upbeat in the face of recession. The
prolonged recession is likely to result in further weakening of the dollar. According to the World
Bank officials, the credit crunch will reflect on decline in business development, unemployment,
weaker consumer outlays and longer period of depressed consumer prices. In India strong
technological advancement have engineered a buoyant growth rate. There is still time for the
storm to come to India. ~ By N. Nagpal, economist and category author. 2008.
Is a recession coming so soon that everyone has to tighten their belts? The world’s largest
economy America is facing an unprecedented crisis and chances are that this time it is for real.
Surviving recession in the past was easier. Now it will be tougher. Chances are, that in the
recessive tsunami conditions, some big businesses will also be gobbled up along with many
smaller ones. That’s not all; survival of the fittest will be telling unique stories.

As an individual how will recession affect you and how will you survive it. There will be a
global impact on the recession in US and survival will be challenge. These are the brief points
you should be thinking about and making sustainable decisions.

1. Are you an employee in a big or large company that has decided to lay off staff?

Either way you have to save your skin especially if you have a family to look after. Are you
valuable enough to survive the lay off? If not, start hunting for alternate career or safer
companies, if you feel the axe coming down. Networking with friends (even overseas) will be
helpful. It may take six months or more but it will give some leads.

2. Are you running a small business? Scared you may have to wind up after all these years of
sweat and toil?

Don’t just lay off the staff yet. They are equally scared. This is the time they need assurance that
they are valuable. Remember, ‘be together in good and bad times’. May be you could halve the
salaries. They will understand. Be lenient with the sales and marketing staff. They have met
targets and brought revenues in the past. They are the very apparatus that the business has
survived. They can write off their commissions in these times.

3. If you are an independent professional back up the resources keeping in mind the family you
have to support. Sounds bad, but can you look for a job in the Middle East, India or New
Zealand. That’s where most professionals are making good money. Your consultancy may not
be required for quite some time and even if it is, the fees will be a pittance.

4. Evaluate your current position in the industry. This will give you an idea if you want to shut
shop, go aggressive or stay calm. This is the time to pay off all the debts. You don’t want
creditors sealing your property or hard earned valuables.

5. Be proactive and get a plan to stay afloat. How have you managed all these years? You have
to really think hard to get out of the credit crunch.

COMPANY ANALYSIS
Company Profile:
BEML Limited (formerly Bharat Earth Movers Limited) was established in May 1964 as a
Public Sector Undertaking for manufacture of Rail Coaches & Spare Parts and Mining
Equipment at its Bangalore Complex. The Company has partially disinvested and presently
Government of India owns 54 percent of total equity and rest 46 percent is held by Public,
Financial Institutions, Foreign Institutional Investors, Banks and Employees.
During the financial year 2008-09, BEML achieved a sales turnover of INR 3013 crores and a
pre tax profit of INR 387 crores. The export earnings touched INR 304 crores.

Vision & Mission:

Vision:
To become a market leader, as a diversified company supplying products and services to Mining
& Construction, Railway & Metro and Defence Services and emerge as an International Player.

Mission:
1. Improve competitiveness through organizational transformation and
collaboration / strategic alliances / joint ventures in technology.
2. Grow profitably by aggressively pursuing opportunities in national and
international markets.
3. Attract and build people in a rewarding and inspiring environment by
fostering creativity and innovation

Objectives:
1. To maintain a dominant position in design, development, manufacture and
marketing of Defence, Earthmoving & Construction and Rail & Metro
equipment.
2. To diversify and grow.
3. To provide total engineering solutions to its customers.
4. To internationalise operations by enhancing exports.
5. To improve profitability.
6. To maintain State-of-the-Art technology for all products.
7. Re-orientation of the business operations to match present scenario.
8. Continuous building of skills and competencies to bring about Executive
Effectiveness for Management Succession

PORTERS FIVE FORCE MODEL OF BEML:

New Entrants – Medium
Supply side economies of scale, huge capital requirements and high exit costs deter entry of new
players. However, MNCs looking to diversify their business could find India as an attractive
destination.

Supplier Power - Low to Medium

Raw materials used in capital goods companies are mostly standardised and largely domestic in
origin, which leaves little scope for a bargain. However, if production line is set up adjacent to
supplier’s manufacturing facility, manufacturer may face switching cost in changing suppliers.

Buyer Power – Medium to High

Large volume buyers like industrial customers are major purchasers of capital goods which
pressurise manufacturers to offer products on thin margins.
Indian capital goods sectors are characterized by a large array of standardised products
which provides ample scope for buyers to switch between suppliers.

Substitute Products - Low

There is less number of products that can be substituted with other products in the sector.

Rivalry Intensity – Medium to High

The Indian capital goods space is highly fragmented industry with dominance of PSEs in heavy
engineering, machine tools, boiler manufacturing while private firms exist in industrial segments
such as cement, sugar and non-electrical machinery. There is high level of competition among
organised players.

FINANCIAL RATIO ANALYSIS

1) CURRENT RATIO = current assets / current liabilities

Standard ratio 2:1

particulars 2008 2009 2010

Current assets 296581.16 344437.29 358823.94

Current liability 97916.44 113007.58 89224.17

 CURRENT RATIO 3.03 3.05 4.02

INTERPRETATION
The BEML CO current ratio is good by comparing to the its standard and it gradually increases
yoy , it seems company can ability to meet its debt and liquidity portion of BEML CO is sound.
co’s current assets 3.3times, 3.05 times & 4.02 times more than its current liabilities.

2) LIQUID RATIO OR QUICK RATIO= Quick assets/Quick liabilities

Quick assets are; cash , bank, debtors

Quick liabilities; current liabilities

Standard Quick Ratio 1:1

particulars 2008 2009 2010

QUICK ASAETS 203623.16 182379.43 193523.64

 QUICK 97916.44 113007.58 89224.17
LIABILITIES
QUICK RATIO 2.08 1.61 2.16

INTERPRETATION
The BEML company liquid/quick ratio is good by comparing to its standard, the standard ratio
is 1:1 means total quick assets is equal to the total current liabilities, but the BEML total quick
assets more than its liabilities like in 2008 = 2.08, in 2009 = 1.61, & in 2010= 2.16 its shows the
company liquidity position is good & ability to meet its outside liability.

3) CASH TURNOVER RATIO= NET SALES / CASH

Idle ratio is 10 times

particulars 2008 2009 2010

NET SALES 253959.88 279717.10 283823.95

CASH 52109.53 26351 56715.06

CASH TURNOVER 4.87 10.61 5.00

RATIO
INTERPRETATION
The BEML company total cash turnover ratio was not good in 2008 like- 4.87 means only 4.87
times cash was turnover by comparing to the standard time 10, it means company not utilising
maximum cash on productivity purpose, then after gradually in 2009 it roses to 10.61 it means
co considered as serious action regarding the cash turnover that is why it roses to 10.61. But in
2010 it again come down to 5.00 it means company not having constant policy regarding the
cash turnover.

4) TOTAL ASSETS TURNOVRE RATIO= NET SALES / TOTAL ASSETS

Idle ratio is 2 times

particulars 2008 2009 2010

NET SALES 253959.88 279717.10 283823.95

TOTAL ASSETS 339173.02 414168.98 439806.21

ASSET TURNOVER 0.75 0.68 0.65

RATIO
5) SOLVENCY RATIO= TOTAL ASSETS / TOTAL LIABILITIES

particulars 2008 2009 2010

Total assets 339173.02 414168.98 439806.21

Total liabilities 340869.01 414998.65 439951.64

Solvency ratio 0.99 50 0.99 80 1.997

6) NET PROFIT RATIO = NET PROFIT / NET SALES x 100

particulars 2008 2009 2010

Net profit 27088.88 33126.31 32064.49

Net sales 253959.88 279717.10 283823.95

Net profit ratio 10.67 11.84 11.30

INTERPRETATION
The Net profit to sales of BEML goes on increasing by comparing to yoy 2008 to 2010 like in
2008 = 10.67, in 2009 = 11.84 & in 2010 =11.30%( percentage) ,this shows company
profitability goes on increasing trend, by comparing 2009 to 2010 some percentage of profit
decreases like 0.54% it doesn’t make difference to company because of the trend of company
profitability goes on increasing means there is such effect to company.
7) DEBTORS TURN OVER RATIO= NET SALES / AVERAGE DEBTORS

particulars 2008 2009 2010

Net sales 253959.62 279717.10 283823.95

Avg debtors 149605.62 154526.67 136073.75

Debtors turn over 1.70 1.81 2.08

ratio

INTERPRETATION
The BEML company total debtor turnover to its sales is not so much good but the company
ability to manage its debts very efficiently the results which shows the gradually increase its
turnover of debt to sales like in 2008 = 1.70 , in 2009 = 1.81 & in 2010 = 2.08 it means
company goes on increases its debt turnover.
8) INVENTORY TURNOVER RATIO= SALES / INVENTORY

particulars 2008 2009 2010

sales 271334.47 301346.94 355767.69

Inventory 92958.00 165057.86 165300.30

Inventory turnover 2.92 1.83 2.16

ratio

INTERPRETATION
The BEML company total inventory turnover to its sales is not so much good
but the company ability to manage its inventory very efficiently the results
which shows the gradually increase its turnover of inventory to sales like in
2008 =2.92, in 2009 = 1.83 & in 2010 = 2.16 it means company goes on
increases its inventory turnover.
9) FIXED ASSETS TURN OVER RATIO= SALES/ FIXED ASSETS

particulars 2008 2009 2010

sales 271334.47 301346.94 355767.69

Fixed assets 23483.16 27909.67 30608.08

Fixed assets 11.55 10.80 11.62

turnover ratio

10) CURRENT ASSETS TURN OVER RATIO= SALES/ CURRENT ASSETS

particulars 2008 2009 2010

sales 271334.47 301346.94 355767.69

Current assets 314894.97 385464.42 404958.49

Current assets 0.86 0.78 0.88

turnover ratio
11) PROFIT MARGIN RATIO = PAT/SALES

particulars 2008 2009 2010

PAT 22565.38 26884.24 22284.82

Sales 271334.47 301346.94 355767.69

Current assets 0.083 0.089 0.063

turnover ratio

12) RETURN ON INVESTMENT= NET PAT/TOTAL ASSETS

particulars 2008 2009 2010

PAT 22565.38 26884.24 22284.82

TOTAL ASSETS 339173.02 414168.98 439806.21

RETURN ON 0.067 0.065 0.051

INVESTMENT

13) OPERATING PROFIT RATIO= EBIT / NET SALES X 100

particulars 2008 2009 2010

 EBIT 238551.97 276591.56 275809.55

NET SALES 253959.88 279717.10 283823.95

OPERATING 93.93% 98.88% 97.18%

PROFIT RATIO

14) INTEREST COVERAGE RATIO = EBIT/ INTEREST X 100

Idle time 6 or 7

particulars 2008 2009 2010

EBIT 238551.97 276591.56 275809.55

INTEREST 2308.75 3368.18 4892.92

INTEREST 103.32 82.12 56.37

COVERAGE
RATIO

TECHNICAL ANALYSIS

Technical analysis refers to the process of identifying the trend reversals at an earlier stage to
formulate the buying and selling strategy.

Moving average
ROC