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Mcom sem 4 Project work on financial performance

m.com (Gujarat University)

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A STUDY ON FINANCIAL PERFORMANCE OF ATUL AUTO LTD

MAJOR RESEARCH PROJECT

SUBMITTED BY

MA NA SV I A R V INDBHA I PA NSUR IY A

Roll No. 28

UNDER THE GUIDANCE OF

DR. S.S. SODHA

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE AWARD OF THE DEGREE
OF
MASTER OF COMMERCE (HPP)
(WITH SPECIALIZATION IN ACCOUNTING AND AUDITING
SERVICES) TO
SHETH DAMODARDAS SCHOOL OF COMMERCE

GUJARAT UNIVERSITY
AHMEDABAD
MARCH, 2022

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Table of Content

Chapter No. Title Page No.

Declaration 4
Certificate 5
Acknowledgement 6
List of Figures 7
List of Charts 8
Abstract 9
1 Introduction 10
1.1 Industry Profile 12
1.2 Company Profile 19
1.3 Product Profile 21
2 Literature Review 24
3 Theoretical Framework 30
3.1 Financial statement analysis 31
3.2 Financial position 32
3.3 Financial performance 32
3.4 Ratio analysis 33
4 Research Methodology 38
4.1 Problem Statement 39
4.2 Objectives 40
4.4 Scope of study 40
4.5 Sources of data 40
4.6 Method of data collection 42
4.7 Period of study 42
4.8 Research design 42
4.9 Sample design 43
4.10 Population 43
4.11 Sample size 44

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4.12 Sampling Method 45

4.13 Framework analysis 46
4.14 Research Gap 47
4.15 Limitations of the study 47
5 Data Analysis 48
6 Findings, Suggestions & Conclusion 63
7 Bibliography 68

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DECLARATION

I undersigned, hereby declare that the project titled “A STUDY ON FINANCIAL

PERFORMANCE OF ATUL AUTO LTD” submitted in partial fulfilment for the award of
Degree of Master of Commerce of S D School of Commerce, Gujarat University is a bonafide
record of work done by me under the guidance of DR. S.S. SODHA, WITH
SPECIALIZATION IN ACCOUNTING AND AUDITING SERVICES. This report has not
previously formed the basis for the award of any degree, diploma, or similar title of any
University.

NIJAL HARESH BHAGDEV

24/3/2022

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S D School of Commerce, Gujarat University

CERTIFICATE

This is to certify that the report titled “A STUDY ON FINANCIAL PERFORMANCE OF ATUL
AUTO LTD” being submitted by NIJAL HARESH BHAGDEV, ROLL NO. 28 in partial
fulfilment of the requirements for the award of the Degree of Master of Commerce, is a bonafide
record of the project work done by NIJAL HARESH BHAGDEV of S D School of Commerce,
Gujarat University

Guide Department Coordinator

DR. S.S.SODHA DR. S.S.SODHA

(Associate professor) (Head of accounting and auditing)

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ACKNOWLEDGEMENT

Every work accomplished is a pleasure – a sense of satisfaction. However, a number of people

always motivate, criticize and appreciate a work with their objective ideas and opinions. Hence, I
would like this opportunity to thank all, who have directly or indirectly helped me in accomplishing
this project.

I owe a great many thanks to a great many people who helped and supported me in carrying out
my project successfully.
At the very outset I would like to thank “ATUL AUTO LTD”. For giving me the opportunity to
work with them. Special thanks to MR. J.V. ADHIA for giving me opportunity to participate in
the project work and helped me gain insights of the real corporate world.

I would like to thank DR. S.S. SODHA sir, internal guide who gave me the opportunity for the
same at Sheth Damodardas School of Commerce (Gujarat University) supported me at all
times, making sure the timely completion of the project. Would also like to thank my Institution
and my faculty members and ATUL AUTO LTD. without whom the project would have been a
distant reality.

NIJAL HARESH BHAGDEV

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List of Figures

TABLE NO. CONTENT PAGE NO.

1 Types of automobile 12
2 Portfolio of Products 21
3 Process of Making Product 23
4 Financial statement analysis 31
5 Types of Ratios 34
6 Population – ratios 44

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List of Charts

TABLE NO. CONTENT PAGE NO.

1 Automobile Production Trend 13
2 Domestic Market Share 2019-20 14
3 Market share of two-wheelers 15
4 Market share of Passenger Vehicle 16
5 Market share of commercial Vehicle 17
6 Market share of three-wheeler sector 18
7 Number of vehicles sold 22
8 Gross profit ratio 49
9 Net profit ratio 50
10 Return On Capital Employed 51
11 Return On Assets Ratio 52
12 Return On Equity Ratio 53
13 Current Ratio 54
14 Quick Ratio 55
15 Debt-equity Ratio 56
16 Interest Coverage Ratio 57
17 Inventory Turnover Ratio 58
18 Assets Turnover Ratio 59
19 Earnings Per Share 60
20 Dividend Pay-Out Ratio 61
21 Dividend Per Share 62

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Abstract
Auto sector is an integral part of Automobile industry and have been contributing to country’s
GDP over the years. Pandemic has hit the sector very badly and affected the net income of all the
companies. Atul Auto Ltd being a three wheeler manufacturer, is in the top five leading companies
of India. To study company’s performance financial ratios are important to understand, which help
us to know the present situation of company in every possible aspect. The main objective of the
study is to study financial performance through different ratios for the period of five years i.e. from
2016-17 to 2020-21. Overall trend of company is good, but covid-19 effects are directly visible in
top categories ratios.

Keywords: GDP, pandemic, Atul Auto, financial performance, financial ratios.

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Ch-1
INTRODUCTION

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Automobile industry is playing a prominent in the economic development of the country. It is a

significant driver of macroeconomic growth and technological enhancement. India’s automobile
industry is projected to be the world's third-largest automotive market in terms of volume
by 2026, followed by China and USA. Indian automobile industry is becoming largest
Electronic- vehicle market for 2-wheelers, 3-wheelers and cars. As on 8 th December, 2021-
there were 8.77 lakhs Active Electric Vehicles are on Indian Roads.

The total budgetary allocation for FY 2022-23 towards the Ministry of Heavy Industries is
INR 3,306 crore. Automobile industry contributes around 7.1% to overall GDP of India
and 49% to the manufacturing GDP, having annual turnover of 7.5 lakhs crores and export
of 3.5 lakh crores. 37 million jobs are created by this sector and it is estimated that this
will increase up to 50 million new jobs, and GDP to 12%. The current annual sale of
vehicles of all categories is expected by government to reach 84.5 million by 2030.

The Indian automotive market is one of the most competitive markets with low costs, which make
it an attractive assembly base for foreign automotive manufacturers. India is the second fastest
growing after China from all over the world in automobile market, stands on the 5th position in the
World Market after Germany.

The impact of Covid-19 on Indian automobile industry, they recorded a 20.3% decline in
domestic sales in FY20 as compared to a 5.9% growth in FY19 and the five-year (2015-16 to
2020-21, or FY21) compound annual growth rate (CAGR) of the general automobile industry is
currently negative at 2%, against 5.7-percent development it found in the previous years (from
2010-11 to 2015-16)

Let’s have the detail about the Indian automobile sector by the segment wise.

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[1.1] INDUSTRY PROFILE

Figure 1

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Chart 1

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Chart 2

Two- Wheelers:

The two-wheelers market is primarily comprised of motor cycles and Scooters. India is the largest
in two-wheeler manufacturer from all over the world. The two-wheeler sector contributes to 7%
of manufacturing GDP in India and it also contributes to 2% of GST revenues. At present two-
wheeler production is more than 80% of total automotive production in India. Majority of Indians,
especially the youngsters prefer motorbikes more rather than cars.

Two-wheeler industry and faced a downfall- one of the sharpest contradictions in demand, due to
Covid-19 and increase in price of two-wheelers due to new regulations. The rural market has
shown a strong growth. Demand for personal mobility was also increased due to spread of Covid-
19. These factors helped in revival of two-wheelers sales in the last year.

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Market share of two-wheelers across India in financial year 2021

Chart 3

Passenger Vehicle:

India is the fifth largest passenger vehicle manufacturer from all over the world and still steering
towards growth as the economic environment improves day by day. Passenger vehicle accounts
for 13% of market share from overall industry. Sales of passenger vehicles fell down by about
10.07 per cent, compared to March 2021. Due to pandemic, the sale of Passenger Vehicles
declined by (-) 2.24 percent in April-March 2021 over the same period last year. In case of export,
passenger vehicle declined by (-) 38.92 percent.

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Market share of Passenger Vehicle across India for the financial year 2021

Chart 4

Commercial Vehicle:

India is the leading manufacturers and exporters of commercial vehicles (CVs) in the world.
Commercial Vehicles hold almost 4% of the total market share of all vehicles sold in India. The
Commercial Vehicle Industry has seen a seen a lot of ups and downs in the past few years. The
Commercial Vehicle sales have been going down for more than one-and-a-half years and looks to
drop even further in FY21 due to current outbreak of covid -19. The domestic sales was 568,559
in 2020-21, as compared to 717,593 in 2019-20.

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Major Classification of CV Industry:

Light Commercial Vehicle (LCV) –

Goods & Carriage Vehicle with gross vehicle weight less than 7.5 tons.

Medium Commercial Vehicle (MCV) –

Single Axle Vehicle used mainly for the carriage of perishable goods with gross vehicle weight
between 7.5 tons and 16.2 tons.

Heavy Commercial Vehicle (HCV) –

Dingle Axle Vehicle used mainly for the carriage of non-perishable goods with gross vehicle
weight greater than 16.2 tons.

Market share of commercial Vehicle across India for the financial year 2021

Chart 5

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Three wheelers:

India is largest manufacturer for Three-wheeler across the globe, and having a large domestic as
well as export market. Three-wheelers vehicles like auto-rickshaws, hand-driven carts and e-
rickshaws were one of the main tools for public transport among Indian states. Recent trend in e-
vehicles saw a boom in e-rickshaw sales. In 2021, electronic three-wheeler sales accounted for
over 37 percent of the total e-vehicle sales. Covid-19 impact on three-wheeler sector has borne the
brunt due to factors like the reduced requirement for last-mile commute with the closure of offices,
schools and other public places and now public preference is increased for personal mobility,
instead of sharing ride.

As per the data available, Market share in the three-wheeler sector across India in financial year
2021 is as under:

Chart 6

Atul Auto Ltd stands on the fourth position – contribution in market share across India.

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[1.2] COMPANY PROFILE

ATUL AUTO LTD, an Atul group company was originally incorporated as an Atul Auto
(Jamnagar) Pvt. Ltd. On June 18, 1986 under the Companies ACT, 1956, in the State of
Maharashtra. Late. Mr. Jagjivanbhai Karasanbhai Chandra was the founder of the Company,
having started the Company with a small capital of only Two Thousand rupees in 1986; in the year
of 2020-21 it has achieved a turnover of Rs. 29,027 (in lacs). The name of the Company was
changed from Atul Auto (Jamnagar) Pvt. Ltd. to ATUL AUTO LTD. August 12, 1994. The
Company was subsequently converted into Public Limited Company and fresh certificate of
incorporation was obtained on August 12, 1994 from Registrar of the Companies, Gujarat.

Atul Auto Ltd is a leading Automobile Manufacturing Company from the state of Gujarat, India,
Established in 1960.The manufacturing facilities are located at Rajkot, Jamnagar and Bavla
(Ahmedabad) with an installed capacity of 60,000 vehicles per annum. Atul Auto Ltd is a listed
company in Bombay stock exchange and National Stock Exchange as engaged in manufacturing
3wheelers Company in Gujarat and maintained the leadership position. Company has created its
wide network in domestic (300+ dealers) & global market, having presence in 15+ countries and
still growing. Atul Auto having 1 million + vehicles plying on roads.

The improvements in technologies were done from time to time to make it a sturdy and comfortable
vehicle. And like father like son, Mr. Jayantibhai Chandra also joined this mission.

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Their passion did not end up with success of ‘chhakada”. The group’s focus was now to engineer
similar product for semi-urban and urban areas. Soon, ‘Shakti’ was on the road which proved to
be a runway success and other vehicles like half tonner, Commercial 3-wheeler and more were
also introduced under the brand name of Shakti and now having Electric range with adoption of
BS-6 norms. Thanks to them, today ATUL AUTO LTD. is pronounced as a leading manufacturer
of three wheelers commercial vehicle in Gujarat. They are among top five – 3 wheelers company
in India.

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[1.3] PRODUCT PROFILE

Figure 2

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This chart shows us about the number of vehicles sold by the company in last five years:

Chart 7

In the year 2020-21, there is a downward slope in the chart which shows the impact of
covid-19 on the organization.

PLANT FACILITY:

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PROCESS OF MAKING PRODUCT:

Figure 3

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Ch-2
LITERATURE
REVIEW

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1) Ms. Kajal Rameshbhai Solanki and Dr. Urvashi J. Devmurari have undertaken a study
on, “A Study of Financial Statement Analysis of Selected Automobile Companies in India
with Special Reference to Goods and Services Tax”. The study is based on five automobile
companies, to know the implementation of GST on company's profitability ratio and
liquidity ratio. T-Test was used as an analytical tool. They have concluded that there is
positive impact but GST had no significant effect on profitability or liquidity ratio

2) A. Dharmaraj and Dr. N.Kathirvel researcher on, “Analysing the Financial Performance
of Selected Indian Automobile Companies”. The data were collected for fifteen different
companies for fifteen years, different ratios were used for analysis and ANOVA was used
as an analytical tool. The results were that the financial performance of Atul Auto Ltd,
Ashok Leyland, HMT Ltd, Tata Motors Ltd, and SML ISUZU Ltd are exceptionally
improved as compared to the group average value for all ratios and the companies selected
are financially strong and are growing at the rate of 17% and are contributing to the Indian
economy.

3) Dharmaraj Arumugam, Ashok Kumar M, Preetha R have studied on, “FACTORS

DETERMINING PROFITABILITY IN INDIAN AUTOMOBILE INDUSTRY”. The
study is based on sixteen automobile companies wre undertaken and twenty-one variables
were studied through Karl Pearson’s correlation coefficients between Return on sales
and selected measures relating to the of Indian automobile industry during pre and post
foreign direct investment. Study concluded that profitability of the Indian Automobile
Industry is highly dependent on Operating Ratio and it contributes 93.40 percent to
changes in return on sales.

4) Joji Abey and R. Velmurugan have studied on, “Determinants of Profitability in Indian
Automobile Industry”. The sample of 23 companies have been selected for ten years,
statistical tool used to analyze the data were (i) Correlation and (ii) Multiple Regression.
The result of analysis disclose that leverage, size of the company, growth in sales, asset
turnover ratio, index of industrial and production are the factors that determine profitability

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of automobile companies, it also revealed that there exist a relationship between age,
expenses to income ratio and assets turnover ratio on profitability.

5) Neeraj Kumar and Dr. Kuldip Kaur, have undertook a study on, “Firm Size and
Profitability in Indian Automobile Industry: An Analysis”. The sample of 25 companies
was taken of automobile industry. Secondary data like profitability ratio, total sales
turnover and net assets were used for analysis. Statistical tools like linear regression model
and s cross-section analysis were used to obtain result. They concluded that, time-series
analysis showed the positive relationship and cross-section analysis showed that there
exists no relationship between firm size and profitability.

6) Joji Abey, R. Velmurugan in their study, “Factors influencing short-term solvency in

Indian automobile industry”. The sample of different 23 companies of automobile industry
in taken into the study. Secondary data is used to know the liquidity position for period of
10 years. Statistical tools like correlation and regression test were used to know the result.
Study concluded that the liquidity position of a company depends on age, inventory
turnover ratio, dividend payout ratio and leverage.

7) M. M. Swalih , K.B. Adarsh and M.M. Sulphey studied on, “A study on the financial
soundness of Indian automobile industries using Altman Z-Score”. Sample of 10
companies of automobile industry were taken. Secondary data was used to know the
financial soundness. Statistical tool to analyze the data was Altman Z Score. The study
concluded that the Indian Automobile Industry is sound, healthy and robust and is not prone
to and financial distress or bankruptcy in the near future.

8) Dr. Samita Mahapatra, Deven Patil and Shubham Jadhav in their study, “Financial
Performance Analysis of Selected Automobile Companies in India”. The sample was- 3
companies of automobile industry. Secondary data was used for the purpose of research to

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calculate different ratios for period of 10 years. Statistical tools like arithmetic mean,
standard deviation, co-efficient of variation and one-way analysis of variance test
(ANOVA) were used to know growth, market capitalization and net sales of selected
companies. Study concluded that, automobile sector is growing after pandemic, adapting
new technologies and will maintain to contribute to India’s GDP. All three companies
selected will continue to maintain their market leadership.

9) Dr. G. Kanagavalli and R. Saroja Devi studied on, “FINANCIAL PERFORMANCE OF

SELECTED AUTOMOBILE COMPANIES”. The sample was 3 companies of automobile
industry and secondary data was collected for analyzing financial performance through
ratios. ANOVA test was used as a statistical tool. They concluded that after analyzing all
the aspects of research, Bajaj Auto and TVS Motors have satisfactory results but Hero
Motocorp is having a good position in the market. So, shareholders can easily invest
without any hesitation.

10) Ajay Kumar Patel, Shikha Jalota and Swati Sharma have studied on, “DETECTION
OF FINANCIAL DISTRESS IN THE INDIAN AUTOMOBILE INDUSTRY”. The
sample of 10 automobile companies were taken for research. Secondary data like financial
variables and ratios were used for analysis and statistical tool like Altman score, Grover
score, and Springate scores to know the signs of financial distress. The study concluded
that financial performance measured has not changed significantly over the years and
models adapted for financial distress resulted the same for all selected automobile firms.

11) Vikram Shende, (shende, 2014) concluded that consumer behavior comprises of all
human behavior which are included before making of purchase and post purchase
decisions. One can prevail in the serious market solely after understanding the intricate
consumer behavior. After analyzing the consumer behavior, marketer can take the
marketing decision which are compatible to consumer needs. It will be beneficial for the
company if it enters into the global market as they will be able to achieve benefits of

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economies of scale, decreased cost per unit and high production efficiency resulting in
serving customers efficiently and economically.

12) K.Vidyavathi, (K.VIDYAVATHI, 2012) the study throws light on different aspects that
the manufactures should concentrate on to attract the potential buyers. The demand for the
small Automobile segment is increasing because of the growing number of nuclear families
as well as parking problems. Hence the manufactures should figure out the needs, wants,
tastes and preferences of consumers in order to design the best products. Also fuel economy
and driving comfort are the most important characteristics followed by availability of
spares and their price.

13) Rhea R. Valecha1, Saumya Mathur2, Vanshita Khanna, (Rhea R. Valecha S. M., 2018)
and studied the effect of green marketing practices of automobile industry on consumer. It
researches that how green the consumers are in terms of their knowledge, their attitudes
and behavior. Their attitude is identified by seeing their judgment on protection and
promotion of environment. Do consumer use Petrol, Diesel or Kerosene which are harmful
to environment at large or are consumer shifting to CNG and Electric vehicles which helps
the Environment to heal.

14) Sanjay Singh Yadav, (Yadav, 2018) concluded consumer behavior comprises of different
human behavior, by studying this marketer can understand the market easily and can take
decision which are compatible to consumer needs. There are four major determinants for
consumer behavior - cultural, socioeconomics, personal and psychological. Rising income
has increased the buyers of car, now a day’s car has become the status of symbol. It is not
only as a mean of transportation but also as status of symbol.

15) Dr. R. Menaka, K. Ashath, (Dr. R. Menaka, 2014) studied that automobile industry is
expanding at large and increasing per capita income have lead them to buy expensive things
like car, diamonds, etc. every companies now a day’s are trying hard to serve their
customers and find many ways to satisfy them. Customer satisfaction is a main thing that
affects the company at large. On the off chance that client assumptions meet with the

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apparent worth of products and administration, client is fulfilled however in the event that
the apparent worth of merchandise and administration is not exactly the client assumptions
than client is disappointed and if the apparent worth surpassed the normal worth of the
products and administration than the client is pleased. Furthermore, clients by and large
need the most ideal item or administration for a minimal expense. The impression of the
best item or administration at least cost with wellbeing impact the business and client
section altogether.

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Ch-3
Theoretical
framework

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[3.1] What is financial statement analysis?

Figure 4

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[3.1.1] Financial statements comprise of:

Particulars Details covered

1. Balance sheet Assets, Liabilities and Equity
2. Income statement Revenue, Expenses and Profit or Loss
3. Cash-flow statement Operating, Investing and Financing activities
4. Statement of Change in Equity Shareholders Contribution
5. Notes to Financial statement Disclosure details

[3.2] Financial position:

It is the current balance of assets, liabilities and equity. The information pertaining to this are
written in financial statement i.e. balance sheet to know the financial condition of company.

For knowing financial condition, Financial ratios are calculated to know the results and are
compared with the either other entities or with past year to know the result.

[3.3] Financial performance:

It is a subjective measure of how well a firm can use assets from its primary mode of business and
generate revenues. The term is also used as a general measure of a firm's overall financial health
over a given period of time.

Financial performance helps investors to know about the general well-being of the firm and it is a
picture of company’s economic health and the work done by its management.

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[3.4] Ratio analysis:

It analyzes data from financial statements by calculating ratios which are used to evaluate a
company’s overall financial condition. These ratios are popular tools for analysts, investors, and a
company’s management team to gain useful knowledge into specific areas of a company’s
financial health.

Financial ratio analysis is the most popular type of financial statement analysis and can be
classified into multiple categories as shown below:

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Figure 5

1. Profitability Ratio:

It measures and evaluate the ability of a corporation to generate a profit. Profitability ratios are
important for managers to steer the corporation in the right direction. It helps in measuring the
ability of a company in earning sufficient profits.

A) Gross-Profit Ratio:
It is calculated in order to represent the operating profits of an organization after making
necessary adjustments pertaining to the COGS or cost of goods sold.

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B) Net Profit Ratio:

It is calculated in order to determine the overall profitability of an organization after
reducing both cash and non-cash expenditures and after deducting tax expense.

C) Return On Capital Employed:

It is used to determine the profitability of an organization with respect to the capital that is
invested in the business.

D) Return On Equity Ratio:

It is used by the investors use to better understand how profitable a company is in relation
to its shareholder equity.

E) Return On Assets Ratio:

It is used by investors understand how efficiently a company is generating revenue on its assets.

2. Liquidity ratio:

It refers to a company’s ability to pay its short-term bills and debts and, if needed, its capability to
sell assets quickly and pay due obligations.

A) Current Ratio:

It is the ratio between the current assets and current liabilities of a company. The current ratio is
used to indicate the liquidity of an organization in being able to meet its debt obligations in the
upcoming financial year. A higher current ratio will indicate that the organization is highly capable
of repaying its short-term debt obligations.

B) Quick Ratio:

The quick ratio is used to know the information pertaining to the capability of a company in paying
off its current liabilities on an immediate basis.

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3. Solvency/ leverage Ratio:

It refers to company’s ability to meet its long-term debts and obligations. Potential lenders
typically use solvency ratios to evaluate a company’s creditworthiness.

A) Debt-equity Ratio:
It is defined as a ratio between total debt and shareholders fund. The debt-equity ratio is
used to calculate the leverage of a company by management team.
B) Interest Coverage Ratio:
It is used to determine the solvency of an organization in the nearing time as well as how
many times the profits earned by that very organization were capable of absorbing its
interest-related expenses.

4. Turnover Ratio:

It used to determine how efficiently the financial assets and liabilities of an organization have been
used for the purpose of generating revenues.

A) Inventory Turnover Ratio:

It is used to determine the speed of a company in converting its inventories into sales.

B) Assets Turnover Ratio:

It used to compare a company's total average assets to its total sales. The ratio helps
investors to know how efficiently a company is using its assets to generate sales.

5. Valuation Ratio:

These ratios typically tell investors how much they are paying for the company regarding its
earning power or the value of its asset in the organization. It determines the returns that an
organization generates for its investors.

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A) Earnings Per Share:

It is used to know the earnings of an equity holder based on each share.

B) Dividend Pay-Out Ratio:

It measures the relative amount of dividends paid to a company’s shareholders and it
expresses the relationship between a company’s net income and the total dividends paid
out to shareholders.

C) Dividend Per Share:

It is the number of declared dividends issued by a company for every ordinary share
outstanding. It is the number of dividends each shareholder of a company receives on a
per-share basis.

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Ch-4
RESEARCH
METHODOLOGY

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What is research methodology?

Research Methodology is a set of actions about the process of research. It aims at the stages and
reason of the research. Research methodology discloses the method of data collection, different
statistical tools used to find objectives of study, and find out any relation between under – research
variables and type of research applicable.

Importance of research in my project:

This study is under taken to analyze the financial position of Atul Auto Ltd through different
financial ratios over a period of five years and to know company’s growth by adapting new
technologies.

[4.1] Problem Statement:

A statement of problem refers to the critical issue that the research seeks to address. In other words,
it captures the existing knowledge gap that your study aims to bridge using reliable results or
outcomes.

Financial position is the current balance of all assets and liabilities. It shows us the true picture of
company and through this we can know how sound the company is. Financial position can be
known from four different statements: (1) balance sheets (2) income statements (3) cash flow
statements and (4) statements of shareholders' equity. It helps all the related party to know about
company’s position.

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Here, the problem statement in the project is to know the financial position and soundness
through various ratios like profitability, liquidity, efficiency, leverage position, etc. of Atul
Auto ltd and to compare it with past year result and interpret the same.

[4.2] Objectives:

1) To know the overall financial performance of Atul Auto Ltd for the period of five years
i.e. 2016-17 to 2020-21
2) To measure profitability performance of Atul Auto ltd.

[4.3] Scope of study:

1) This present study is concerned with the financial performance of Atul Auto ltd -an
automobile company.
2) Financial Performance measures whether the company’s strategy and its implementation
and execution are effectively contributing towards Profitability, Liquidity, Efficiency and
Solvency so that the business can be carried out smoothly ensuring success, growth and
bottom line improvement.

[4.4] Sources of data:

There are two types of data in which research can be done

[4.4.1] Primary Data

[4.4.2] Secondary Data

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Primary sources are usually defined as first-hand information or data that is generated by witnesses
or participants in past events. Primary sources are characterized not by their format but rather by
the information they convey and their relationship to the research question. The interpretation and
evaluation of these sources becomes the basis for other research.

Secondary data is all the information collected for purposes other than the completion of a research
project and it's used to gain initial insight into the research problem. It is classified in terms of its
source – either internal or external.

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Secondary data and financial ratios are used for the study on Atul Auto Ltd and was considered
more appropriate as financial performance of a company can be determined by analyzing annual
report of the company and deriving data from it.

[4.5] Method of Data Collection:

It is important to note that for collection of secondary data, no need to use specific methods. They
are easily collected from various published sources.
For the project, secondary data has been collected from the annual reports of the company.

[4.6] Period of study:

The study covers period of five years from 2016-17 to 2020-21. The financial year runs from 1st
April to 31st March every year.

[4.7] Research design:

The research design refers to the overall strategy that you choose to integrate the different
components of the study in a coherent and logical way, thereby, ensuring you will effectively
address the research problem; it constitutes the blueprint for the collection, measurement, and
analysis of data. The design of a study defines the study type (descriptive, correlation, semi-
experimental, experimental, review, and meta-analysis) and sub-type (e.g. descriptive-longitudinal
case study), research question, hypotheses, independent and dependent variable, experimental
design, and if applicable, data collection methods and statistical analysis plan. Research design is
the framework that has been created to seek answers to research questions.

The research was designed according to:

1. Ease of researcher
2. By studying annual report of the company
3. Considering important ratios to know financial performance.

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[4.8] Sample Design:

A sample design is the framework, or road map, that serves as the basis for the selection of a survey
sample and affects many other important aspects of a survey as well. In a broad context, survey
researchers are interested in obtaining some type of information through a survey for some
population, or universe, of interest.

Here, Atul Auto ltd is selected for research on the financial performance through financial
ratios on the basis of availability of data for the period of five years i.e. 2016-17 to 2020 -21.
Minor research project was done on the consumer analysis of Atul Auto Ltd and carried the same
company for major research project for studying overall financial performance.

[4.9] Population:

A population or a research population is also known as well-defined collection of individuals or

objects known to have similar characteristic. All individuals or objects within a certain population
usually have a common, binding characteristic or traits.

For the project purpose, I had studied financial ratios, for the purpose of study- from the annual
report of the company.

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Figure 6

[4.10] Sample Size:

The sample size of a survey most typically refers to the number of units that were chosen from
which data were gathered. However, sample size can be defined in various ways. There is the
designated sample size, which is the number of sample units selected for contact or data collection.

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For major research project, ratios selected are:

1. Gross profit ratio
2. Net profit ratio
3. Return On Capital Employed
4. Return On Equity Ratio
5. Return On Assets Ratio
6. Current Ratio
7. Quick Ratio
8. Debt-equity Ratio:
9. Interest Coverage Ratio
10. Inventory Turnover Ratio
11. Assets Turnover Ratio
12. Earnings Per Share
13. Dividend Pay-Out Ratio
14. Dividend Per Share

[4.11] Sampling Method:

Sampling refers to the statistical process of selecting and studying the characteristics of a relatively
small number of items from a relatively large population of such items, to draw statistically valid
inferences about the characteristics about the entire population.

[4.11.1] Probability sampling:

A probability sampling method is any method of sampling that utilizes some form of random
selection. In order to have a random selection method, you must set up some process or procedure
that assures that the different units in your population have equal probabilities of being chosen.
Humans have long practiced various forms of random selection, such as picking a name out of a
hat, or choosing the short straw.

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Some of the most common types of random sampling methods are

1. Simple random sampling
2. Systematic sampling
3. Stratified sampling
4. Cluster sampling

[4.11.2] Nonprobability sampling:

Non-probability sampling is defined as a technique in which the researcher selects samples based
on the subjective judgment of the researcher rather than random selection. It is a flexible method.
This sampling method depends heavily on the expertise of the researchers.
Some of the most common types of non-probability sampling methods are:
1. Convenience sampling
2. Quota sampling
3. Judgment (or Purposive) Sampling
4. Snowball sampling

Here, in the project Judgment (or Purposive) Sampling is used to select the accounting ratios
of the study sample for last five years i.e. 2016-17 to 2020-21 as we are studying the financial
performance of the company.

[4.12] Framework Analysis:

Relevant key figure, tables and charts- from excel are used for the aim of study and presentation
purposes.

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[4.13] Research Gap:

From the review of past literature, the gaps identified was the absence of research study on
particular one company i.e. Atul Auto Ltd of Automobile industry to know its financial
performance through various accounting ratios for period of last five years and to interpret the
same.

[4.14] Limitation of the Study:

1. Financial data were collected for the study, data is secondary in nature. As a result, the
study bears all the problems intrinsic with the secondary data.
2. Study is restricted for the period of five years i.e. from 2016-17 to 2020-21.
3. While calculating the data for the sake of analysis, the estimation of decimal places leads
to minor deviations in ratios as well as percentage analysis and hence these are bound to
exist in the present study.

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Ch-5
Data
Analysis

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1. Profitability Ratio:
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
A. Gross profit ratio = × 100
𝑆𝑎𝑙𝑒𝑠

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 11.74% 12.43% 12.17% 10.67% -4.43%

Gross profit ratio

14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00% Ratio
-4.00%
-6.00%

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 8

Interpretations:

The above table shows the gross profit ratio for the year of 2016-17 to 2020-21, it was highest in
the year 2017-2018, but it turned out to be decreasing in coming years and in 2020-21 it was
negative due to pandemic.

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
B. Net profit Ratio = × 100
𝑆𝑎𝑙𝑒𝑠

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 7.85% 8.38% 8.03% 8.48% -3.51%

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Net Profit Ratio

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
Ratio
-2.00%

-4.00%

-6.00%

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 9

Interpretations:

The above table shows the net profit ratio for the year of 2016-17 to 2020-21. It was highest in the
year 2019-20 and turned negative in 2020-21, which indicates that Company has been badly
affected due to covid-19.

𝐸𝐵𝐼𝑇
C. Return on capital employed = × 100
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 29.73% 31.06% 31.37% 22.13% -3.98%

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Return on Capital Employed

35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
-5.00% Ratio

-10.00%

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 10

Interpretations:

The above table shows the return on capital employed for the year of 2016-17 to 2020-21. Negative
in 2020-21 shows that earning before interest and tax was lower and negative as compared to
capital employed by company.

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
D. Return on Assets =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
× 100

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 15.10% 15.43% 15.02% 13.93% -2.67%

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Return on Assets
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00% Ratio
-4.00%

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 11

Interpretations:

In 2017-18, company was working with full capacity and return was highest, while in 2020-21,
net income was negative and company increased their non-current and current investment which
resulted into negative ratio.

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
E. Return on Equity = × 100
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 20.10% 21.05% 20.54% 17.27% -3.47%

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Return on Equity
25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Ratio
-5.00%

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 12

Interpretations:

In 2020-21, ratio was negative due to loss in net income and shareholders’ equity was high as
compared to net income for the year, which shows that company has been badly affected by covid-
19.

2. Liquidity Ratio:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
A. Current Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 2.63 2.56 2.11 1.98 1.53

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Current Ratio
3

2.5

1.5

0.5

0
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 13

Interpretations:

Till 2018-19 current ratio was very good and above the ideal level of 2:1, but it stared decreasing
in 2019-20 which shows that company is having more current liabilities that current assets. In
2020-21, there is increase of 10cr (approx.) in trade payables and decrease in trade receivables
54.34cr (approx.) which might have affected the ratio.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
B. Quick Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 1.97 1.94 1.47 1.27 0.82

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Quick Ratio
2.5

1.5

0.5

0
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 14

Interpretations:

The ideal quick ratio is 1:1 which was available till 2019-20, but in 2020-21 it was below
acceptable level, there is increase of 10cr (approx.) in trade payables and decrease in trade
receivables 54.34cr (approx.) which might have affected the ratio.

3. Solvency/ Leverage Ratio

𝑇𝑜𝑡𝑎𝑙 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
A. Debt-Equity Ratio =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 0.00 0.00 0.00 0.00 0.05

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Debt - Equity Ratio

0.06

0.05

0.04

0.03

0.02

0.01

0
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 15

Interpretations:

The above table shows debt to equity ratio, it was nil from 2016-17 to 2019-20 as company didn’t
required debt. But in 2020-21 they took 15cr in the form of long term borrowings.

𝐸𝐵𝐼𝑇𝐷𝐴
B. Interest Coverage Ratio=
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 0.00 0.00 0.00 0.00 -35.30

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Interest Coverage Ratio

0
Ratio
-5

-10

-15

-20

-25

-30

-35

-40

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 16

Interpretations:

The above table shows interest coverage as compared to its earning. In previous four years
company was debt free. In last year they took debt of 15cr, interest ranges from 7% to 9%.

4. Turnover ratio:

𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑

A. Inventory Turnover ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 13.12 12.08 11.61 13.02 5.79

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Inventory Turnover Ratio

14

12

10

0
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 17

Interpretations:

The above chart shows inventory turnover ratio, till 2019-20 company was working with full
capacity to convert its inventories into sales, but in 2020-21 ratio was half as compared to previous
year, which shows covid-19 effects, company was facing.

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
B. Asset Turnover ratio =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
× 100

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 193.76% 185.75% 188.62% 166.38% 77.72%

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Assets Turnover Ratio

250.00%

200.00%

150.00%

100.00%

50.00%

0.00%
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 18

Interpretations:

The above table shows that company was using all its assets efficiently to generate sales till 2019-
20. In 2020-21 there was decrease in the ratio, which says that company didn’t used its assets
efficiently to generate sales.

5. Valuation Ratio:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑓𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
A. Earnings Per Share =
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑆ℎ𝑎𝑟𝑒 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 16.88 21.05 24.21 24.00 -5.00

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Earnings Per Share

30

25

20

15

10

0
Ratio
-5

-10

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 19

Interpretations:

The above table shows earning per share by the investors of the company. Till 2019-20 company
gave a good return to its investors, but failed in 2020-21, as net income was in loss and number of
shares were same through out this five years.

𝑇𝑜𝑡𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠
B. Dividend Pay-Out Ratio = × 100
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 31.09% 20.19% 21.68% 11.50% 0.00%

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Dividend Pay-out Ratio

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 20

Interpretations:

The above table shows the dividend paid as compared to the net income of the company. Till 2018-
19 company paid good amount of dividend but it started decreasing in 2019-20 and in 2020-21 it
turned out to be 0.00% as company was making loss due the nationwide lockdown.

𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
C. Dividend Per Share =
𝑁𝑜.𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠

Years 2016-17 2017-18 2018-19 2019-20 2020-21

Ratio 4.25 5.25 4.00 1.50 0.00

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Dividend Per Share

6

0
Ratio

2016-17 2017-18 2018-19 2019-20 2020-21

Chart 21

Interpretations:

The above table shows dividend paid per share to investors. Highest was paid in the year 2017-18
as company’s income increased by 9cr (approx.), but it was less in 2019-20 as company was
preparing itself for covid-19 effects and in 2020-21 it was nil, as company was making loss.

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Ch-6
Findings,
suggestions &
conclusion

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[6.1] Research Findings:

1. COVID has impacted three wheeler industry in the country. The total size in FY 2019-20
was 12 lacs units, has come down to 6 lacs units in FY 2020-21 and estimated to remain
same level in current financial year too.
2. In order to move company’s ratio from negative to positive side, they should first plan how
to increase their net income.
3. Company should plan its current assets and current liabilities accordingly so that ideal ratio
can be achieved.
4. As company took debt of 15cr to operate their working cycle properly in 2020-21 which
was affected due to pandemic in the country. This might generate fear in investors mind so
company should try to repay it when possible.
5. Company’s plant should work at their full capacity otherwise inventory would not convert
into sales at full level.
6. Assets turnover ratio was low in last year, which says that company has not used its assets
at full capacity to generate sales.
7. Earnings per share has gone below face value of the company, which should be brought
back to normal.
8. Company was not able to issue dividend to its shareholders as net income was loss.
9. The company focuses on quick and efficient after sales services to end users, since the
product should run all the time and livelihood of the rickshaw owner is directly connected
its being “on-road”.
10. Local garage owners are trained by company in addition to service staff at dealership, so
the rickshaw owner can get prompt service at any location.
11. Employee are benefited with free bus service and canteen facility at subsidized rate. Best
environment and work culture is offered with equal opportunities to develop required skills.

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[6.2] Suggestions:

1. Company should provide some subsidy or offers to dealers and customers to increase their
sales and number of vehicles sold during the year.
2. Company should now plan their portfolio accordingly that even if Covid wave affects the
country it should not disrupt the company’s financial position
3. Company should now start to maintain some amount of contingency fund which would
help company to face such situation.
4. Company should plan ways to increase its earnings per share and dividend per share which
would re-gain its trust from investors.
5. Company should launch its most-awaited electric (li-ion battery version) as soon as
possible as it cost less than other fuel vehicle and can help to make India pollution free.

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[6.2.1] Future Scope of Study:

1. By doing ratio analysis, company can plan and forecast their new strategy.
2. Inter firm comparison can be done to know how our competitors are working and handling
the situation in tough times.
3. SWOT analysis can be undertaken to know company’s weakness and threats.
4. If company plans out FPO – follow-on public offering, shareholders ratio can be studied in
detail to know the results.

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[6.3] Conclusion:

1. Employing skilled and trained executives for performing operations of the firm pays out
quality results and increasing business.
2. Technologies play a very vital role in market. Always remaining updated and active in
consuming new technologies gives an added advantage to the company to increase its sales.
3. “Plan Big, Start Small and Scale Fast”, the operations of the company should be well timed
and planned to enjoy the advantage of being the first mover in automobile industry.
4. Vision and Mission statement of company clearly indicates that they are working for the
well-being of common men by making them self-dependent and giving them
technologically enhanced products.
5. Company is working hard to achieve its original level and move ahead, from disruptions
of Covid-19.

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Ch-7
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