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A

case study on
Scooter India limited

PRESENTED TO : PRESENTED BY :
Prof. Harsha Jariwala 1.Riyaz
V.M.P.I.M 2.Vishal
G.N.U 3.Mukesh
KHERVA . 4.Savan
Content
History of company
Scooter India was est. by GOI in 1972, as a
PSU.

SIL is the joint agreement between GOI and


automobile product of India ltd (API) innocenti.

The case is around 1986 ,company was


incurring huge losses from its beginning.
Table 1
GOI have two following alternatives :
Item Plant with entirely Plant offered by
new equipment Innocenti
offered by
PIAGGIO
1.Total fixed assets RS.15.91 cr RS.10.90 cr
2.Foreign exchange 6.56 2.90
elements
3.Working capital 5.00 5.00
requirement
4.Production cost RS.2022 RS.1989
/scooter
5.ex-factory price at RS.2321 Rs.2235
assume level 12.5%
gross return on total
fixed investment
Proposal for the 3 wheeler

In jan. 1973 proposal made by innocenti for


sale of world right for three wheeler .

SIL approached GOI for the same .


OPPORTUNITY IN PROPOSAL:
1.Light transport vehicle with load of 600 kgms.
2.Greater export potential in developed country
3.Reduction in production cost by integrating two
and three wheeler production
4.Attractive price of technical documentation and
equipment .
5.More intensive use of plant and equipment
available for the two wheeler production .
6.The additional investment of RS.47 Lakhs would
result in plant being able to add a product line
valued at RS.16.5 crores and additional profit of
RS 1.5 crore /annum
This proposal was agreed by GOI subject to some
owned condition .
1. Factor responsible for company's poor
performance
The SIL making losses ever since its inception .
By examined P&L account it showes RS 6604.77
crore .

The major factor for same are as follows :


1.Low production rate
2.Transparency in dealing
- dealing with innocenti
- dealing with API for DPR
Financial analysis
3. Debt/Equity ratio
debt/equity ratio analysis

140
120
debt/equity

100
80
debt/equity
60
40
20
0
1979- 1980- 1981- 1982- 1983- 1984-
80 81 82 83 84 85
year
Cont…..
From exhibit 4 we can see that debt is increasing
in respect of equity.
Equity remain same for all the year. It is 50 lakhs.
Major reason in increase is losses incured by the
company.
Because of losses company can not pay aloan
taken from financial institute rather they have to
go for funding by borrowing.
So debt/equity ratio increasing every year,so
company reputation decreases so funding from
equity is not possible.
4. Profitability ratio
Company continuously witnessed losses from
1980-85.

profitabilityratio

5000

4000
rs in lakhs

3000
year
2000
expences
1000
loss
0
0

5
-8

-8

-8

-8

-8

-8
-1000
9

4
7

8
9

-2000
1

year
Action plan
profit

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