A Study Of The Relation Between Profitability And Working Capital In Some Selected Auto Manufacturing Companies In India

The new economic policy adopted in India in 1991 known as Liberalization, Privatization and Globalization (LPG model). This policy designed to make the Indian economy progressively market oriented and integrate it with the emerging global economy structure. Therefore in line with this policy it was very imperative to analyze the working management and profitability in selected Auto manufacturing companies. The purpose of the study was to analyze the practice of working capital Management and profitability in six selected Indian auto manufacturing companies. For this aforementioned study, a time series data for the years 2003- 2012 has been employed and a secondary data from the annual reports of the six companies was solicited. Both qualitative and quantitative paradigms were employed so as to analyze the research. As far as the profitability and working capital is concerned, Index of gross profit margin, operating profit margin and return on capital employed ratios were analyzed. The results for gross profit margin reveal that the minimum gross profit margin chain index in Hero MotoCorp was 60.83 in 2011-2012, TVS Motor was -15.12 in 2007-2008, Ashok Leyland were 47.84 in 2008-2009, Tata Motors was 42.86 in 2008-2009, Mahindra & Mahindra was 93.59 of 2008-2009 and Maruti Suzuki was 60.78 in 2011-2012. The maximum gross profit margin chain index in Hero MotoCorp was 100.62 in 2003 -2004, TVS Motor was 101.28 in 2003-2004, Ashok Leyland was 110.73 in 2003-2004, Tata Motors was 134.03 in 2003-2004, Mahindra & Mahindra was 181.63 in 2006-2007 and Maruti Suzuki was 212.41 in 2005-2006. Moreover, the minimum operating profit margin chain index in Hero MotoCorp was 69.55 in 2006-2007, TVS Motor was 14.24 in 2007-2008, Ashok Leyland was 64.70 in 2008-2009, Tata Motors was 57.30 in 2008-2009, Mahindra & Mahindra was 100.00 of 2002-2003 and Maruti Suzuki was 100.00 in 2002-2003. The maximum operating profit margin chain index in Hero MotoCorp was 100.00 in 2002 -2003, TVS Motor was 100.00 in 2002-2003, Ashok Leyland was 100.00 in 2002-2003, Tata Motors was 113.15 in 2003-2004, Mahindra & Mahindra was 198.42 in 2009-2010 and Maruti Suzuki was 227.87 in 2005-2006. The minimum return on capital employed chain index in Hero MotoCorp was 49.25 in 2007-2008, TVS Motor was 2.84 in 2007-2008, Ashok Leyland was 53.15 in 2008-2009, Tata Motors was 31.25 in 2008-2009, Mahindra & Mahindra was 100.00 of 2002-2003 and Maruti Suzuki was 100.00 in 2002-2003. The maximum return on capital employed chain index in Hero MotoCorp was 100.00 in 2002 -2003, TVS Motor was 100.00 in 2002-2003, Ashok Leyland was 144.19 in 2006-2007, Tata Motors was 153.53 in 2003-2004, Mahindra & Mahindra was 292.19 in 2009-2010 and Maruti Suzuki was 398.81 in 2005-2006.

KEY WORDS: Profitability, “Working capital Auto manufacturing companies”