1. Hindustan Machine Tools Limited
(HMT)
A
PROJECT REPORT
Submitted To:- Submitted By:-
Dr. Kiran Mehta DEEPAK KUMAR
Associate Professor (Finance) NAVEEN KUMAR
Chitkara Business School
CHITKARA BUSINESS SCHOOL
CHITKARA UNIVERSITY, PUNJAB
2014
2. LETTER OF TRANSMITTAL
11th
of March, 2015
To
Dr. Kiran Mehta
Course Instructor
Associate Professor (Finance)
Chitkara Business School
Chitkata University
Rajpura (Punjab)
Subject: Submission of project report.
Dear Mam,
This is to inform you that we have completed the Financial Management project that you had
assigned us for the course module of “Financial Management” March 2015. For the project, we
selected “Hindustan Machine Tools Limited”.
In writing this report, we have followed the instructions that you have given us in the class, and
we have also applied relevant concepts that we have learnt throughout our course module. We
have defied our core competencies, strategies in different level in inventory and financial
calculations. The contents provided in this report are all our own, though some information and
references have been taken from different sources to facilitate our report.
However, we will be glad to clarify any discrepancy that may arise.
Finally, we would love to express our gratitude for your supportive thoughts and kind
consideration in and outside of the class.
Yours sincerely,
Deepak Kumar Shekhawat (F&B-1420981098)
Naveen Kumar (FMP-1420981012)
3. LETTER OF AUTHORIZATION
December 16, 2014
To
Dr. Kiran Mehta
Course Instructor
Associate Professor (Finance)
Chitkara Business School
Chitkata University
Rajpura (Punjab)
Subject: Seeking permission to conduct visit in a company
Dear Mam,
We the MBA students of Chitkara Business School, Chitkara University are writing to request
permission to conduct a visit in a company as a requirement of our Special Project subject. We
are currently studying Financial Management and our performance task in this subject is to make
a study of “Hindustan Machine Tools Limited”. The study will include various factors which
drive Inventory level in a company and move on to another in addition to some
recommendations based on the findings of this visit and its conclusion.
If approval is granted, documentation should take no longer than two (2-3) hours and to be done
on your convenience. The data/results of the study will remain absolutely confidential and to be
used on educational purpose only.
Your approval to conduct this study will be greatly appreciated.
Thank you.
Yours sincerely,
Deepak Kumar Shekhawat (F&B-1420981098)
Naveen Kumar (FMP-1420981012)
4. ACKNOWLEDGEMENT
A mammoth thesis of this nature calls for intellectual nourishment, professional help, and
encouragement from many quarters. I would like to express my gratitude to:
The pioneers in the field of Financial Management who have shaped their understanding
through their rich and varied contributions.
Professors, seniors and classmates for providing the stimulus for making this project
successful.
A number of academics and practitioners for generously sharing their insight and
experience with us.
It is my immense pleasure to work under the guidance of Associate Prof. Dr. Kiran Mehta
(Finance Faculty of Chitkara Business School), and we heartily thank them for providing me
the guidance whenever needed. I am also thankful to beloved The Dean Dr. Sandhir Sharma,
who gave me guidance in each and every step of the way. We would also like express our
profound gratitude to Dr. Ashok K Chitkara, Chancellor for his guidance, encouragement and
compassion in providing facilities and helping throughout the way.
My heuristic approach towards the project was one of the major contributors in the outcomes that
we arrived at. I’d like to thank my institution, Chitkara University – Rajpura (Punjab), for
providing me this great opportunity and attempting to inculcate the traits needed to succeed.
I am also thankful to various industry experts and executives for sharing relevant information
and valuable thoughts with me and helped me in writing my thesis.
5. CHAPTER 1 : INTRODUCTION
INDUSTRY PROFILE
The machine tool industry constitutes the backbone of the industrial sector and is vital for the
growth of the Indian machine tool industry. Even though the Indian machine tool industry is a
small segment of the engineering industry, it plays a very important role in the development and
technology up gradation of the engineering industry. The quality and cost of engineering
products depends on the quality of mother machine tools and their automation level. The
development of the machine tool industry is therefore of paramount importance for a competitive
and self-reliant industrial structure.
The growth of Indian machine tool industry and major user industries clearly shows the close
inter dependencies of indigenous machine tools and the major user industries. This level of
performance of the major user industries has been made possible only because of support of
indigenous manufacture large and small, to meet almost all the requirement of machine tools,
conventional, CNC special purpose and flexible manufacturing lines required by them.
Had the indigenous machine tool industry not been able to meet the major user industries
demand, then these machine tools would have to be imported, at much higher prices, irrespective
of rising cost of foreign exchange or not. This would have severely affected not only the country
GNP and the overall economy of the country but not severely impaired the country space and the
defense sector.
PROFILE OF COMPANY HMT
By end of the Second World War, the government of India confronted by a big problem of
disposing the colossal war waste. Ultimately, a committee was constituted to inquire into the
possibilities. The committee report of 1948 proposed the establishment of a government owned
machine tool industry. This was expected to fulfill two aspects. The first was being utilization of
the Rs.4000 million worth of metallic waste. The second was the incorporation of a state owned
infrastructure – manufacturing facility. The result was the birth of THE HINDUSTAN
MACHINE TOOLS LIMITED, which diversified in due course of time to the present stature of
the multi core, multi location, and multi unit, multi product industrial giant HMT Ltd.
6. The HMT Ltd was started as a single factory to produce Tool Room Lathe at Bangalore in
collaboration with M/s Oerlikon of Switzerland in 1953, with a 6 capacity to manufacture around
400 machines per year. Since then different collaborations, continued in house R&D and
tremendous marketing efforts brought HMT, to present status.
The growth of HMT Ltd. was characterized by the forward and backward integration of
technology and product diversification. Thus the company that stated with manufacturing and
selling lathes expanded its machine tools products range to evolve as the ultimate solution in
metal cutting. The product diversification efforts took the company to the business of watches in
1962, tractor in 1971, die-casting on plastic machinery in 1971, printing machinery in 1972,
presses in 1972, lamps & lamp making machinery in 1976, food processing machinery in 1980,
CNC systems in 1986, ball screws in 1986 and reconditioning in 1990.
The multi-product activities made HMT Ltd. change its identity as Hindustan Machine Tools
Limited. Today HMT Ltd has 16 manufacturing units with 22 products divisions spread through
the length and breath of India. A subsidiary viz., HMT (international) Ltd undertakes the exports
of the company. They are also export agents for general other Indian companies.
HMT Ltd was restructured in 1992 to facilitate better administration of the multi-product
business activities. Accordingly, the following business group was established.
Machine tools business group, to concentrate on mental cutting machines. ‰
Industrial machinery business group to deal with printing machines, die casting and
plastic injection molding machines food processing machines and metal forming
machines
Agricultural business group to concentrate on tractor
Engineering components business group to deal with casting and ball screws
Consumer product business group, to deal with watches and lamps
7. IN ADDITION TO THESE BUSINESS GROUPS, THE COMPANY OWNS THRESS
SUBSIDIARIES AS FOLLOWS:
HMT (international) Ltd. which undertakes overseas project & exports ‰
PRAGA Tools Ltd. which manufacturers machine tools ‰
HMT bearing Ltd which manufacture precision bearing in collaboration with M/S Kozo
Japan
As per the revival plan of this public sector industry a turn around plan has introduced in early
days of this millennium and re-organized as HMT Ltd holding company including tractor
division and presently comprises of the following subsidiaries.
1. HMT Machine Tools Limited.
2. HMT Watches Limited
3. HMT Chinar Watches Limited
4. HMT Bearing Limited
5. HMT International Limited
6. PRAGA Tools Limited
Machine Tools industry , being the mother industry , has strategic importance and is a major
support for growth of various other industries. Initially it started with an objective of producing a
limited range of machine tools, required for building an industrial edifice for the country. Thus,
Hindustan Machine Tools Limited, or HMT began in a small way to meet a big commitment -
"To manufacture mother machines to build modern industrial India".
Organization Structure
8.
9. CORPORATE VISION
To establish ourselves as one of the world’s premier companies in the engineering field
having strong international competitiveness
To achieve market leadership in India through ensuring customer satisfaction by
supplying internationally competitive products and services
To achieve sustained growth in the earnings of the group on behalf of shareholders.
CORPORATE MISSION
Objectives & Goals
To encourage the modernization of Indian Industry through the supply of engineering
goods and services of world class excellence
To maintain technological leadership through continuous efforts to update product
technology and manufacturing methods
To globalize our operations by developing a mix of international markets and businesses
To ensure a satisfactory return on capital employed, to meet the growth needs and the
aspirations of our stakeholders
To present an active, pleasant and productive working environment
10. The product range of HMT machine tools, Bangalore ‰
Heavy duty lathes ‰
Single and multi spindle automates ‰
Radial drilling machines ‰
Multi spindle drills ‰
Cylindrical & surface grinders ‰
Laser cutting machines ‰
CNC turn mill centers ‰
CNC wire cut EDM
PINJORE FMS & FMC ‰
Horizontal machining centers ‰
Vertical machining centers ‰
Milling machines ‰
Broaching machines
KALAMASSERY ‰(KERLA)
CNC turning center ‰
Turn mill center ‰
Flexible turning cell ‰
Copying lathes ‰
Center lathes ‰
Offset printing machines ‰
Paper cutting machines
HYDERABAD ‰
Special purpose machines ‰
Horizontal machining center ‰
FMS ‰
CNC horizontal boring machines ‰
Bed type & floor types boring machines
11. AJMER ‰
Grinding machines ‰
SPM grinders ‰
CNC grinders
FACILITIES AVAILABLE IN DIFFERENT MACHINE TOOL UNITS ‰
CNC ram type plano miller ‰
Horizontal machining centers 9 ‰
Vertical machining centers ‰
Vertical machining centers ‰
Horizontal jog boring machines ‰
CNC turning centers ‰
Turn mill centers ‰
Slide way grinders ‰
Cylindrical grinders ‰
Internal grinders ‰
Precision gear shapers ‰
Precision gear hobbers ‰
Gear grinders ‰
Induction hardening machines
3D co-ordinate measuring machines
12. CHAPTER 2 : INVENTORY
Meaning of Inventory
Inventory is the collection of unsold products waiting to be sold. Inventory is listed as a current
asset on a company's balance sheet.
How it works/Example:
Inventory is commonly thought of as the finished goods a company accumulates before selling
them to end users. But inventory can also describe the raw materials used to produce the finished
goods, goods as they go through the production process (referred to as "work-in-progress" or
WIP), or goods that are "in transit."
There are generally five reasons companies maintain inventories:
To meet an anticipated increase in demand;
To protect against unanticipated increases in demand;
To take advantage of price breaks for ordering raw materials in bulk;
To prevent the idling of a whole factory if one part of the process breaks down; and,
To keep a steady stream of material flowing to retailers rather than making a single
shipment of goods to retailers. Inventory can also be used as collateral to obtain financing in
some cases. The basic requirement for counting an item in inventory is economic control rather
than physical possession. Therefore, when a company purchases inventory, the item is included
in the purchaser's inventory even if the purchaser does not have physical possession of those
items. Inventory is usually classified in its own category as an asset on the balance sheet,
following receivables. It is important to note that the balance sheet's inventory account should
also reflect costs directly or indirectly incurred in making an item ready for sale, including the
purchase price of the item as well as the freight, receiving, unpacking, inspecting, storage,
maintenance, insurance, taxes, and other costs associated with it.
Types of Inventory
Raw Materials
Work-in-Process
Finished Goods
Other Types of Inventory
13. Importance of Inventory
Inventory is a current asset on your company’s balance sheet. More important, it is a major part
of your ongoing business operations. For manufacturers, inventory includes raw materials used
to make and assemble products. For resellers, it includes products you acquire to resell to
customers. In either case, you need inventory to earn revenue.
Revenue and Profits
As a product seller, inventory is the driving force behind your ability to generate revenue and
profits. Revenue is the money you collect at the time you sell inventory. Profit equals your final
income after you subtract your variable costs. This means the ability to get inventory at the
lowest cost possible and sell it at the highest price is key to a successful, profitable operation.
Management
Managing your inventory in a cost-efficient way helps you optimize your profits. This begins
with negotiating the lowest costs with your suppliers. Buying in volume or committing to
suppliers in long-term relationships can help with this. Managing inventory once you have it is
vital as well. If you order too much inventory, you have to pay more money for employees to
organize it and manage it. You have more expenses for storage areas where you hold it. You also
risk waste on expired or rotted items. Having too little inventory can lead to stock-outs, which is
bad for customer service.
Turnover
Turning over inventory efficiently is also important. Calculating your inventory turnover ratio
allows you to see how efficiently you sell through your inventory. The formula is costs of goods
sold divided by your average inventory level for a given period. A high turnover rate means you
get products off the shelf while they have maximum value to customers. You also make room for
newer merchandise while it’s trendy or in demand. A lower turnover ratio leads to higher
management costs and more waste. It also forces you to have more sales promotions to clear out
excess products.
14. Just-in-Time
A common approach to inventory management in the latter 20th and early 21st centuries is just-
in-time or JIT inventory. This is a technology-driven method intended to keep your inventory at
ideal levels where you have enough on hand to cover customer demand, but not too much to lead
to high costs. To use JIT, you need strong relationships with key suppliers so you can integrate
your inventory data through shared software databases. This allows for automated ordering so
suppliers can quickly get new inventory out to your distribution center or stores as needed.
Methods for Inventory Control
ABC System.
This system includes three groups of products. The first group (A) includes large, costly
products; the second group (B) includes somewhat less-costly products; and the third group (C)
includes small, cheap products. The ABC System focuses on product types, not quantity. If you
use inventory tracking software, you should be able to use this system just fine. The ABC
System will help you know how long it will take to reorder certain products, based on their
group.
Min-Max System.
This is the simplest method of inventory control. You simply draw two lines, which represent a
maximum amount of inventory and a minimum amount. When your stock of a certain product
reaches the minimum line, it’s time to reorder. However, you can’t order more than the
maximum line. The simplistic approach of this method can be both a good thing and a bad thing.
It’s easy to use, but it could leave you with shortages or overstocks, if you’re not careful.
Two-Bin System.
As its name suggest, this system includes two bins: One bin with products you sell day to day,
and another bin with products that are sold only when the first bin is empty and an order has
been placed to refill it. This is also a fairly simple approach, though it can still require a lot of
work. Be sure to rotate through the backup bin fairly often and try not to stock up too much on
products or your carrying costs will rise.
15. Order-Cycle System.
In this system, every 30, 60 or 90 days you go through your inventory and check product levels.
You order more of products that you suspect will sell out before the following scheduled
inventory checkup. This is the worst of the four inventory control methods. It is fraught with
danger. If you only look at your inventory levels every 30 days or so, you could run into
overstock problems or shortages. You should steer clear of this inventory control method
16. CHAPTER 3
Types of Inventory for manufacturing concern
Your business inventory consists of your stock, the goods that you offer for sale and any other
materials you need to run your businesses. Maintaining an appropriate inventory is crucial to the
profitability of any small business, where inventory amounts may be smaller than in a large
company. Running out of goods means you may not be
able to meet demand, while having too many goods means your money is tied up in inventory
that you cannot sell.
Raw Materials
This type of inventory includes any goods used in the manufacturing process, such as
components used to assemble a finished product. Raw materials may also include partially
finished goods or materials. For example, for an orange juice company, oranges, sugar and
preservatives are raw materials; while for a computer manufacturer, chips, circuit boards and
diodes are raw materials. Inventory items may be classified as raw materials if the organization
has purchased them from an outside company, or if they are used to make components.
Work-in-Process
Work-in-process inventory items are those materials and parts that are waiting to be made into
something else. These may include partially assembled items that are waiting to be completed.
Work-in-process inventory items may include finished goods that have not yet been packaged
and inspected, as well as raw materials that have moved from storage to a preassembly area. For
example, in an orange juice company, the oranges may come in to a storage area, where they are
raw goods, but once they have been moved out of the storage area and onto the assembly line for
juicing, they become work-in-process inventory. In a small company, work-in-process goods
may be stored in the same area as raw materials and finished goods.
Finished Goods
Finished goods are any products that are ready to be shipped out or sold directly to customers,
including to wholesalers and retailers. Finished goods may be waiting in a storage area or on a
17. shop floor. If the amount of inventory of finished goods increases faster that the amount of raw
goods and work-in-process goods, then production may need to slow down until more finished
goods are sold. In some businesses, goods are not included in the finished goods inventory until
Inventory includes any raw materials that are used to manufacture your finished goods. Systems
they are sold. For example, in companies where goods are made to order.
Other Types of Inventory
Maintenance, repair and operating inventory are all the items an organization needs in order to
operate, such as office equipment, packing boxes and tools to repair equipment. There are also
other types of inventory that are classified based on the purpose they serve. These include transit
inventory, which are products or components that are being moved from one location to another,
such as from a warehouse to a factory; buffer inventory, which are excess inventory items that
are kept on hand to protect against supply problems, such as poor quality or slow delivery of raw
materials; and anticipation inventory, which are items that an organization stocks up on in case
of excess demand -- such as in the build up to Christmas shopping.
