FINANCIAL MANAGEMENT- II Topic 3

Submitted to:
Prof. Seetharam V

Submitted by:
Gaurav Sharma 12MBA0039

Company Name- LeasePlan

The worlds leading vehicle leasing and fleet management company With nearly 5 decades of experience, LeasePlan has unmatched credentials in fleet management. LeasePlan Corporation N.V. is held by Global Mobility Holding B.V., a company owned by the Volkswagen Group headed by Volkswagen AG (50%) and Fleet Investments B.V. (50%). The company is headquartered in The Netherlands. In India, LeasePlan began operations in 1999. As the pioneers, we established the foundation for the corporate fleet management business in India. We offer a wide range of comprehensive mobility solutions that help companies concentrate on their core business while we take care of their fleets. We have direct presence in Delhi/NCR, Mumbai, Pune, Kolkata, Ahmedabad, Hyderabad, Bangalore and Chennai, and an operational reach in all major towns and cities across the country. THE WAY WE CONDUCT BUSINESS Building a sustainable future of success for our business is based on having sound business ethics, and having respect for our stakeholders and society at large. We have described the way we conduct business in a Code of Conduct. The LeasePlan Code of Conduct provides our employees worldwide with a framework for everyday business decisions. The LeasePlan Code of Conduct is based on our values, starting with what we expect from employees in our duty of care towards clients, suppliers and business partners. The Code of Conduct further describes the commitments we have in providing employees with a fair, rewarding and enjoyable work environment. As we strive to balance the interests of people, planet and profit our Code of Conduct also gives guidance on our responsibilities towards our wider society and the environment. Furthermore, employees are given information on the several channels open to them for asking questions or dealing with business ethics issues. When conducting business for LeasePlan, consultants, contractors, agents and joint venture partners are expected to observe the same standards of conduct as LeasePlan employees.

Living up to these standards of conduct will help us be a socially responsible company and continue to build a business of which we are, and will be, proud. Determination of lease contract (a) by efflux of the time limited thereby, (b) where such time is limited conditionally on the happening of some event-by the happening of such event, (c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event-by the happening of such event, (d) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right, (e) by express surrender, that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them, (f) by implied surrender, (g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease, (h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other. Illustration to clause (f) A lessee accepts from his lessor a new lease of the property leased, to take effect during the continuance of the existing lease. This is an implied surrender of the former lease, and such lease determines thereupon.

Assessment of feasibility of Lease contract , The decision to acquire equipment by lease or purchase is based on the findings of a case by case evaluation of comparative costs and other factors. The following factors are the minimum that should be considered. 1. 2. 3. 4. 5. 6. 7. 8. Estimated length of the period the equipment is to be used and the extent of use within that period. Financial and operating advantages of alternative types and makes of equipment. Cumulative rental payments for the estimated period of use. Net purchase price. Transportation and installation costs. Maintenance and other service costs. Potential obsolescence of the equipment because of imminent technological improvements. The following additional factors should be considered, as appropriate, depending on the type, cost, complexity, and estimated period of use of the equipment. a. Availability of purchase options. b. Potential for use of the equipment by other agencies after its use by the acquiring agency is ended. c. Trade-in or salvage value. d. Imputed interest. e. Availability of a servicing capability, especially for highly complex equipment; e. g., can the equipment be serviced by the Government of other sources if it is purchased?

The purchase method is appropriate if the equipment will be used beyond the point and time when cumulative leasing costs exceed the purchase cost. In addition, the possibility that future technological advances might make the selected equipment less desirable is not justification to rule out the purchase method. The lease method is appropriate if it is to the Governments advantage under the circumstances. If a lease is justified, lease with option to purchase is preferable. Generally, a long term lease should be avoided, but may be appropriate if an option to purchase or other favorable terms are included.

To identify whether contract is feasible or not in lessor point of view The lease evaluation from the point of view of the lessor aims at ascertaining whether to accept a lease proposal or to choose from alternative proposals. As in the case of the evaluation by a lessee, the appraisal method used is the discounted cash flow technique based on the lessor's cash flows. The leaser related cash flow from his angle consists of (a) outflows in terms of the initial investment/acquisition cost of the asset at the inception of the lease; income tax on lease payments, sales tax on lease transaction, if any; lease administration expenses such as rental collection charges, expenses on suits for recovery and other direct cost, and so on, (b) inflows such as lease rentals, management fee, tax shield on depreciation residual value and security deposit, if any, and so on. This section illustrates lease evaluation from the point of view of a lessor and includes aspects such as break-even rental for the lessor, negotiation and fixation of lease rentals.

LeasePlan

Deal with PSU lease contract

PUBLIC SECTOR COMPANIES WARM UP TO LEASING This is how Maharatnas and Navratnas and other PSUs realised substantial savings & convenience through their fleet outsourcing Company Countrys largest public sectors with offices and plants spread across the nation Background Company hired fleet that included various makes & models of cars used by their Top Management and Executives. Challenges in the existing system of hiring of vehicles Vehicles registered as Yellow plate commercial vehicles Additional financial burden of entry tax while plying interstate Vehicle supplied is not uniform; it may change from day to day Cars were not maintained as per manufacturers guidelines Multiple Vendors Multiple revenue leakage areas

 Consumables in vehicles changed based on need and not on manufacturers guideline Cars did not stay with users for 24 hours Average age of vehicle at start of contract : 2 years Opportunity LeasePlans fleet audit revealed that costs could be brought down significantly besides providing new vehicles to the PSUs Comparative analysis convinced the company of the cost savings through outsourced fleet management and enhanced comfort and convenience Roadblocks 5 decade old system of hiring prevalent in almost all PSUs Handling of chauffeurs independently Solution LeasePlans Total Cost of Ownership (TCO) model for vehicle outsourcing made sure only efficient car models are used by the company; thereby reducing costs significantly. LeasePlans fixed monthly outflows provided budgeting of transportation expenses for top and middle level management besides immunity from maintenance and damage risks. Executives provided with monthly driver allowance. So, every executive hires his/ her own driver. Benefit of individual reporting reaped instead of centralized hiring of drivers. Provision of cashless maintenance and insurance facilities even at remote plant locations. This ensures zero involvement of cash in maintenance of vehicles thus giving convenience to all users spread across the country. Vehicle procurement done centrally as it brings in benefits of price and delivery timelines. Choice remains with the users to buy the vehicle at the fair market price on expiry of lease term. Result Savings! Company hived off their entire fleet to LeasePlan. Cost reduction between 20- 25% Better accounting and peace of mind! Outflows have become predictable and under control. Increased acceptability of LeasePlan services within the company and other PSUs as well.

 Seamless Mobility Employee Satisfaction