INTRODUCTION

MRF Ltd., incorporated in 1960 to take over the business of the

Madrass Rubber Factory, MRF later went public in 1961. The company has its works at Tiruvottiyour, Arakkonam, medak, kottayam and Goa. The Company manufactures tyres and tubes in collaboration with Mansfield tyres and Rubber, US. Its products include Nylogrip. Zigma, Tyredrome, etc. Its subsidiary companies are Funskool International. MRF diversified into conveyor belts in collaboration with Pierelli, Italy, in 1991-62, tied up with Vapocure, Australia, to manufacture polyurethane paint formulations and later into tyre machines in collaboration with Abex, US. It also diversified into speciality surface coatings, conveyor belts and leather. MRF is planning to take over Dunlop, which is a BIFR company. It has undertaken a study to examine Dunlops operations before firming up its stand on the issue,. MRF is to extend support to the manufacturers, including investing in like moulds and to finalize a proposal for development of area tyres for different aircraft with the IAF in consultation with DGAQA ( Directorate General of Air Quality Assureance.) It has launched a steel-belted premium radial ty8re variant called MRF ZVTS. While this tyres augments the companys overall range of radials, it also marks a step forward in terms of technology, performance and superior ride quality, ZVTS in available in more than 11 sizes to fit all Maruti vehicles and Fiat, GM, For, Honda, Hyundai, Mitsubishi and Daewoo cars, ZVTS 9 (India), MRF Corp and MRF

has been develope4d especially for Indian road conditions. It has become an original equipment supplier of radial tyres to Tata Indica,. MRF has been selected as one of Indias Top 10 companies for the sixth consecutive year by the Far Eastern Economic Reviews annual Review 200.

More than 1,500 owners of 28 different vehicle models participated in the 2004 study, which was fielded from June to August, 2003.A new model of customer satisfaction measurement was deployed for 2004. Overall tire performance is assessed on 20 attributes, grouped into five predefined factors: ride, handling, traction, durability, and appearance. A design and quality built for heavy overloading conditions, have proved to be ideal for operations in Bangladesh MRF tyres have earned the reputation of being the best suited tires for Bangladesh and are preferred by transport operators for their cost effectiveness. With the setting up of its new show room in Dhaka, MRF moves closer and will help to service its customers in Bangladesh better. MRF claims that it has launched the broadest radial car tyre ever to be manufactured in India. MRF ZVRL, the 265/70 Ri 5-size radial tyre, has been tested and approved by Fords international standards. These broad MRF tires come as 100 per cent fitment on the Ford Endeavour, says a release from the company. These tires compete with imported brands, which were the only tires available in India in this segment until recently. This is a premium radial, which can also be fitted on Scorpio and Safari vehicles, without necessitating the change of OE (original equipment) rims, the release adds. 10

Unlike past years, the study deals only with radial tires, as nearly all new passenger vehicles sold in India are now fitted with radial tires, JD Power said. MRF TYRES has been selected as one of the Indias TOP 10 companies for the sixth consecutive year by the far EASTERN ECONOMIC REVIEWS ANNUAL Review .It is presently under the leadership of Arun Mammen, son of the late K.M. Mammen Papillae. MRF has today taken the path of self-reliance and successfully developed indigenous technology to produce world class tires MRF received the highest ratings in the study in four of the five factors determining overall satisfaction with tires: appearance, durability, traction, and handling. Bridgestone, JK Tyre, and Goodyear followed MRF in the rankings. Maintenance of high quality standards and constant innovation has become synonymous with the organization, giving all its products the unique status of highest brand preference solely due to their superior quality, performance and durability. MRF has won the J.D.Power Asia Pacific Study [Study based on a total of 2500 new- vehicle owners of 11 makes and 31 different vehicle models in India.] for 5years-2004,2005,2006,2007,2008 in 7years.This is the trust that drives MRF to raise the bar of quality and performance year after year.

11

HISTORY

12

The MRF LIMITED factory & Regd. Office is situated at 124, Greams Road, Chennai-600006. The companys performance in past few years can be described as follows:

1946 A young entrepreneur, K. M. Mammen Mappillai, opened a small toy balloon manufacturing unit in a shed at Tiruvottiyur, Madras (now Chennai).

1949 Although the factory was just a small shed without any machines, a variety of products, ranging from balloons and latex-cast squeaking toys to industrial gloves and contraceptives, were produced. During this time, MRF established its first office at 334, Thambu Chetty Street, Madras (now Chennai), Tamil Nadu, India. 1952 MRF ventured into the manufacture of tread rubber. And with that, the first machine, a rubber mill, was installed at the factory. This step into treadrubber manufacture, was later to catapult MRF into a league that few had imagined possible. 1955 MRF soon became the only Indian-owned unit to manufacture the superior extruded, non-blooming and cushion- backed tread-rubber, enabling it to compete with the MNCs operating in India at that time.

1956 The quality of the product manufactured was of such L a high standard that by the close of 1956, MRF had become the L market 13

leader with a 50% share of the tread-rubber market in India. So effective was MRFs hold on the market, that the large multinationals had no other option but to gradually withdraw from the tread rubber business in India. 1961 The quality of the product manufactured was of such a high standard that by the close of 1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So effective was MRFs hold on the market, that the large multinationals had no other option but to gradually withdraw from the tread rubber business in India.

1963 The quality of the product manufactured was of such a high standard that by the close of 1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So effective was MRFs hold on the market, that the large multinationals had no other option but to gradually withdraw from the tread rubber business in India.

1964 The quality of the product manufactured was of such a high standard that by the close of 1956, MRF had become the market leader with a 50% share of the tread-rubber market in India. So effective was MRFs hold on the market, that the large multinationals had no other option but to gradually withdraw from the tread rubber business in India.

14

1967 MRF became the first Indian company to export tyres to USA - the very birthplace of tyre technology.

1973 MRF scored a major breakthrough by being among the very first in India to manufacture and market Nylon tyres passenger tyres commercially .

1978 MRF developed the MRF Superlug-78, a sturdy tyre for heavy-duty trucks. The tyre was a significant improvement over its existing products, and went on to become the countrys largest selling truck tyre in later years. 1979 MRF developed the MRF Superlug-78, a sturdy tyre for heavy-duty trucks. The tyre was a significant improvement over its existing products, and went on to become the countrys largest selling truck tyre in later years. 1980 MRF entered into a technical collaboration with the B.F. Goodrich Tyre Company of USA, which was involved with the development of tyres for the NASA space-shuttle. With this began a significant exercise in quality improvement and new product development. MRF took a major policy decision to be aggressive on the racing circuits.

1983 MRF began a rapid product development programme for new vehicles entering India.

15

1984 Sales crossed INR two billion. MRF tyres were the first tyres selected for fitment onto the Maruti Suzuki 800 - Indias first small, modem car. 1985 MRF Nylogrip tyres for two-wheeler vehicles were launched.

1986 MRF was selected by the National Institution of Quality Assurance for their most prestigious award. Pitted against 20 tyre companies worldwide, MRF also won six Quality Improvement Awards instituted by the B.F. Goodrich Tyre Company from USA.

1987 MRF crossed the INR three billion mark and also became the No. 1 tyre company in India. MRF Legend, the premium nylon car lyre was introduced. 1988 The MRF Pace Foundation was set up, with international pace bowler, Dennis Lillee as its Director. Not long thereafter, pace bowlers trained at the Foundation were selected for the Indian Cricket Team. 1989 By 1989, MRF was the clear market leader in every lyre segment. Once again, in recognition of excellence, MRF was awarded the Visvesvaraya Award for the Best Business House in South India and the Economic Times Harvard Business School Award for the Best Corporate Performance. MRF collaborated with Hasbro International USA, the worlds largest toy makers, and launched Funskool India. The company also entered into collaborations with Vapocure, Australia to manufacture polyurethane paint formulations and with Pirelli for MUSCLEFLEX Conveyor & Elevator Belting. MRF launched the MRF ZIGMA CC Radial synchronising with the MRF World 16

Series Cricket Tournament for the Jawaharlal Nehru Trophy sposered by the company. The Chief. Minister of Tamil Nadu, Dr. M. Karunanidhi, awarded MRF the Special Export Award. MRF also opened the MRF Tyredrome, Indias first tyre company- owned wheel care complex at Madras (now Chennai). 1990 MRF brought the 6th World Cup Boxing Championship to Mumbai the first of its kind - with 39 countries participating. The event was telecast live on TV networks worldwide. 1993 K. M. Mammen Mappillai was awarded the Padmashri Award of National Recognition for his contribution to industry - the only industrialist from South India to be accorded this honour until that time. MRF also became the first tyre company in India to cross the INR 10 billion mark. In addition, the company was voted by the Far Eastern Economic Review, as one of the ten leading Corporate Groups in India and a Leader in Asia. MRF was selected as one of Indias most admired Marketing Companies by the readers of the A & M magazine. 1995 The companys turnover crossed INR 15 billion. MRF was chosen for fitment on the Daewoo Cielo. This year too MRF was voted by the Far Eastern Economic Review as one of the 10 leading Indian Companies.

1996

In the Golden Jubilee year, MRFs turnover crossed the INR 20

billion milestone. A special factory dedicated entirely to the manufacture of radials was started at Pondicherry. MRF Tyres were also chosen for fitment

17

on the Ford Escort, Opel Astra and Fiat Uno. Further proof of its superior quality.

1999

MRF

was

declared

the

most

ethical

company

by

Business World magazine in its survey.

2000 MRF launched the Smile campaign on Indian roads.

2002 MRFs turnover crossed INR 30 billion mark. 2004 MRF won J.D. Power Asia Pacific study along with

Bridgestone for the customer satisfaction. Mrf Ltd. has informed the Exchange that at its meeting held on December 19, 2003 the. BOD have redesignated Mr. Arun Mammen as Managing Director of the Company w.e.f April 01, 2004. 2007 MRF received the highest rankings in the study in four of the five factors determining overall satisfaction with tyres appearance, durability, traction and handling. Ties up with Maruti Udyog to boost motorsports in India. 2009 MRF Ltd launches premium truck tire Super Lug 50- FS. The mere mention of the word MRF is bound to bring the Muscleman to the mind of Indians. The soon after MRF began manufacturing tires. Over the past years, it has evolved from a mere corporate mascot to a symbol of streanth, 18

reliability and durability embodying the very qualities of the tires it represents. The Robotic muscleman introduced in the mid-80s, a sign of the changing times. His new appearance was silent testimony. The musciemans appearance changed once again in 1996, MRFs golden jubilee year. He started appearing in full form, and came to be known affectionately as the MRF Tyreman by motorists across India and 65 countries worldwide, who have come to rely on him for a safe comfortable ride. Then again in the year 2002 MRF has crossed the INR 30 billion mark and from that onwards it has won Customer Satisfaction Award continuosly for five years in seven years of J.D. Power Pacific Study. Recently in 2008 MRF Ltd. Launched a near range of two wheeler tyres called Zapper.

HISTORY BEHIND THE TRADEMARK

19

The Birth of The MUSCLEMAN

In the 1960s, the Indian tire market was completely controlled by the
large multinational companies. Around this time MRF opened a tyre factory at Thiruvottiyur in Tamil Nadu. With , came the task of recognizing an appropriate Corporate Brand Symbol: One that would distinctly represent the Companys culture, and convey the same to everyone in a country of varied languages and cultures. In this process of developing suggestions for the symbol, some enterprising employees conducted an informal market survey, interviewing people from all over the country about their expectations from a good tyre. The responses ranged from the mundane to the mediocre. But one day, a truck driver at a roadside dhaba (makeshift eatery) somewhere in Weastern India hit upon the right idea when he said, A good tyre should have all the qualities of a Pahaiwan (strong man). And from this simple statement, the muscleman was born.

20

COMPANY PROFILE

21

MRF Ltd. Is the first Indian company to export tyres to the US, the very birthplace of tyre Technology. It is the first company in India to manufacture and market Nylon tyre passenger tyres commercially. In 2004, the companys turnover crossed INR 30 billion mark. The company was given the title of most ethical company by Business World magazine after a survey conducted in 1999. Founder Country Year of Establishment Industry Listings and its codes Registered Office K.M.Mannen Mappillai India 1946 as a toy factory Tyre Manufcturing NSE:MRF; BSE:500290 124, Greams Road Chennai-600 006 India Tel.: +(91)-(44)-28292777 Website Related Website Fax: +(91)-(44)-28291844/0562 www.mrftyres.com www.mrf-export.com(MRF Export)

Segment and Brands

Truck / Bus Tyres 22

 Light commercial,Jeep and Utlity Vehicle tyres Passenger Cars Tyres Off the road tyres Two-Wheelers Tyres Farm Service Tyres

MRF International offices

Bangladesh #69/k.Green Road PanthaPath Dhaka 1205 Bangladesh Mobile: +( 880)-173000810 E-mail:mrfdhaka@bangla.net. Untied Arab Emirates

23

OBJECTIVES OF THE STUDY

24

1. To study attitude and satisfaction among the consumer for mrf tyres 2. ]to study and analyse various factors influencing the consumer to purchase the mrf tyres 3. To analyse the factors influencing perception and buying 4. Find out effectiveness of advertisement 5. To study attempts to find the reach of mrf tyres which would help the company in formulating suitable strategies 6. Study also identifies the attitude and preference pf consumer 7. The study finds the different types used in promotion through which product reaches the end user.

25

PRODUCTION DEPARTMENT

26

Production Management is concerned with the acquisition & the

use of the physical resources employed in the provision of goods & services. Production Management will normally be responsible for the management of inventories , quality, the maintenance & replacement of failities & scheduling of activities as well as responsibility for location, layout, capacity & managing of a system. Managers working in this function will also normally have some involvement in the design/specification of a product or services process, manning prices & measurement performance .

27

Production process
Raw-Material converted into finished product is called as production process. Inputs are men, materials, machines, drawings, instructions & paperwork. The transformation process involves operations mechanical to convert inputs into outputs. It also includes activities that assist conversion. E.g; 1. Planning &Control of factor of production. 2. 3. 4. 5. 6. 7. Procurement of material. Receipt, Storage & issue of material. Material handling. Inspection of in-process & parts. Assembling & testing of product. storage of finished goods.

28

PRODUCTION INFORMATION
RAW MATERIAL
Apart from being capital intensive, the tyre industry is also raw materials accounting for about 70% of the cost production. Labour cost is another significant overhead. The Tyre industry has a narrow product range, huge operating overheads and high break-even levels. The major Raw materials used are natural rubber, nylon tyre cord, carbon black, synthetic rubber Raw material costs for the last three years have been rising constantly, especially those of rubber and crude oil-linked raw materials. The steep rise in raw material prices has impacted profit margins of all players. Consistent rise in major raw materials costs with limited pricing flexibility, has resulted in pressure on margins of tyre companies, despite a good topline growth. Consequently, while the revenues showed a healthy growth, profitability remained depressed. In fact, some of the major tyre companies are operating at break-even situations. The following is the brief description of the major raw materials;

29

RUBBER PRICES
In 2007-08 production and consumption of rubber grew by 5.5% and 6.2%, respectively, while exports increased by 51.2% (for the same period), on account of the imbalance in the global demand-supply position. The average domestic price of rubber increased by 20.3%, while the international prices soared by 31.5% in the same period. In April-June 2006, Domestic-Rubber prices increased 59% y-o-y, while the international prices increased 76.6%. Natural-Rubber prices have been continuously on the rise in the international markets, with weather conditions playing a major role in disrupting supplies. During FY06, China lost rubber plantations in the Hainan province due to a typhoon in September 2007, followed by floods in Thailand and Malaysia in December, the same year. Production suffered in most rubber-producing regions in India, due to bad monsoons, which in turn led to the soaring of rubber prices. With international natural-rubber prices ruling high, and India being a part of the global market, exports of rubber from the country affected the demand and supply positioning in its domestic market. The growth in exports is driving-up average domestic prices of rubber. With rising demand from the Tyre sector, the supply situation is expected to remain constrained in the medium term. Currently, rubber prices have depleted to around Rs.80- levels, but there is high level of volatility and hence, their behaviour is difficult to predict. If current levels persist, it would result in better profitability for tyre companies.

30

Nylon Tyre Cord (NTC) Fabric.

Nylon tyre cord accounts for around 22% of the total raw material costs. During 2007-08, the production of NTC fabric declined by 12.2%, while its consumption grew by 9%. This imbalance in the production-consumption pattern has led to a 7.5% increase in domestic NTC prices in 2005-06. The international prices are much higher than domestic rates and have shown a 15.2% increase in 2007-08 the price of caprolactam, the main feedstock for NTC fabric, increased by 6.2% in the same period. However, the average international anddomestic prices during April-June 2006 were lower, by 22% and 18%, respectively, due to carpolactarn prices, which declined by 10.8 %.

31

OTHER RAW MATERIALS:

The prices of other raw materials like carbon black, styrene butadiene rubber (SBR) and poly butadiene rubber (PBR) are closely linked to global crude oil prices. The average domestic price of carbon black increased by 7.7% in2008-09 and the average international prices of both SBR and PBR increased by 16.9% and 13.4%, respectively, during 200809. During April-JuneO6, the average domestic price of carbon black increased by 27.2% and this momentum is expected to continue. The average international prices of both SBR and PBR fell by 10% and 1.4%, respectively, during April-JuneO6. The prices are expected to be in line with global oil prices. The risks & concerns are rising due to the rise in Raw Material prices. The consistently rising natural-rubber and crude oil prices.and the resultant increase in petroleum-based inputs has been posing a big challenge to tyre operators. In a move to protect their profitability, the players have increased tyre prices by 20%, across categories. However, the continuously rising trend witnessed in the prices of raw materials remains an area of concern. Though the rubber prices have come down from their peaks of Rs.1 15, to Rs.82 currently, the trend is very volatile. Tyre companies would definitely show improvement in the margins, sequentially, and if prices remain at these levels, profitability would improve. But then, it is highly dependent on the prices of major raw materials like Rubber, Carbon Black, NTC Fabric,

32

SBR and PBR, which are highly volatile. However, with surging automobile sales, if demand for tyres increases without the supply catching up with it, then, prices of tyres are likely to increase. This may provide some benefit to the tyre companies.

33

FINANCE DEPARTMENT

34

INTRODUCTION TO FINANCE
FINANCIAL MANAGEMENT is that part of management

which
-

is

concerned

mainly

with

raising

funds

in the most economic & suitable manner. Using these funds as

profitability as possible : planning future operations & controlling current performances & future developments through financial accounting
,

budgeting

statistics & other means. It holds

importance as it has an impact on al the activities of a firm. Its primary responsibility is to discharge the finance function successfully & it also touches on all other business functions. All business decisions have financial implications and a single decision may financially affect different departments of an organization. According to Hunt Williams & Donald Sons; Finance function is defined as a task of providing funds required by an enterprise on the terms most favourable to it in the light of the objectives of the business.

35

According to Archer & Ambrosiv,

Financial Management is the application of planning & controlling functions to the finance function. Thus, Financial Management is that specialized function of general management which is related to the procurement of finance & its effective utilization for the achievement of the common goals of the oranisation.

36

RESOURCES OF FINANCE
The Migration research Foundation focuces on receiving project specific funding, and efforts are made to secure financial support in the regions where they conducted. For projects of particular significance to conservation (i.e., Critically endangered species and habits) , MRF seeks international support when local funding is insufficient. Telemetry units and data retrieval are very costly, and it is critical to secure the support of all interested parties. The foundation will ensure that its projects are managed efficiently and that its operating costs are maintained at a level no higher than 20% of the total operating budget. MRF is committed to focusing the vast majority of its financial and human resources towards the development, implementation and completion of scientific research projects. All profits derived from tracking contracts for third party organizations will be directed towards the foundations operating costs. The IRS recognizes MRF as United States 501 (3) registered charity and as a Canadian registered charity with the Canadian Customs Revenue Agency.

37

SOURCES OF FUNDING
(1) Government

Governments are faced with needing to publicity involving a third party, they show they are handling the situation in objective and non-political manner. Government realizes that properly done research is expensive and designate funds each year for such work. MRF will take advantage of this public need to obtain long-term funding and expand the foundations reputation for high quality scientific work. (2) Corporations Corporations are an effective public relations tool, as they demonstrate the corporations active participation in environmental protection and giving back to the communities in which they operate. The general public is increasingly focused on this corporate community responsibility. Corporations can feel secure that funds donated to MRF will be used for sound scientific research without emotional or political bias. (3)

Public and Private Foundation

There numerous foundations that sponsor conservation research via funds dedicated to individual projects. Such organizations are important for the support of specific research proposals developed by MRF. For projects conducted in partnership with other organizations, MRF will arrange for joint fundraising campaigns, as projects with two lead partners have greater potential for securing the necessary financial support.

38

(4)

Creative Funding Campaigns.

The directors will develop creative fundraising campaigns to establish

new partners and promote continued support from current sponsors. An example of such a campaign is entering into a partnership with regional wineries to obtain royalties off the sale of specially labeled wine, if you have ideas that pertain to this type of joint venture. (5)

Individual Donors
The private sector is an important source of funding for MRF. If you

would like to contribute, please visit our.

HOW YOU CAN HELP section to make a donation. Your financial

commitment is greatly appreciated, and fully tax- deductible under the applicable laws of Canada and THE UNITED STATES. Unfortunately, at this time we are only able to accept donations in U.S. or Canadian dollars.

39

CURRENT SENARIO MRF Limited, Indias largest tyre company and the 15th largest tyre
company in the world. Today MRF is at its peak, it is the only market leader among tyre manufacturers in India, with a 24% share in terms of revenues. Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price- maker status. MRF has a strong presence in the T&B segment, the largest segment of the tyre industry. It is the leader in the two! motorcycles) in the three-wheeler and tractor cars front and passenger segment tyres, tractor and rear (including holds second MRF place has tyres.

emerged as the sole supplier of truck tyres to Volvo. It is the largest supplier of radial car tyres (40% share) to Telcos Indica, with a monthly supply of 10,000 tyres. The Company has a distribution network of 2,500 outlets within India and exports to over 65 countries worldwide. India Vs Global The global tyre market currently is estimated at USD 70 billion while the Indian market is around Rs. 100 million. The global market is dominated by Goodyear-Sumitomo with a share of 22%. On the other hand, the domestic industry is dominated by MRF Ltd. Several mergers and acquisitions have characterized the global market, in the recent past. Current Scenario Pricing .

40

Scenario Pricing is influenced by the demand. Since the tyre demand has
not significantly increased in the last one year, many of the tyre companies have surplus stocks. Hence, in the last 2-3 months the lyre companies are offering discounts between 20 to 40 percent to car manufacturers, but the car companies are trying to squeeze more discounts. The cheap imports of nonradial tyres especially from China, South Korea, Japan, Thailand and Indonesia, which sell at very low prices, have been posing a challenge to the industry. Indias signing of the Bangkok agreement with ASEAN countries, in October 2003, intensified the import threat, as this agreement provided for preferential customs duly of 15% for imports from China and South Korea, along with Sri Lanka and Bangladesh, as against the standard rate of 20%. This led to a gush of imported tyres from these countries. The landed price is approximately 25% lower than that of the corresponding Indian Truck/LCV tyres. Imports from China now constitute around 5% of the market share. However, Chinese tyres do not come with any warranty and the life of these tyres is significantly lower than that of Indian tyres. In a move to bring about quality control in the lyre industry, the ISI mark has been made compulsory for tyres. This would effectively rule-out the sale of foreign tyres and thus result in reduced lyre-imports.

41

Hike in Tyre Prices:

The rising raw material prices have been the key concern for the tyre industry, especially due to the lack of pricing flexibility. Since the tyre industry is highly competitive and price sensitive, players have been very conservative about increasing the prices. However, after the constant rise in raw material costs, almost every player has, in different branches, stepped up their product prices. In 2006-07, the average tyre prices have been hiked thrice and the cumulative increase in truck & bus tyres is 4.6%, in car nylon is 1.2% and in car radial tyres is 5.1 %, over the same period last year. The price hikes in 2007-08 have resulted in a cumulative price hike of 20% across all categories, by almost all players, with MRF an exception, which did not increased prices in July O6. Combined with the price hikes, if the current price-levels of raw materials persist, it would result in better profitability for tyre companies. There also exists a possibility of tyre companies rolling back the price hikes, since the prices of rubber and oilrelated raw materials have come down. However, it is very difficult to predict rubber and other raw material prices. MRF Ltd has informed that the Board of Directors of the Company at its meeting held on October 25, 20 inter alia, has declared 30% second interim dividend on the paid-up capital of the Company.

42

MRF

Ltd.

has

informed

regarding

the

standalone Results for the quarter ended on 3O-JUN-2008 s follows: Net Sales of Rs.1 13 343/- for quarter ending on 30JUN-2009 against Rs.99477/- for the quarter ending on 30- JUN-2007 Net Profit / (Loss) of Rs.4250 lacs for the quarter ending on 30-JUN-2009 against Rs.817 lacs for the quarter ending on 30-JUN-2008.

43

TECHNOLOGY
The tyre industry has evolved from the more basic cross ply to the more sophisticated radial tyres. Nylon cords that impart low weight and additional strength to the tyres have also replaced Cotton piy. Nylon tyre cord accounts for around 22% of the total raw material costs. During the production of NTC fabric declined by 12.2%, while its consumption grew by 9%. This imbalance in the productionconsumption pattern has led to a 7.5% increase in domestic NTC prices in 2005-06. The international prices are much higher than domestic rates and have shown a 15.2% increase in 2005-06; the price of caprolactam, the main feedstock for NTC fabric, increased by 6.2% in the same period. However, the average international and domestic prices during April- June 2006 were lower by 22% and 18%, respectively, due to carpolactam prices, which declined by 10.8 %.This industry is strongly linked to the automobile sector and is also driven by agricultural and infrastructural activity that takes place in the region, as these two have an impact on the transport sector. In terms of technology, radial tyre usage has been catching up at a quick pace in the global market. Almost all the automobile segments have shifted to radial tyres and the usage of cross ply is restricted to trucks and buses only. On the other hand, in the domestic market, the radial tyres are

44

BEING used only in the passenger car segment while the rest of them still stick to the cross ply variety. This is because of the lower price of cross ply and its re-treadability. In addition, the poor quality of roads in India restricts the use of such tyres. Radial Tyres are better, as they offer better fuel efficiency, longer life and smooth movement on roads, together with working out to be cheaper in the long run. The level of radialisation in passenger cars is as high as 90%, but for commercial vehicles it is very low; in T&B, it is only 2% (globally 65%). This trend has not really picked-up pace, mainly because of poor road infrastructure, overloading, poor vehicle maintenance, high costs involved and the requirement of radial tyres for regular maintenance, in terms of checking air pressure, balancing and realignment of wheels. Additionally, the industry believes that vehicles with radial tyres cannot be overloaded to the same extent, as can vehicles with cross-ply tyres. Radial tyres cost close to 20% more than cross-ply tyres (Rs.2,000 more in the case of MHCV tyres, and Rs.1,500 more in the case of LCV tyres). Hence, the OEM(Original Equipment Manufacturer) segment has not pushed radialisation, as radial tyres mean an elevated cost of around Rs.10,000 for LCVs (5 tyres), Rs.14,000 for single-axle MHCVs (7 tyres), Rs 22,000 for double-axle MHCVs (11 tyres) and Rs.30,000 for triple-axle MHCVs. However, going forward, with the improvement in the quality of highways, we expect radialisation to gather.

45

Some momentum; levels of radialisation in MHCV is predicted to be 10% in five years time, while in LCV, around 20%. The future is expected to see many strategic alliances among the domestic and global players to enable them to have access to latest technology and expand their distribution network. A better distribution will also ensure easy availability. The introduction of newer auto models will significantly have a bearing on the tyres demand. The tyre companies will also be looking for tie-ups with the N OEMs(Original Equipment Manufacturer) for better stability and long-term relationship. For instance, the international player Bridgestone has a tie-up with Tatas for supply of tyres for its model Indica. Bridgestone has entered the Indian market in association with Associated Cement Companies and has set up a manufacturing plant at Kheda in Madhya Pradesh. Ilyundais associate tyre manufacturer is reported to set up operations at Sriperumbudur, in Tamil Nadu. Other multinational tyre companies are also likely to enter the Indian market viz. Michelin with J.K.Tyres and Pirelli of Italy, with Birla Tyres. Such arrangements are very essential if one has to remain competitive. Companies are now giving emphasis to innovation in product and process technology and to operational efficiencies. The governments emphasis on improving the road infrastructure will facilitate the road.

Transport sector that in turn will brighten the prospects of the tyre industry in the coming years. 46

Several mergers and acquisitions have characterized the global market, in the recent past. This is essentially to acquire technology, gain wider access to markets and be competitive. Indian players are also reengineering their businesses and looking at strategic tie-ups in this segment.

47

HUMAN RESOURCE DEPARTMENT

48

Human Resource Management (HRM) is the function within an organization that focuses on recruitment of, management of, and providing direction for the people who work in the organization. Flippos definition: It Is a process of searching for prospective employees and stimulating and encouraging them to apply for jobs in an organization. Thus the purpose of recruitment is to locate sources of manpower to meet job requirements and job specifications.

Factors affecting Recruitment:

1. 2. 3. 4. 5. 6. 7. The size of the organization. The employment conditions in the community where the organization is located. The effects of past recruiting efforts which show the organizations ability to locate and retain the good performing people. Working conditions, salary and benefit packages offered by the organization. Rate of growth of the organization. The future expansion and production programs. Cultural, economic and legal factors. However these factors may be divided specifically as Internal and External factors.

49

Internal Factors:
1. 2. 3. 4. 5. Recruitment policy of the organization Human resource planning strategy of the company Size of the organization and number of people employed Cost involved in recruiting employees Growth and expansion plans of the organization

External Factors:
1. 2. Supply and demand of specific skills in the labour market. Political and legal factors like reservations of jobs for specific sections of society etc

Steps of a Recruitment Process:

Personnel recruitment process involves five elements: 1. 2. 3. 4. 5. A recruitment policy A recruitment organization A forecast of manpower The development of sources of recruitment Different techniques used for utilizing these sources & a method of assessing the recruitment program

These five elements MRF Uses for recruitment :

1. Recruitment Policy: It defines the objective of the recruitment and also provides a framework for the implementation of the recruitment program. The policy should be based upon corporate goals and needs.

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The criteria for selection and preferences should include merit and suitability. 2. Recruitment organization: It is necessary to centralize the recruitment and selection function in a single office. This will bring about maximum efficiency and success in hiring. This centralized office is known as the Employee Office or the Recruitment Section. 3. Forecast of Manpower: This usually specifies: a, b. c. d. 4. recruitment: a. Internal This includes personnel already on the payroll of an organization. Whenever there is a vacancy, somebody within the organization fills in or is upgraded. b. 5. External These sources lie outside the organization. Methods of Recruitment: The possible recruiting methods can be divided into three categories: a. Direct In this method, rec ts visit colleges and technical schools, e.g. Infosys, the Tata Group, Accenture, IBM, Siemens and several other companies Jobs or Operations for which the person should be available. Duration of their employment. Salary to be offered & terms of the employment Necessary factor and experience

Sources of Recruitment: There can be two kinds of sources for

maintain continuous relationship with institutions to hire students for responsible positions. 51

b.

Indirect This involves advertising in newspaper, radio, TV., journals etc. Advertising can be very effective if its media is properly chosen.

c.

Third Party methods This include use of commercial or private pjQymer ajieoes, placement officials of schools, recruitment firms etc. Friends and relatives of present employees are also a good source from which employees may be drawn as part of the Buddy Referral programs.

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MARKETING DEPARTMENT

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Marketing Management is a compound word which means to

manage the entire system of marketing. The process of ascertaining consumers needs ,converting those needs into product or services & moving the product or services to the end users to satisfy needs of specific consumer segment with a emphasis on profitability ensuring the optimum use of available resources in the organization. Todays market is customer oriented oriented. All the marketing activities are carried out considering the customer in the mind. In order to achieve the marketing objective, it is very necessary to have a clear picture of customers buying behaviour. All commodity markets are heterogeneous, some commodity are never in conformity with each other as far as their nature, habits , test, interest, income & mode of purchasing .So all customers cannot be satisfied with the same product. In order to facilitate the marketing of the product , the marketing manager divides a market into homogeneous sub-sets of customer having common characteristics to serve that sub-set concenterated.

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MARKET INFORMATION
Although the tyre industry faces huge competition, price & cost pressures and high entry barriers, the changing dynamics, with the growing economy and the escalating auto industry, provide a fillip to the industry. The zooming auto industry, with sales growing at a CAGR of 15.8% during the 2002-06 period, has driven the growth in the tyre industry, keeping both the OEM and replacement demand buoyant. The demand and growth for the industry depends on primary factors like overall GDP growth, agricultural & industrial production and growth in vehicle-demand and on secondary factors like infrastructure development and prevailing interest rates. The total number of vehicles on the road is constantly swelling, on the back of an increase in road transportation, which would gain more momentum once projects like the Golden Quadrilateral and NSEW Corridor project get implemented. The Indian tyre industry, comprising of 40 companies (47 factories) in the organised and un-organised sectors, can be divided into two tiers; Tier-I players (top 5 tyre companies) account for over 80% of industry turnover containing a well diversified product mix and presence in all three major segments, i.e. replacement market, original equipment manufacturers (OEMs) and exports. Tier-IT companies are small in size, concentrating chiefly on production of small tyres (for two! three-wheelers, etc.), tubes and flaps and the replacement market. The industry has a negligible.

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Market share in the commercial vehicles lyre category and is around 20% in the two wheeler lyre category. The Indian lyre industry has witnessed a CAGR of 7.7% over the last decade. Though the replacement market has driven the industry growth for a long time, the OEM market has seen a robust growth over the last three years. The truck and bus market is the largest segment of the industry, accounting for approximately 70% of the industry turnover, in terms of value. Tyre production, in tonnage terms, grew at a healthy rate of 8.7% in 2008-09 against that of 2007-08. The medium and heavy commercial vehicle (MHCV) lyre segment registered a growth of 7.7% while the light commercial vehicle (LCV) and passenger car lyre segments registered a phenomenal growth of 14.8% and 14.7%, respectively. A few years back the auto industry was sluggish and so also was the lyre industry, but there has been a dramatic shift since the last 2-3 years. as the vehicle production has considerably gone up. Economic expansion, investments and road development have all contributed to this increase in demand for vehicles. This, in turn, has helped the growth in the lyre industry. However, although the lyre industry grew in terms of sales volumes, profitability has been adversely affected due to a substantial increase in raw materials costs, which accounted for 62% of the operating income in 200102, soared to over 70% in 2008-09 Hence, the growth in sales volumes has not really added to the bottom line.

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DEMAND FOR TYRES

The Demand Cycle GROWING ECONOMY
Increase in income Level, higher disPosable income Increase in dernand for passenger cars increase in cornercial vehicles demand increase in of freight movement demand increase in wear & tear of tyres creates repla cement demand for tyres increase in demand for passenger car tyres increase in demand from OEMs (Original Equipment Manufacturer) creates replacedemand after about 24-48 months creates replace men ment demand about 12-18 months tyres

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INCREASE IN TYRE SALES

EXPLAINATION Demand for tyres can be categorised under four segments Replacement Market (RM), the Original Equipment Manufacturers (OEMs), Exports, and the Government. In FYO5-06, the replacement market constituted 48.7% of tyre sales (by volume), followed by OEMs at 42.8%. Exports constituted 8.2% and government sales were at 0.3%. According to the products, the maximum tyre sales are in the Truck & Bus segment, followed by Passenger cars and Tractor - trailers. Traditionally, the replacement market has been the main growth driver for the tyre industry, as also the major segment that consumes tyres; however, with the recent escalation in auto sales, OEM demand too, has been on a substantial increase, thus enlarging its share in the sales pie. Auto sales have been growing at a CAGR of 15.8% during 2002-06, which has driven the growth in the tyre industry, keeping the OEM demand buoyant. Going forward, the automobile industry is estimated to grow at double digits. This, in turn, is expected to keep demand, for tyres from OEMs, buoyant. Looking at the global rail-to-road cargo scenario, in Europe, roadways have an 84% share, while in India, currently, the ratio is 35:65, which was 62:38, two decades ago. Also, with growth in roadways and with projects like Golden Quadrilateral and NSEW getting implemented, there would be a further shift in freight movement, from railroad to roadways. This would lead to an increase in demand for automobiles and hence, the OEM demand for tyres.

Replacement market to see sustainable growth:

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The Replacement Market is one of the more sought-after markets by Tyre players, since the margins are better, compared to those of OEMs (who are relatively few in number and have a huge bargaining power). Replacement demand, which comes from existing automobiles, has been increasing for sometime now and is expected to do the same, going forward. Replacement of tyres varies across categories, due to different life-spans of tyres, which depends on reasons like i. ii. iii. iv. Road conditions Load carried Distance travelled Re-treading

The typical life of truck tyres is 40,000-45,000 kms or, on a general basis, around 12 to 18 months. The replacement cycle is relatively longer for twowheelers and cars, ranging anywhere between 24 to 48 months. However, the demand for radial tyres in cars has further augmented the replacement cycle.

Here, it becomes important to talk about Re-treading, which is a

phenomenon of repairing the outer surface of the tyre in order to increase its life. The cost of re-treading a tyre is around 20-25% of the cost of a new tyre. A re-treaded tyre lasts for around 60% of the life of a new tyre. Though the quality of tyre deteriorates on retreading, since it is highly economical, it is highly resorted to, especially in the passenger car segment. In the LCV/ HCV (truck) segment, re-treading depends on the type of operator. For instance, for a single truck operator that operates over shorter

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distances, mainly on inter-city and intra-state routes, re-treading is high. However, the organised or large-fleet operators prefer to replace the tyres after an average usage of 40,000-45,000 kms. These operators do not risk using old or re-treaded tyres on long-distance trips because breakdowns costs are immense. The substantial growth that the auto and tyre industries have seen in the last few years is bound to keep the replacement demand high, in the years to come. Similarly, the current growth in the auto industry and mounting OEM demand would keep replacement demand further buoyant, going ahead. Though the replacement market has driven the industry growth for a long time, the OEM market has seen robust escalation over the last three years. Going ahead, OEM demand is expected to be buoyant while replacement demand would also see sustainable growth.

COMPARISION BETWEEN MARKET SCENARIO OF VARIOUS TYRES

MRF is the market leader among tyre manufacturers in India, with a 24% share in terms of revenues. Its leadership position, coupled with its strong brand recall and high quality, MRF commands the price-maker status. MRF has a strong presence in the T&B segment, the largest segment of the tyre industry, and commands around 19% market share in the segment. It is 60

the leader in the two! three-wheeler segment (including motorcycles) and tractor front tyres, and holds second place in the passenger cars and tractor rear tyres. Appollo Tyres(AIL) MRF Tyres is the second largest player in the Indian tyre industry, with a market share of 22%, in terms of revenues, and the largest player in the T&B segment, with around 22% market share and 82% of its product mix coming from this segment. It also enjoys a strong brand recall. ATL derives 80% of its revenues from the replacement market, where the EBITDA margins are higher; hence, at operating levels, MRF Tyres has better margins compared to those of its peers

JK Industries has a 17% market share, in terms of revenue, making it the

third largest player in the industry. The Company ranks first in the MHCV and Passenger Car tyre segments, with 79% and 7% of its product mix coming from these segments, respectively

CEAT
CEAT has a 14% market share, in terms of revenues, and is an average player across categories. 68% of its product mix comes from the MHCV segment. Its leading brands in the T&B segment are Lug XL, Mile XL and Rib XL, Secura in two-wheelers and Formula-1 in passenger radials.

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In terms of profitability, CEAT has lower margins compared to its peers, in spite of deriving 60% of its revenues from the replacement market.

Goodyear India.
Goodyear India, with presence across the globe, has a market share of 6% in the Indian Tyre industry, in terms of revenues. It has a significant market share in the tractor tyres segment, with 22% share in tractor - front tyres and a 30% share in tractor - rear tyres. It derives 45% of the product mix from the MHCV segment and 31% from the tractor tyres segment.

Falcon Tyres Falcon Tyres has a 2% market share in the tyre industry, and is the
third largest player in the two & three wheeler (including motorcycle) tyres segment. 86% of the Companys product-mix accounts for motorcycles and the two! three-wheeler segment.

If we view the financial performance of various tyre manufacturing companies, most of them are operating at wafer-thin margins and any substantial increase in costs would hurt the business adversely. Also, reviewing the balance sheet, the ROCE and RONW are at very low levels. The industry leader, MRF, has an ROCE of 6.7% and an RONW of 5.5%. MRF is a little better off, with ROCE and RONW at 12.8% and 14.8%, respectively. Hence, we do not find tyre stocks attractive, from an investment perspective. 62

The industry is definitely set to grow, but the huge competition, huge buyer power, pricing inflexibility and cost pressures prove as detriments. Tyre companies are operating at very thin margins and their return ratios are also not attractive. One can look at tyre stocks but only from a trading perspective On the positive side, it is estimated that there would be a Qooc o volume growth of 12-14% in 2009-10. The performance of the tyre.

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industry is linked to the automobile and infrastructure sectors, the growth of which is dependent on the Performance of the economy. The current estimated economic growth is over 8%. The continuous thrust being placed by the Government on the development of infra-structure, particularly roads, agriculture and manufacturing sectors, would lead to an impressive acceleration in the automobile! tyre sector, generating more demand for tyres. Companies keep on developing different sizes and designs to match the competitors products. However, the future is likely to be different since companies are investing in technology. Marketing too is going to become technology-driven.

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EXPORTS
In 1967, MRF began to export tyres to USA - the birthplace of tyre technology. Currently, MRF Tyres are exported to 65 countries, including United States, South America, Africa, Middle East, Australia and other Asian countries. In the international market, however, MRF Ltd faces much better scenario. About 30-40 per cent of our sales comes from exports. The prices are much better in international markets, the MRF CMD said, pointing out that international tyre prices reflected the high input costs.MRF has been able to achieve this through its commitment and conformity to a level of quality that has been accepted not only in India but in 75 countries around the world. DPMC is the sole agent for MRF motorcycle and three-wheeler tyres in Sri Lakethe Company has set up shop in Dubai to target markets in the UAE as part of its export thrust. On the other hand, in tonnage terms MRF has not grown much due to the slowdown in MHCV tyre and have recorded a 0.3% growth, in the demand for tyres. Exports constituted 8.2% in such away that sales segment in truck &bus is 2000,in passenger cars is 8%,in 1ev it is 3 1%.The global tyre market currently is estimated at USD 70 billion while the Indian market is around Rest 100 million. The global market is dominated by Goodyear-Sumitomo with a share of 22%. On the other hand, the domestic industry is dominated by MRF Ltd. Several mergers and acquisitions have characterized the

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Global market, in the recent past. This is essentially to acquire technology, gain wider access to markets and be competitive. Indian players are also reengineering their businesses and looking at strategic tie-ups in this segment. The export market for India has been predominantly to the USA that accounts for nearly 30% of exports from the country. These are mostly of the cross ply variety. However, of late Indias share in the US market is being threatened by China and Japan. These two countries are able to offer prices that are lower than that offered by Indian manufacturers. In addition, these two nations are logistically better placed than India when it comes to exporting to the USA. Domestic tyre manufacturers are also facing threat from imports from China and South Korea. The landed cost of tyres from China is lower than the Indian price by 30%. In addition, tyres from South Korea are imported at 30% customs duty while from other countries the duty levied is 35%. Thus in both cases the domestic tyre manufacturers are feeling the heat.

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INTRODUCTION TO PROMOTIONAL ACTIVITIES

Promotion consists of those activities which are designed particularly to help easy sale of goods or services to the favourable attention of consumers. Sales promotion is one of the part of promotional mix which stimulates customers & dealers for the purpose of increase in sales. It can be defined as; 1. 2. An exercised information, persuation & influence.

Sales Promotion includes all the activities & tools of marketing

management which stimulates the target customers for the purpose of increase in sales volume. In the above definitions, the main theme is that the sales promotion does not include Advertisement, Personal Setting & Publicity, instead these activities are performed purely on temporary basis or at certain times Such as; Display, Free samples,Exhibition, etc.

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PROMOTIONAL ACTIVITIES
Promotion consists of those activities which are designed particularly to help the easy sale of goods .Sales promotion is one of the part of promotional mix which stimulates customers& dealers for the purposes of increases in sales. There are many promotional activities undertaken by MRF TYRES some of which are as follows; RACING & RALLYING MRF tyres are developed in the toughest lab known to man.MRF is the pioneer of major racing in India. The grueling race track has been laboratory for testing our tyres. Every MRF tyre designed is the result of a special decisive test(that s sheer torture) on the race rally tracks. Sharp turns, abrupt braking and straight stretches of steaming asphalt. Excruciating conditions. but then only the tough can survive, and only the toughest win. At MRF, all this is put to good use.MRFs lyre experts and rubber technologists are present at every stage, and especially during those crucial moments, to study tyre behaviour. MRF tyres are made to run at speeds exceeding 150 kmph, at which they are exposed to extreme conditions of heat and traction. The molecular stability of the rubber compounds is tested against severe gravitational stress. Our experts observe, analyse and gather rinformation at the dirt track, which they pass on to R&D department. This is then reviewed used to develop safer, better quality tyres, not only for formula cars racing bikes, but also for cars that rough it out on the tough INDIAN ROADS everyday.

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ACHIVIEMENTS OF MRF achievements

Special Export Award Top Export Award Top Export Award Top Export Award Top Export Award Top Export Award CAPEXIL Awards Certificate of Merit Special Export Award Top Export Award Highest Export Award Top Export Award Special Export Award Certificate of Merit Special Export Award J.D. Power Asia Pacific Study Awards Customer Satisfaction Award Customer Satisfaction Award Customer Satisfaction Award Customer Satisfaction Award 2003-2004 2004-2005 2006-2007 2007-2008 1987-88 1988-89 1989-90 1992-93 1993-94 2005-06 2007-08 2008-09

YEAR
1990-91 1991-92 1992-93 1993 -94 1994-95 1995-96

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Customer Satisfaction Award

2008-2009

CONCLUSION

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MRF TYRES has been selected as one of the Indias ECONOMIC REVIEWS ANNUAL REVIEW.
1.

TOP 10

companies for the sixth consecutive year by the far EASTERN

The market share of MRF Tyres In Varanasi more then 25.75 % in Four wheeler Segment(Passenger Car Radial).

2. 3. 4. 5.

Approximately 87% customers are satisfied with the MRF Tyres . Rate of MRF Tyres are not high against with the other Company tyres. After sale service (Claim) of MRF Tyres is very good. Approx 82% customer said that they MRF Tyres very easily whenever they require them from the nearest dealer.

6.

Around 75% customer said that they purchase MRF Tyres from the Exclusive dealer of MRF Tyres Ltd.

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SUGGESTION

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STREANGTH
1. 2. 3. Established brand names (key in the replacement market) Extensive distribution networks Good R&D initiatives by top players

WEAKNESS 1. Cost Pressures - The profitability of the industry has high

correlation with the prices of key raw materials such as rubber and crude oil, as they account for more than 70% of the total costs 2. Pricing Pressures The huge raw material costs have resulted

in pressure on the realisations and hence, the players have been vouching to increase the prices, although, due to competitive pressures, they have not been able to pass on the entire increase to the customer 3. Highly capital intensive - It requires about Rest 4 billion to set

up a radial tyre plant with a capacity of 1.5 million tyres and around Rest 1.5-2 billion, for a cross-ply tyre plant of a 1.5 million tyremanufacturing capacity

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OPPORTUNITIES Growing Economy- Growing Automobile Industry Increasing OEM demand- Subsequent rise in replacement demand With continued emphasis being placed by the Central Government on development of infrastructure, particularly roads, agricultural and manufacturing sectors, the Indian economy and the automobile sector! tyre industry are poised for an impressive growth. Creation of road infrastructure has given, and would increasingly give, a tremendous fillip to road transportation, in the coming years. The Tyre industry would play an important role in this changing road transportation dynamics Access to global sources for raw materials at competitive prices, due to economies of scale Steady increase in radial Tyres for MHCV, LCV Continuous increase in prices of natural rubber, which accounts for nearly one third of total raw material costs Cheaper imports of Tyres, especially from China, selling at very low prices, have been posing a challenge. The landed price is approximately 25% lower than that of the corresponding Indian Truck! LCV tyres. Imports from China now constitute around 5% of market share. With crude prices scaling upwards, added pressure on raw material prices is expected Ban on Overloading, leading to lesser wear and tear of tyresand subsequent slowdown in demand. However, this would only be a short-term negative Cyclical nature of automobile industry .

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BIBLIOGRAPHY

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MARKETING MANAGEMENT:By Philip Kotler

WEBSITES:www.mrftyres.com www.google.com www.weekypedia.com

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