Credit risk refers to the probability of loss due to a borrower’s failure to make

payments on any type of debt. Credit risk management, mean while is the practice of
mitigating those losses by understanding the adequacy of both a bank’s capital and
loan loss reserves at any given time – a process that has long been a challenge for
financial institutions.

The global financial crisis – and the credit crunch that followed – put credit risk
management into the regulatory spotlight. As a result, regulators began to demand
more transparency. They wanted to know that a bank has thorough knowledge of
customers and their associated credit risk. And new Basel III regulations will create
an even bigger regulatory burden for banks.

To comply with the more stringent regulatory requirements and absorb the higher
capital costs for credit risk, many banks are overhauling their approaches to credit
risk. But banks who view this as strictly a compliance exercise are being short-
sighted. Better credit risk management also presents an opportunity to greatly
improve overall performance and secure a competitive advantage.

1
OBJECTIVES OF THE STUDY:
1. To analysis the credit policies of HYUNDAI MOTORS LTD
2. To find out debtor turnover ratio and average collection period.
3. To find out whether it is profitable to extend credit period or reduce credit
Period.
4. To suggest measures to increase profits.
5. Are all areas of business are influenced by Credit Risk Management
6. To create information for a volume driven business.

2
NEED AND IMPORTANCE OF THE STUDY:
1. Credit risk management is one of the key areas of financial decision-making.
2. The management must see that an excessive investment in current assets
should protect the company from the problems of stock-out.
3. Current assets will also determine the liquidity position of the firm.
4. The goal of Credit risk management is to manage the firm current assets and
current liabilities in such a way that a satisfactory level of working capital is
maintained.
5. If the firm cannot maintain a satisfactory level of working capital, it is likely
to become insolvent and may be even forced into bankruptcy.

3
RESEARCH METHODOLOGY:
The data used for analysis and interpretation from annual reports of the company.
This is secondary forms of data. DDR, ACP and Increase in credit period analysis
are the techniques used for calculation purpose.

The project is presented by using tables, graphs and with their interpretations.

PRIMARY DATA:
Primary data is collected from the Execute of the organization

SECONDARY DATA:
Secondary data obtained from the annual reports, books, magazines and websites.

4
LIMITATIONS:
 The study is based on only secondary data.
 The period of study was 2013-18 financial years only.
1. Another limitation is that of standard ratio with which the actual
ratios may be compared generally there is no such ratio, which may
be treated as standard for the purpose of comparison because
conditions of one concern differ significantly from those of another
concern.
2. The accuracy and correctness of ratios are totally dependent upon the
reliability of the data contained in financial statements on the basis of
which ratios are calculated.

5
Risk Management:
Good risk management at a strategic level helps protect an organization’s reputation,
safeguard against financial loss, minimize disruption to services and increase the
likelihood of achieving business objectives successfully.

This also gives assurance on how an organization’s business is managed and at the
same time will satisfy any compliance requirements of the organization, where an
internal control mechanism is established. Internal control includes:
 The establishment of clear business objectives, standards, processes and
procedures
 Clear definition of responsibilities
 Measurement of inputs, outputs and performance outcomes in relation to
objectives.
 Performance Management
 Financial controls over expenditure and budget.

Requirements of Risk Management:

 The establishment and understanding of a risk management policy and
framework
 The identification, assessment and judgment of threats to the achievement of
clear business objectives.
 Effecting the right action to anticipate and militate against risk - this includes
establishing effective internal controls to counter key risks.
 Where necessary, to take reasonable and calculated risks based on well
informed management decisions.
 Balancing risks by design control to give reasonable assurance to contain
risks and offer value for money.
 Monitoring risks and reviewing progress
 Quantifying risks by assessing any potential costs or benefits arising from
possible impact
 Reporting on the above.

6
How to identify risks?
Step 1 - Clarity of Objectives
Be clear first of all about the overall objectives of the organization and understand
how departmental objectives are aligned to the delivery of same.
Think about:
 What needs to be done
 By when
 Who is accountable for delivery?

Step 2 - Identify Risks

With your objectives in mind, ask the following questions:
 What can go wrong?
 How and why can it happen?
 What do we depend on for continued success?
 What could happen?

Consult with staff and others as appropriate and consider a range of possible
scenarios including the best and worst cases. Be as creative with this process as
possible. Consider the cause and effect' and scope of the risk and state as clearly as
possible to avoid misunderstanding and misinterpretation. Try to quantify where
possible based on what the effect might be.

Go back to Step 1 above and do the same for external risks by considering the
relationship between the organization and its wider environment and follow the
steps above. Consider potential external cause of business disruption, issues
affecting relationship with partners, suppliers and any possible changes in
government policy and legislation.

Step 3 - Assess Risks

 Identify existing controls and their effectiveness
 Assess what other controls may be necessary
 Determine likelihood / impact - use a bespoke template:

7
  Likelihood of risk occurring is used as a qualitative description of probability
or frequency
 Impact is the outcome of the risk impacting and is expressed qualitatively or
quantitatively, i.e. being a loss, injury, disadvantage or gain. NB - there may
be a range of possible outcomes.
 Set out a realistic timeframe for managing / mitigating risk.

Step 4 - Address Risks

This involves practical steps to managing and controlling risks. Think about:
 What actions or responses are required to control risks
 What are the associated cost of these actions
 Are the costs proportionate to the risk that it is controlling
 What information is needed to make an informed decision to accept, manage,
avoid, transfer or reduce the risks
 Is it better to work to eliminate or innovate through taking reasonable
calculated risks?

Step 5 - Review, Quantify and report Risks

Although policy may dictate a review and half yearly update should be enacted, risk
owners need to regularly review to ensure there is ongoing relevant management of
risks
Advice should be sought where quantification / confirmation is needed, i.e. Finance
or Audit Department.
Build into the current reporting structure via the business planning round. Where
key risks need to be considered, ensure it is given priority within the agreed
framework.

Credit risk refers to the probability of loss due to a borrower’s failure to make
payments on any type of debt. Credit risk management is the practice of mitigating
losses by understanding the adequacy of a bank’s capital and loan loss reserves at
any given time – a process that has long been a challenge for financial institutions.
The global financial crisis – and the credit crunch that followed – put credit risk
management into the regulatory spotlight. As a result, regulators began to demand

8
more transparency. They wanted to know that a bank has thorough knowledge of
customers and their associated credit risk. And new Basel III regulations will create
an even bigger regulatory burden for banks.

To comply with the more stringent regulatory requirements and absorb the higher
capital costs for credit risk, many banks are overhauling their approaches to credit
risk. But banks who view this as strictly a compliance exercise are being short-
sighted. Better credit risk management also presents an opportunity to greatly
improve overall performance and secure a competitive advantage.

Challenges to Successful Credit Risk Management

 Inefficient data management. An inability to access the right data when it’s
needed causes problematic delays.
 No group wide risk modeling framework. Without it, banks can’t generate
complex, meaningful risk measures and get a big picture of group wide risk.
 Constant rework. Analysts can’t change model parameters easily, which
results in too much duplication of effort and negatively affects a bank’s
efficiency ratio.
 Insufficient risk tools. Without a robust risk solution, banks can’t identify
portfolio concentrations or re-grade portfolios often enough to effectively
manage risk.
 Cumbersome reporting. Manual, spreadsheet-based reporting processes
overburden analysts and IT.
 The first step in effective credit risk management is to gain a complete
understanding of a bank’s overall credit risk by viewing risk at the
individual, customer and portfolio levels.
 While banks strive for an integrated understanding of their risk profiles,
much information is often scattered among business units. Without a
thorough risk assessment, banks have no way of knowing if capital reserves
accurately reflect risks or if loan loss reserves adequately cover potential
short-term credit losses. Vulnerable banks are targets for close scrutiny by
regulators and investors, as well as debilitating losses.

9
  The key to reducing loan losses – and ensuring that capital reserves
appropriately reflect the risk profile – is to implement an integrated,
quantitative credit risk solution. This solution should get banks up and
running quickly with simple portfolio measures. It should also accommodate
a path to more sophisticated credit risk management measures as needs
evolve. The solution should include:
 Better model management that spans the entire modeling life cycle.
 Real-time scoring and limits monitoring.
 Robust stress-testing capabilities.
 Data visualization capabilities and business intelligence tools that get
important information into the hands of those who need it, when they need it.

Recommended Credit Risk Management Solutions from SAS

 Credit Scoring Develop, validate and monitor credit scorecards faster,
cheaper and more flexibly than any outsourcing alternative.
 Regulatory Risk Management Proactively manages regulatory risk across
multiple jurisdictions with a single, end-to-end risk management
environment.
 Expected Credit LossMeet the challenges of IFRS 17, IFRS 9, CECL and
beyond with a centralized, flexible, high-performance analytics environment.
 Platforms quickly and efficiently execute a wide range of models used in
bank stress tests and other enterprise-level risk assessments.
 Workbenches orchestrate all aspects of financial stress test and credit loss
reserving processes, and consolidate results from various systems, via a
central hub.
 Workbench Lower costs and reduce the operational risks associated with risk
model development.

10
A credit risk can be of the following types:
Credit default risk
The risk of loss arising from a debtor being unlikely to pay its loan obligations in
full or the debtor is more than 90 days past due on any material credit obligation;
default risk may impact all credit-sensitive transactions, including loans, securities
and derivatives.

Concentration risk
The risk associated with any single exposure or group of exposures with the
potential to produce large enough losses to threaten a bank's core operations. It may
arise in the form of single name concentration or industry concentration.

Country risk – The risk of loss arising from a sovereign state freezing foreign
currency payments (transfer/conversion risk) or when it defaults on its obligations
(sovereign risk); this type of risk is prominently associated with the country's
macroeconomic performance and its political stability.

Significant resources and sophisticated programs are used to analyze and manage
risk. Some companies run a credit risk department whose job is to assess the
financial health of their customers, and extend credit (or not) accordingly. They may
use in-house programs to advice on avoiding, reducing and transferring risk. They
also use third party provided intelligence.

Companies like Standard & Poor's, Moody's, Fitch Ratings, DBRS, Dun and
Bradstreet, Bureau van Dijk and Rapid Ratings International provide such
information for a fee.

For large companies with liquidly traded corporate bonds or Credit Default Swaps,
bond yield spreads and credit default swap spreads indicate market participant’s
assessments of credit risk and may be used as a reference point to price loans or
trigger collateral calls.

11
Most lenders employ their own models (credit scorecards) to rank potential and
existing customers according to risk, and then apply appropriate strategies.[9] With
products such as unsecured personal loans or mortgages, lenders charge a higher
price for higher risk customers and vice versa. With revolving products such as
credit cards and overdrafts, risk is controlled through the setting of credit limits.
Some products also require collateral, usually an asset that is pledged to secure the
repayment of the loan.

Credit scoring models also form part of the framework used by banks or lending
institutions to grant credit to clients. For corporate and commercial borrowers, these
models generally have qualitative and quantitative sections outlining various aspects
of the risk including, but not limited to, operating experience, management
expertise, asset quality, and leverage and liquidity ratios, respectively. Once this
information has been fully reviewed by credit officers and credit committees, the
lender provides the funds subject to the terms and conditions presented within the
contract (as outlined above).

Sovereign risk
Sovereign credit risk is the risk of a government being unwilling or unable to meet
its loan obligations, or reneging on loans it guarantees. Many countries have faced
sovereign risk in the late-2000s global recession. The existence of such risk means
that creditors should take a two-stage decision process when deciding to lend to a
firm based in a foreign country. Firstly one should consider the sovereign risk
quality of the country and then consider the firm's credit quality.
Five macroeconomic variables that affect the probability of sovereign
debt rescheduling are:
 Debt service ratio
 Import ratio
 Investment ratio
 Variance of export revenue
 Domestic money supply growth

12
The probability of rescheduling is an increasing function of debt service ratio,
import ratio, variance of export revenue and domestic money supply growth.[17] The
likelihood of rescheduling is a decreasing function of investment ratio due to future
economic productivity gains. Debt rescheduling likelihood can increase if the
investment ratio rises as the foreign country could become less dependent on its
external creditors and so be less concerned about receiving credit from these
countries/investors.

Counterparty risk
A counterparty risk, also known as a default risk, is a risk that a counterparty will
not pay as obligated on a bond, derivative, insurance policy, or other contract.
Financial institutions or other transaction counterparties may hedge or take
out credit insurance or, particularly in the context of derivatives, require the posting
of collateral. Offsetting counterparty risk is not always possible, e.g. because of
temporary liquidity issues or longer term systemic reasons.

Counterparty risk increases due to positively correlated risk factors. Accounting for
correlation between portfolio risk factors and counterparty default in risk
management methodology is not trivial.

Risk-based pricing
Lenders may charge a higher interest rate to borrowers who are more likely to
default, a practice called risk-based pricing. Lenders consider factors relating to the
loan such as loan purpose, credit rating, and loan-to-value ratio and estimates the
effect on yield (credit spread).

Covenants
Lenders may write stipulations on the borrower, called covenants, into loan
agreements, such as;
 Periodically report its financial condition,
 Refrain from paying dividends, repurchasing shares, borrowing further, or
other specific, voluntary actions that negatively affect the company's
financial position, and Repay the loan in full, at the lender's request, in

13
 certain events such as changes in the borrower's debt-to-equity
ratio or interest coverage ratio.

Credit insurance and credit derivatives

Lenders and bond holders may hedge their credit risk by purchasing credit
insurance or credit derivatives. These contracts transfer the risk from the lender to
the seller (insurer) in exchange for payment. The most common credit derivative is
the credit default swap.

Tightening
Lenders can reduce credit risk by reducing the amount of credit extended, either in
total or to certain borrowers. For example, a distributor selling its products to a
troubled retailer may attempt to lessen credit risk by reducing payment terms
from net 30 to net 15.

Diversification
Lenders to a small number of borrowers (or kinds of borrower) face a high degree
of unsystematic credit risk, called risk. Lenders reduce this risk by diversifying the
borrower pool.

Deposit insurance
Governments may establish deposit insurance to guarantee bank deposits in the
event of insolvency and to encourage consumers to hold their savings in the banking
system instead of in cash.

Risk Defined:
Risk:
Risk is the actual exposure of something of human value to a hazard and is often
regarded as the product of probability and loss - Source: Smith K 2001;
Environmental Hazards Assessing Risk and Reducing Disaster: London: Rout ledge:
6 -7.

14
Risk Assessment:
The evaluation of a risk to determine its significance, either quantitatively or
qualitatively.

Risk Management:
Determines the levels at which risk acceptability is set and methods of risk reduction
are evaluated and applied.

Resilience:
The ability at every relevant level to detect, prevent and, if necessary handle
disruptive challenges. Source: CCS Resilience

Business Continuity:
A proactive process which identifies the key functions of an organization and the
likely threats to those functions; from this information plans and procedures which
ensure that key functions can continue, whatever the circumstances, can be
developed.

CREDIT POLICIES:
The first decision area is credit policies; the credit policy of a firm provides the
frame work to determine-Whether or not to extend credit to a customer.

How much credit to extend. The credit policy decision of firm has two broad
dimensions are;
 Credit standards and Collection cost

CREDIT POLICY VARIABLES:

In establishing an optimum credit policy. The financial manager must consider the
important decisions variables which influence the level of receivables.

15
The major controllable decision variable include the following –
 Credit standards
 Credit analysis
 Credit terms
 Collection policies and procedures

CREDIT STANDARDS:
The term credit standards represent the basic criteria for the extension of credit to
customers. The quantitative basic of establishing credit standards or factors such as
credit rating, credit reference, average payment period and certain financial ratio’s
since we are interested in illustrating the trade – off between benefit and cost to the
firm as a whole.

We do not consider here these individual components of credit standards. To

illustrate the effect, we have divided the overall standards into –
 Tight or restrictive and Liberal or non- restrictive i.e., to say our aim is to
show what happens to the trade off when standards are relaxed or
alternatively, tighten.
The trade – off with reference to credit standards covers –
 The collection cost
 The average collection period or investment in receivables.
 Levels of bad debts losses and
 Level of sales.
These factors should be considered while deciding whether to relax credit standards
or not.
 If standards are relaxed, it means more credit will be extended while. If
credit standards are tightened. Less credit will be extended. The implication
of four factors are elaborated below –

16
 Fig 2.1

COLLECTION COST:
The implication of relaxed credit standards are –
 More Credit.
 A large credit department to service accounts receivables and related matters.
 Increase in collection cost.

The effect of tightening of credit standards will be exactly the opposite. These costs
are likely to be semi-variable.

This is because up to a certain point the existing staff will be able to carry on the
increased workload but beyond that, additional staff would be required these are
assumed to be included in the variable cost per unit and need not be separately
identified.

17
INVESTMENT IN RECEIVABLE OR AVERAGE COLLECTION
PERIOD
The investment in accounts receivable involves a capital cost as funds have to be
arranged by the firm to finance them till customers make payment. Moreover, the
higher the average accounts receivables; the higher is the capital or carrying cost. A
change in the credit standards – relaxation or tightening leads to a change in the
level of accounts receivables either –
 Through a change in sale, through a change in collection.
A relaxation in credit standards as already stated, implies an increase in sales
Which in turn would lead to higher average accounts receivables?
Further relaxed standards would mean that credit is extended liberally so, that it is
available to even less credit worthy. Customers who will take a longer period to pay
over dues.
The extension of trade credit to slow paying customers would result in a higher level
of accounts receivables.

A tightening of credit standards would signify –

 A decrease in sales and lower average accounts receivables / ACP and
 An extension of credit limited to more credit worthy customers who can
promptly pay their bills and thus, a lower average level of accounts
receivables.

Thus a change in sales and change in collection period together with a relaxation in
Standards would produce a higher carrying cost, while changes in sales and
collection period result in lower costs when credit standards are tightened. These
basic reactions also occur when changes in credit terms or collection procedures are
made.

BAD DEBTS EXPENSES:

Another factor which is expected to be affected by changes in the credit standards is
bad debts (default) expenses. They can be expected to increase with relaxation in
credit standards and decreases if credit standards become more restrictive.

18
 SALES VOLUME:
Changing credit standards can also be expected to be change the volume of sales. As
standards are relaxed, sales are expected to increase; conversely a tightening is
expected to cause a decline in sales.

The basic changes and effects on profits arising from a relaxation of credit standards
are summarized in exhibit –

If the credit standards are tightening, the opposite effects, as shown in the brackets
would follow-
EFFECT OF STANDARDS
Direction of change Effect on profits
Sl. No ITEM (Increase = I) (positive + )
(Decrease = D) (Negative - )

1 SALES VOLUME I (D) +(-)

AVG COLLECTION
2 I (D) - (+)
PERIOD
3 BAD DEBTS I (D) - (+)
Table 2.1.1

Direction of change Effect on profits

Sl.No Item (I= Increase) or (D = (Positive +) or
Decrease) (Negative -)
1 BAD DABTS D +
2 ACP D +

3 SALES VOLUME D -

COLLECTION
4 I -
EXPENDITURE

Table 2.1.2

19
CREDIT ANALYSIS:
Credit standards influence the quality of the firm’s customers. There are two aspects
of the quality of customers –
 The time taken by customers to repay credit obligations,
 The default rate.
The ACP determines the speed of payment by customers. It measures the number of
days for which credit sales remains outstanding. The longer the ACP, the higher the
firm’s investment in accounts receivables.

DEFAULT RATE - Can be measured in terms of bad debts losses ratios – the
proportion of uncollected receivable. Bad debts losses ratio indicates default risk.

DEFAULT RISK - Is the likelihood that a customer will fail to repay the credit
obligation. On the basis of past practice and experience, the financial or credit
manager should be able to form a reasonable judgment regarding the chance of
default.
To estimate the probability of default, the financial or credit manager should
consider
3 co –
a) Character
b) Capacity and
c) Conditions

CHARACTER:
Refers to the customers willingness to pay the financial or credit manager should
Judge whether the customer will make honest efforts to honor their credit obligation.
The moral factor is considerable importance in credit evaluation in practice.

CAPACITY:
Refers to the customers’ ability to pay can be judged by assessing the customers
capital and assets which he may offer as security capacity is evaluated by the
financial position of the firm’s as indicated by analysis of ratio’s and trends in firm’s

20
cash and working Capital position. The financial position or credit manager should
determine the real worth of assets offered as collateral (security).

CONDITION:
Refers to the prevailing economy and other conditions which may affects the
customers’ ability to pay. Adverse economic conditions can affect the ability or
willingness of a customer to pay. An experienced financial or credit manager will be
able to judge the extent and geniuses to which the customer’s ability to pay is
effected by the economic conditions.

Information on these variables may be collected from the customers themselves,

their published financial statement and outside agencies which may keep credit
information about customers. A firm should use this information in preparing
categories of customers according to their credit worthiness and default risk. This
would be an important input for the financial or credit manager in formulating its
credit standards.

The firm may categorized its customers at least, in the following 3 – categories:
 GOOD ACCOUNTS: that is financially strong customers.
 BAD ACCOUNTS: that is financially very weak, high risk customers.
 MARGINAL ACCOUNTS: that is customers with moderate financial health
and risk (falling between good and bad accounts).
The firm will have no difficulty in quickly deciding about the extension of credit to
Good accounts and Rejecting the credit request of bad accounts.

Most of the firm’s time will be taken in evaluating marginal accounts. i.e.,
customers who are not financially very strong but are also not so bad to be rightly
rejected. A firm can expand its sales by extending credit to marginal accounts but
the firms cost and bad debts losses may also increases. Therefore credit standards
should be relaxed upon the point where incremental return equals incremental cost
(IR=IC).

21
 Graph 2.1

CREDIT TERMS:
The 2nd decision area in accounts receivable management is the credit terms. After
the credit standards have been established and the worthiness of the customers has
been assessed the management of a firm must determine the terms and conditions on
which trade credit terms. These relate to the repayment of the amount under the
credit sale.
Credit term is the stipulation under which the firm sells on credit to customers are
called credit terms.
These stipulations include;-
A. Credit period
B. Cash discount and
C. Cash discount period

22
 A. CREDIT PERIOD:
The length of time which credit is to customers is called the credit period. It is
generally stated in net terms of a net date. A firms credit period may governed by
the industry norms. But depending on its objective the firm can lengthen the credit
period. On the other hand, the firm may lengthen its credit period if customers are
defaulting too frequently and bad debts losses are building up.

A firm lengthens to credit period to increases its operating profit through expanding
sales however; there will be net increases in operating profit when the cost of
extended credit period is less than the incremental operating profit. With increased
sales and extended credit period receivable would increases.
 Incremental sales result in incremental receivables and
 Excising customer will take more time to repay credit obligations i.e. the
average
 Collection period will increase.
The 2nd component of credit terms is the credit period.
The expected effect of an increase in the credit period is summarized in table below.

EFFECT OF INCRESE IN CREDIT PERIOD

Direction of change Effect on profit
Item I=increases (positive+ or
D=decreases negative-)

Sales volume 1 +

ACP 1 -

Bad debts
1 -
expenses

Table 2.3
A reduction in the credit period is likely to have an opposite effect. The above table
indicates the credit period decision.

23
 B. CASH DISCOUNT:
A cash discount is a payment offered to customers to induce them to repay credit
obligations within a specified period of time which is less than the normal credit
period.

It is usually expressed as a percentage of sales cash discount terms indicate the rate
of discount and the period for which it is available. It the customer does not avail the
offer; he must make payment within the normal credit period. Credit term would
include.
 Rate of cash discount.
 The cash discount period.
 The net credit period.
A firm uses cash discount as a tool to increases sales & accelerates collections form
customers. Thus the level of receivable & associated costs may be reduced the cost
involved in the discounts taken by customers. The effects of increasing the cash
discounts are summarized in below table
The effect of decreasing cash discount will be exactly opposite.

EFFECTS OF INCREASE IN CASH DISCOUNT

Direction of change
Effect on profit
ITEM (I = increase,
(+values, -value)
D = decrease)
Sales volume I +
ACP D +
Bad Debits Expenses D +
Profit Per Unit D -
Table 2.4
The above table indicates cash discount decision

CASH DISCOUNT PERIOD:

Which refers to the duration during which the discount can be availed of these terms
are usually written in abbreviation for instance 2/10 net 30 i.e. 2% 10 days (time
available) 30 days (maxi)

24
COLLECTION POLICY & PROCEDURES:
A collection policy is needed because all customers do not pay the firm’s bill in
time; some customers are slow payers while some are non payers. The collection
effort should, therefore aim at accelerating collections from slow payers and
reducing bad debts losses. A collection policy should ensure prompt and regular
collection.

Prompt collection is needed for fast turn over or working capital keeping collection
costs & bad debts within limits & maintaining collection efficiency’s. Regularity in
collection keeps Dr’s alert & they tend to pay their dues promptly.

The collection policy should lay down clear cut collection procedures. The
collection procedures for past dues or delinquent accounts should also be established
in unambiguous terms. The slow paying customers should be handled very tactfully,
some of them maybe permanent customers the collection process initiated quickly.
Without giving any chance to them may antagonize them, and the firm may loss
them to competitors.

The accounting dept maintains the credit records and information it is responsible
for collection, it should consult the sales dept before initiating an action against non
paying customers similarly the sales dept must obtain past information about
customers from the accounting dept before granting credit to him.

Through collection procedure should be firmly established, individual cases should

be dept with on their merits. Some customers may be temporarily in tight financial
position and in spite of their best intention may not be able to pay on due date this
may be due to recessionary –conditions, or other factors beyond the contract of the
customers, such cases need special consideration. The collection procedure against
them should be initiated only after they have overcome their financial difficulties
and do not intend to pay promptly.

25
 Fig 2.2

CREDIT GRANTING DECISION;-

Once a firm has assessed the credit worthiness of a customer, it has to decide
whether or not. Credit should be granted. The firm should use the NPV (net present
value) rule to make the decision, if the NPV is positive, credit should be granted.

If the firm chooses not to grant any credit, the firm avoids the possibility of any
losses but losses the opportunity of increasing its profitability.

On the other hand if it grants credit then it will benefit if the customer pay’s. There
is some profitability that a customer will default, and then the firm may lose its
investment.

The expected net pay-off of the firm is the differences between the present values of
net benefit and present value of the expected loss.

26
CREDIT GRANTING DECISIONS

Fig 2.3
CREDIT LIMIT:-
A credit limit is a maximum amt of credit which the firm will extend at a point of
time it indicates the extent of risk taken by the firm by supplying goods on credit to
a customer. Once the firm has taken a decision to extend credit to the applicant, the
amount and duration of the credit has to be decided. The decision on the magnitude
of credit will depend upon the amount of contemplated scale and the customer’s
financial strength in case of customers who are frequent buyers of the firm’s goods,
a credit limit can be establish. This would avoid the need to investigate each order
from the customers.
Depending on the regularity of payment, the line of credit for a customer can be
fixed on the basis of his normal buying pattern...
The credit limit must be reviewed periodically. If tendencies of slow paying are
found. The credit can be revised downward.

27
WHY DO COMPANIES GRANT IN INDIA;-
Companies in practice feel the necessity of granting credit reason;-

 COMPETITION
Generally the higher the degree of competition, the more the credit granted by a firm
however, there are exceptions such as firms in the electronics industry in India.

 COMPANIES BARGAINING POWER ;-

If A Company has higher bargaining power vis-à-vis its buyers, no or less credit.
The company will have a string bargaining power if it has a strong product,
monopoly, and brand image, large size or strong financial position.

 BUYER REQUIREMENT ;-
In a number of business sectors buyers or dealers are not able to operate with extend
credit this is particularly so, in the case of industrial products.

 BUYERS STATUS ;-
Large buyers demand easy credit terms because bulk purchasers and higher
bargaining power some companies fallow a policy of not giving much credit to
small retailers since it is quite difficult to collect dues from them.

 RELATIONSHIP WITH DEALERS ;-

Companies sometimes extend credit to dealers to build long –term relationship with
or to reward them for their loyalty.

 MARKETING TOOL ;-
Credit is used as a marketing tool, particularly when a new product is launched or
when a new company wants to push its week products.

28
  INDURSTRY PRACTICE ;-
Small companies have been found guided by industry practice or norm more than
the large companies. Sometimes companies continue divining credit because of past
practice rather than industry practice.

 TRYNIST DELAY ;-
This is a forced reason for extended credit in the case of a number of companies in
India most companies evolved systems to minimize the impact of such delays some
of them take the help of banks to control cash flows in such situations.
The graph represents the optimum level of receivables:

Fig 2.4 Optimum level of receivables

NATURE OF CREDIT POLICY:-

A firm’s investment in accounts receivable depends on –
A. The volume of credit sales, and
B. The collection period

For example; if a firm’s credit sales are Rs. 30, 00,000 per day and customers, on an
average, take 45 days to make payment then the firm’s average investment in
accounts receivable is:
Daily credit sales x ACP = 30, 00,000 x 45 = 1, 350, 00,000

29
The investment in receivables may be expressed in terms of cost of sales instead of
sales value. The volume of credit sales is a function of the firm’s total sales and the
% of credit sales to total sales. Total sales depends on market size, firm’s share,
product quality, intensity of competition, economic condition etc.

The financial manager hardly has any control over these variables. The % of credit
sales to total sales are mostly influence by the nature of the business and industry
norms.
For example: Car manufacture in India, until recently, was not selling cars on credit.
They required the customers to make payments at the time of delivery. Some of
them even asked for the payment to be made in advance this were so, because of the
absence of genuine competition and a wide gap between demands for and supply of
cars in India.

This position changed after economic liberalization which led to intense

competition. In contrast, the textile manufacture sold 2/3 rd of their total sales on
credit to the wholesale dealers. The textile industry is still going through a difficult
phase.

GOALS OF CREDIT POLICY:-

A firm may follow a Lenient or a stringent credit policy.
The firm follow a lenient credit policy tend to sell on credit to customers on very
liberal terms and standards, credits are granted for longer period even to those
customers whose credit worthiness is not fully known or whose financial position is
doubtful.

A firm follow a stringent credit policy sells on credit on a highly selective basis
only to those customers who have proven credit worthiness and who are financially
strong. In practice firms follow credit policies ranging between stringent to lenient.

30
This graph indicates cost of credit policy:

Fig 2.5
COST OF CREDIT POLICY
 If the credit policy is loose, bad debts are more.
 If the credit policy is tight, bad debts are less.
 If the credit policy is tight, opportunity cost is more.
 If the credit policy is loose, opportunity cost is less-optimum credit policy.

RESEARCH ON CREDIT MANAGEMENT

Business have receivables i.e. dues from credit customers. To increase sales, to earn
more, to meet the competitors, to achieve break even volumes, to gain a foot hold in
the market, to help the customers on whom the business fortune is intimately in
nexus and to develop a strong brand, receivables, i.e. credit sales, are vital.
Maintaining accounts receivables involves cost. Administration cost, capital cost,
collection cost, and bad-debt cost etc. are diverse costs involved. As in any financial
decision matching costs with benefits is needed here too. And what is the optimum
level of accounts receivables is to be decided. Too little of accounts receivable, that
is very limited credit ales reduced sales, loss of customer to the competitor’s camp,
reduced profit and so on. Of course no bad debt, less capital locked up in accounts
receivables resulting lower capital cost etc., are benefits. But, a little more risk can

31
be taken and profits can be inflated. Too much of accounts receivables lead to scale
advantage and hence more profit can be inflated. Too much of accounts receivables
lead to scale advantage and hence mire profit, but costs of added bad debts, capital
cost etc. are involved. Perhaps by reducing accounts receivables costs can be steeply
reduced, while benefits are not similarly decreasing. Therefore optimum investment
in accounts receivable has to be planned and achieved.

Fig 2.6
CREDIT POLICY
Credit policy is a guideline to action. Policy establishes guideposts or limits for
actions. Credit policy, therefore, refers to guide lines regarding credit sales, size of
accounts receivables etc. Credit policy has a few variables. Credit standard, Credit
period, Credit terms and collection policies are the policy variables.
Credit standards refer to classification of customers on the basis of their Credit
standards and stipulation of Credit eligibility of different classes of customers. The
high rated customers may be extended unlimited Credit, the moderate Credit
standards class may be extended a limited credit facility and the rest may not be
given any Credit facility .credit period refers to how long credit is allowed. Longer
credit period might help drawing more customers and vice-versa. Credit terms refer
to discount incentive for prompt payments by offering cash discount can be ensured.
2/30,net 45 means.2% cash discount for payment within 30 days ,failing which full
payment by the 45th day of truncation. Collection policy refers the seriousness or
otherwise with which collection is dealt with, especially the delinquent customers. It
may be harsh or warm.
Credit policy can be liberal or stringent. Liberal credit policy adopts a lenient credit
standards ,i.e. almost all are extended credit; longer Credit period, higher cash

32
discount for a longer entitlement period and informal and accommodative collection
procedure.
Stringent credit policy does the opposite. Both policies have advantages and
Accompanying costs .hence, choice must be exercised by individual firms after
assessing the net effect of liberalizing or tightening up the Credit policy.

LENINET VS STRINGENT CREDIT POLICY

An analysis of effects of lenient credit policies is depicted below in a table form:
Lenient Stringent
Factors
policy policy
Sales More Less
Capital locked up More Less
Customer base More Less
Competitive edge More Less
Profit More Less
Customer goodwill More Less
Capital cost More Less
Bad debt loss More Less
Administrative cost More Less
Collection cost More Less
Discount allowed More Less
Table 2.5
Lenient credit policy enhances benefits as well as costs. Stringent policy reduces
both benefits and costs. Hence the problem of choice. Hence the need for detailed
evaluation for decision-making. Evaluation needs to be done in respect of each and
every credit policy variable.

33
 Fig 2.7

CONTROL ON CREDIT MANAGEMENT

The investment in accounts should be within accepted level. To achieve this, control
measures are needed so that when actual fall outside the prescribed range, corrective
actions can be taken. In controlling accounts receivables certain techniques are
adopted. Three such techniques are described below. These are Debtor’s turnover
ratio (DTR) refers to ratio of sales to accounts receivable (sundry debtors plus bills
receivables). The accounts receivables may be closing figure, or average of year
beginning and year-end figures or average of monthly opening and closing figures.
An acceptable range for the ratio is within this band, is all right. If the actual DTR is
less than 5, it means more money is locked up in accounts receivables. Either sales
have slumped relative to size of debtors, or debtors have risen to sales. If the ratio
exceeds the upper hand, it means customers promptly pay willingly or buy over
force. It is good.

34
Debtor’s velocity:
Debtors velocity refers to how much many days sales are outstanding with the
customers. This is given by: accounts receivables/ per day credit sales. If fact,
debtor’s velocity indicates the average collection period allowed, everything is fine.
If it exceeds the credit period allowed, which should be corrected? If ACP is less
than credit allowed, it can be considered as good, debtors velocity can be computed,
this vary also, that: number of working days in the year/DTR.

Age of debtors:
Age of debtors refers how long debts are outstanding. Say 10% of accounts
receivables is 6 months old,16% is 5 months old,25% is 4 months old,25% is 3%
months old,16% is 2 months i.e., 16% is 2 months old and 10% is 1 month old. The
average age of debtors comes to: 6+75+100+75+3+1=3.5 months. An ideal break up
of accounts receivables can be establishes and actual position is monitored
accordingly. The idle average age and actual average age of accounts receivables
can be compared and control is exercised on accounts receivables.

RESEARCH ON CREDIT MANAGEMENT

The objectives of research non credit management could be:
 To study the credit policies adopted across firms/ industries or in a firm/
industry.
 To study the extent of impact of lenient and stringent credit policies on sales,
capital cost, profit, bad debts, etc.
 To study the influence of different factors like –credit allowed by suppliers,
credit allowed by companies, etc. on credit policy.

Credit Management is a branch of accountancy, and is a function that falls under the
label of "Credit and Collection' or 'Accounts Receivable' as a department in many
companies and institutions. They will usually deal with the credit vetting of
customers, the resolution of any invoice queries or disputes, allocations of payments
or cash application, internal fund movements, reconciliations and also maintaining
positive working relationships with customer during the debt collection or credit
review and approval process. A key requirement for effective revenue and

35
receivables management is the ability to intelligently and efficiently manage
customer credit lines or credit limits. In order to minimize exposure to bad debt,
over-reserving, and bankruptcies, companies must have greater insight into customer
financial strength, credit score history and changing payment patterns. Likewise, the
ability to penetrate new markets and customers hinges on the ability of a company to
quickly make well informed credit decisions and set
Appropriate lines of credit.

Credit Management has evolved now from being a pure accounting function into a
front-end customer facing function. It involves screening of customers and only
those who is credit worthy are allowed to do business. A sound review of the
financial position of the customer, and understanding of their business model is the
first step in ensuring that the company does not end up selling to a customer who
ends up seriously delinquent or in default.
Hence, before the sales function commences its business with the particular
customer, the credit management role begins. Later as the customer starts dealing
with the company, the accounts receivable function is used to ensure recovery as per
agreed terms of credit is followed.

CREDIT ANALYSIS
Credit Analysis is the method by which one calculates the creditworthiness of a
business or organization. The audited financial statements of a large company might
be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial
statements of a small business before making or renewing a commercial loan. The
term refers to either case, whether the business is large or small.

Credit analysis involves a wide variety of financial analysis techniques, including

ratio and trend analysis as well as the creation of projections and a detailed analysis
of cash flows. Credit analysis also includes an examination of collateral and other
sources of repayment as well as credit history and management ability.
Before approving a commercial loan, a bank will look at all of these factors with the
primary emphasis being the cash flow of the borrower. A typical measurement of
repayment ability is the debt service coverage ratio. A credit analyst at a bank will

36
measure the cash generated by a business (before interest expense and excluding
depreciation and any other non-cash or extraordinary expenses). The debt service
coverage ratio divides this cash flow amount by the debt service (both principal and
interest payments on all loans) that will be required to be met. Bankers like to see
debt service coverage of at least 120 percent. In other words, the debt service
coverage ratio should be 1.2 or higher to show that an extra cushion exists and that
the business can afford its debt requirements.

CREDIT CONTROL:
Policies aimed at serving the dual purpose of (1) increasing sales revenue by
extending credit to customers who are deemed a good credit risk, and (2)
minimizing risk of loss from bad debts by restricting or denying credit to customers
who are not a good credit risk. Effectiveness of credit control lies in procedures
employed for judging a prospect's creditworthiness, rather than in procedures used in
extracting the owed money. Also called credit management. People have become
increasingly dependent on credit. Therefore, it's crucial that you understand personal
credit reports and your credit rating (or score). Here we'll explore what a credit score
is, how it is determined, why it is important and, finally, some tips to acquire and
maintain good credit.

What is a Credit Rating?

When you use credit, you are borrowing money that you promise to pay back within
a specified period of time. A credit score is a statistical method to determine the
likelihood of an individual paying back the money he or she has borrowed. The
credit bureaus that issue these scores have different evaluation systems, each based
on different factors. Some may take into consideration only the information
contained in your credit report, which we look at below. The primary factors used to
calculate an individual’s credit score are his or her credit payment history, current
debts, time length of credit history, credit type mix and frequency of applications for
new credit. Because the scoring systems are based on different criteria which are
weighted differently, the three major credit bureaus in the U.S. (Equifax, Transition,
and Experian) may issue differing scores for an individual, even though the scores
are based on the same credit report information.

37
You may hear the term FICO score in reference to your credit score - the terms are
essentially synonymous. FICO is an acronym for the Fair Isaacs Corporation, the
creator of the software used to calculate credit scores.

What about a Credit Rating?

In addition to using credit (FICO) scores, most countries (including the U.S. and
Canada) use a scale of 0-9 to rate your personal credit. On this scale, each number is
preceded by one of two letters: "I" signifies installment credit (like home or auto
financing), and "R" stands for revolving credit (such as a credit card).

Each creditor will issue its own rating for individuals. For example, you may have
an R1 rating with Visa (the highest level of credit rating), but you might
simultaneously have an R5 from MasterCard if you've neglected to pay your
MasterCard bill for many months.
Although the "R" and "I" systems are still in use, the prevailing trend is to move
away from this multiple rating scale toward the single digit FICO score.
Nevertheless, here is how the scale breaks down:

How to manage Credit?

When you borrow money, your lender sends information to a credit bureau which
details, in the form of a credit report, how well you handled your debt. From the
information in the credit report, the bureau determines a credit score based on five
major factors:
 Previous credit performance,
 Current level of indebtedness,
 Time credit has been in use,
 Types of credit available, and
 Pursuit of new credit.

Although all these factors are included in credit score calculations, they are not
given equal weighting. Here is how the weighting breaks down:

38
 Fig 2.8

As you can see by the pie graph, your credit rating is most affected by your
historical propensity for paying off your debt. The factor that can boost your credit
rating the most is having a past that shows you pay off your debts fairly quickly.
Additionally, maintaining low levels of indebtedness (or not keeping huge balances
on your credit cards or other lines of credit), having a long credit history, and
refraining from constantly applying for additional credit will all help your credit
score? Although we would love to explain the exact formula for calculating the
credit score, the Federal Trade Commission has a secretive approach to this formula.

Credit is a Fragile Thing being aware of your credit and your credit score is very
important, especially since you can harm your credit without even being aware of it.
Here's a true story of what can happen:

Paul applied for a travel reward miles card, but never received any response from
the credit card company. Since it was a high-limit travel card, Paul just assumed that
he'd been declined and never thought about it again. More than a year later, Paul
goes to the bank to inquire about a mortgage. The people at the bank pull up Paul's
credit report and find a bad debt from the credit card company. According to the
credit report, the company tried to collect for a year but recently wrote it off as a bad
debt, reporting it as an R9, the worst score you can get. Of course, all this is news to
Paul.

Well, it turns out there was a clerical error, and Paul's apartment suite number was
missing from the address the credit card company had on file. Paul had been
approved for the card but never actually received it, and any subsequent

39
correspondence didn't get through either. So the credit card company still charged
Paul the annual fee, which he didn't pay, because he didn't know the debt existed.
The annual fee collected interest for a year until the credit card company wrote it
off. In the end, after jumping though several fiery hoops, Paul was able to get the
problem rectified, and the card company admitted fault and notified the credit-
reporting agency. The point is, even though it was a small balance due (about $160),
the administration error almost got in the way of Paul getting a mortgage.
Nowadays, since all data goes through computers, incorrect information can easily
get onto your credit report.

Tips to Improve or Maintain a High Credit Score:

 Make loan payments on time and for the correct amount.
 Avoid overextending your credit. Unsolicited credit cards that arrive by mail
may be tempting to use, but they won't help your credit score.
 Never ignore overdue bills. If you encounter any problems repaying your
debt, call your creditor to make repayment arrangements. If you tell them
you are having difficulty, they may be flexible.
 Be aware of what type of credit you have. Credit from financing companies
can negatively affect your score.
 Keep your outstanding debt as low as you can. Continually extending your
credit Close to your limit is viewed poorly.
 Limit your number of credit applications. When your credit report is looked
at, or "Hit," it is viewed as a bad thing. Not all hits are viewed negatively
(such as those for monitoring of accounts, or prescreens), but most are.
 Credit is not built overnight. It's better to provide creditors with a longer
historical
Time frame to review: a longer history of good credit is favored over a shorter
Period of good history.

40
CREDIT POLICIES:-
Credit policies are decided by zonal manager and credit will be given to dealers
based up on track record, history and credit worthiness of the distributors.
It is depends on the management and under control of the credit controller (zonal
Manager and one of the directors).

CREDIT STANDARDS:-
Depends on the credit market position if the position is down. The zonal manager or
Credit controller is looking (i.e., to extend the credit period or limit).
Credit standards are determined based on the economic conditions. If the economy
is in the recession more credit will be extended and if the economy is in boom less
credit will be extended.

CREDIT PERIOD:-
The length of time for which credit is extended to customers.
Credit period = 90 days

CASH DISCOUNT PERIOD:-

A cash period is a reduction in payment offered to customers to induce them to
repay credit obligation within a specified period of time, which will be less than the
normal credit period.
 Cash discount period = 30 days
 Cash discount = 3%
 Credit discount = 40% on MRP

CREDIT LIMIT:-
Credit limit is a maximum amount of credit which the firm will extend at a point of
time.
 Credit limit is depending on the dealers deposit amount.
For example: if he deposit = 500,000
The credit limit = 25, 00,000 will be given.

41
ELIGIBILITY FOR TAKING DEALERSHIP:-
 5 years Bank statement
 2 cheques for security
 1 DD for the dealer deposit amount
 He should have the Tin number ( wholesaler, retailer )
THREE TYPES OF CUSTOMERS:-
1. Builders of contractors-sales: - Company is giving discount depends on the
volume of goods taking by the builders.
2. Institutions-sales: - Up to 6% giving.
3. Ordinary dealers: - Company standards discount.
4. Payment terms 30 days for every sale.

Credit Risk Management

The basic system allows us to look at expected return and particularly expected
losses only, without regard to the variability of the losses over time (the volatility).
A good basic system assumes:
 A well functioning classification (grading) system with preferably around 10
classes. The classification should be based on controllable quantitative and
qualitative factors. Different classes should indicate different probabilities of
default only. The typical probability of default should be estimated for each
class.
 For each customer the estimated loss in case of default should be calculated.
Normally the most important factor in this calculation would be the
estimated value of possible collateral in a default situation.
 These two factors will give a satisfactory basis for the calculation of
expected loss for the total credit portfolio. The expected loss represents a
fairly good guidance for pricing, and for assessing the quality of the total
portfolio. However, it does not give any indication of concentrations of risks
in the portfolio. Are the losses likely to be nicely spread over time, or do we
risk huge losses during a limited period of time (which means high
volatility)?
The advanced system builds on the same basic factors, but should include at
least two additional factors:

42
 The correlation of groups of credits (such as different industries) and also of
individual credits with the total credit portfolio of the enterprise is important
in assessing the volatility of losses. Preferably the correlation with other
activities of the enterprise should also be considered.
 Big individual credit exposures often contribute a lot to the volatility of the
losses of the portfolio, especially if these credits are also somewhat weak.
 The latter approach gives a better basis for internal allocation of equity
capital, for pricing, for calculating the maximum loss that can be expected
and the need for general/unspecific loan loss reserves. Important elements of
Credit Risk Management are illustrated below. The upper three boxes
represent the basic system.

Fig 2.9

43
HISTORY:
The Company is an authorized Dealer of Hyundai Motors India Limited
(HMIL) for sale of its entire range of motor vehicles. It is also authorized to service
& repair of all Hyundai cars and also deals in spare parts of Hyundai cars.

AWARDS:
 Hyundai Verna Won the Technical Strengths and Impressive Design.” 'Car
of the Year' Award at 'Car India (ICOTY) 2018
 Hyundai Verna Won the 'Car of the Year' Award at 'Car India Award at
Tech and Auto Awards 2018
 Hyundai CretaWon the 'Car of the Year' Award at 'Car India Awards of
the Year 2017
 Hyundai EON Won the 'Saloon Car of the Year' Award at 'Bloomberg UTV
Auto Car India 2015'
 Hyundai Elantra Won the 'Car of the Year' Award at 'Car India & Bike India
Awards 2014'
 Hyundai Elantra Won the 'Best Design and Styling' Award at 'Bloomberg
UTV Auto Car India 2014'
 Hyundai Elantra Won the 'Saloon Car of the Year' Award at 'Bloomberg
UTV Auto Car India 2014'
 Hyundai Elantra Won the 'Executive Car of the Year' Award at 'Car India &
Bike India Awards 2014'
 Hyundai Elantra Won the 'Design of the Year' Award at 'Car India & Bike
India Awards 2014'
 Hyundai Elantra Won the 'Car of the Year' Award at 'CNBC TV18
Overdrive Awards 2014'
 Hyundai Elantra Won the 'Executive Sedan of the Year' Award at 'CNBC
TV18 Overdrive Awards 2014'
 Hyundai Elantra won the 'Design of the Year' award at 'NDTV Car & Bike
Awards 2014'
 Hyundai Sonata won the 'Full Size Sedan of the Year' award at 'NDTV Car
& Bike Awards 2014'

44
  Hyundai Elantra won the 'Mid Size Sedan of the Year' award at 'NDTV Car
& Bike Awards 2014'
 Hyundai Elantra won the 'CNB Viewers' Choice Car of the Year' award at
'NDTV Car & Bike Awards 2014'
 Hyundai Elantra won the 'Saloon Car of the year 2012' by BBC Top Gear
Magazine Awards 2012
 Verna gets the 'Sedan Of The Year 2011' Golden Steering Award
 HMIL gets the 'Automotive Company Of the Year 2011' Golden Steering
Award
 Eon gets the 'Entry-Level Hatchback Of The Year' at ET Zigwheels Awards
2011
 HMIL gets the 'Best Car Manufacturer 2012' award by Motor Vikatan
magazine
Awards 2018-2005
Hyundai’s Next Gen VERNA received “Tetchy sedan of the
2018 1-Feb-18
Year” Award by T3 India
Hyundai’s Next Gen VERNA received “Car of the Year 2018”
2018 6-Feb-18
award by Motoring World.
Hyundai’s Next Gen VERNA received “Sedan of the Year
2018 6-Feb-18
2018” award by Motoring World.
Hyundai’s Next Gen VERNA received “Premium Sedan of the
2018 7-Feb-18
Year 2018” award by Times Auto Award-EVO.
Hyundai’s New 2018 ELITE i20 received “Best Global Debut”
2018 7-Feb-18
award by C&B Auto Show Awards 2018.
Hyundai’s Next Gen VERNA received “Car of the Year” Award
2018 13-Feb-18
by Motor beam

Hyundai’s Next Gen VERNA received “Car of the Year” &

2018 16-Feb-18
“Sedan of the Year” Award at BTVI Car India Awards 2017-18

13-Nov- Hyundai’s All New SANTRO received “Best of 2018” Award

2018
18 by Auto X
"Motor beam Awards 2014 Reader's Choice Car of the Year
2015 1-Jan-15
2014 (Elite i20) Premium SUV of the Year (Santa Fe)"

45
 "Fly Wheel Auto Awards 2015 • Hatchback of the Year (Elite
2015 6-Jan-15
i20) • SUV of the Year (Santa Fe)"
"Vikatan Awards 2014 • Car of the Year (Elite i20) • Best
2015 8-Jan-15 Hatchback of the year (Elite i20) • Best Value For Money
(Xcent) • Best Manufacturer of the Year (Hyundai)"
"Bloomberg TV Autocar India Awards • Car of the Year (Elite
2015 9-Jan-15 i20) • Viewer's Choice Awards (Elite i20) • Hatchback of the
Year (Elite i20)"
"NDTV Car & Bike Awards 2015 • Premium Hatchback of the
Year (Elite i20) • CNB Viewers’ Choice Car of the Year (Elite
2015 16-Jan-15
i20) • Design of the Year (Elite i20) • Subcompact Sedan of the
Year (Xcent)"
"7th BBC top Gear India Magazine Awards • Readers’ Choice
Car of the Year (Elite i20) • Hatchback of the Year (Elite i20) •
2015 28-Jan-15
Value Car of the Year (Xcent) • Best Manufacturer of the Year
(Hyundai)"
"ET Zigwheels Awards 2015 • Hatchback of the year (Elite i20)
2015 10-Feb-15 • Car of the Year (Elite i20) • Readers’ Choice Car of the Year
(Elite i20)"
"15th CNBC TV 18 overdrive Awards • Car of the Year (Elite
2015 15-Feb-15
i20) • Premium Hatchback of the Year (Elite i20)"
14-Dec- NDTV cnb Awards – 2016 - Compact SUV of the Year –
2015
15 CRETA
Hyundai i20 wins the ‘Viewers Choice Car of the Year’ award
2010 5-Jan-10
at the CNBC TV18 Overdrive Awards 2010.
Hyundai Motor India Ltd wins the award for ‘Best Customer
2010 5-Jan-10
Service’ at the Auto India Best Brand Survey 2010.
Hyundai i20 wins the ‘Design of the Year’ award at the NDTV
2010 6-Jan-10
Profit Car & Bike Awards 2010.
Hyundai i10 brand ambassador Shahrukh Khan wins the ‘Best
2010 6-Jan-10 Brand Ambassador’ of the year award at the NDTV Profit Car &
Bike Awards 2010

46
 Hyundai i10 wins Small Family Favorite Car award by
2010 13-Jul-10
Carwale.com
Hyundai Motor India Ltd has been awarded the prestigious
2010 23-Jul-10 ‘Corporate Social Responsibility Award’ as the ‘Best
Commercial and Industrial Institution’ for the year 2009-10
HMIL received the 'All India Award for Export Excellence
2008-09' by the Engineering Export Promotion Council (EEPC).
2010 13-Sep-10
HMIL was awarded the Gold Trophy – in the Large Enterprise
category.
Getz awarded ‘Car of the Year 2005” by CNBC – TV 18, Auto
2005 17-Jan-05
Car Auto Awards.
Accent Petrol – was awarded the 'No 1 Entry Midsize Car' by
2005 1-Jan-05
TNS Automotive, India
Accent Cedi – was awarded the 'No 1 Midsize Diesel Car' by
2005 1-Jan-05
TNS Automotive, India

The awards received for “Best in sales” in south region, “Best in finance”, “Top
performer” in 2005 and their technicians being awarded with a Gold Medal for
standing No.1 in the world at World skill Olympics held at Korea-stand testimony to
the recognition that received at the global level.

According to the popular belief, a customer walking into HYUNDAI is treated like
an asset. His/her needs are assessed in the first stage and the customer is educated
subsequently about the product line, service range, allied services, etc., ample
information and time is given to the prospective buyer to make up his/her mind on
which car to buy.

Totally focused customer centric approach, unparalleled service motto, top-end

facilities, bouquet of allied services, solid after sales backup, quality assurance,
unconditional warranty promise and desire to excel through service are some of the
threads which blend in effectively to give birth to the fabric called HYUNDAI.
HYUNDAI’s success is just beginning and more to expect spectacular chapters in
the preamble “Winning Edges”.

47
HYUNDAI branded vehicles are manufactured by Hyundai Motor Company, which
along with Kia comprises the Hyundai KIA Automotive Group. Headquartered
in Seoul, South Korea, Hyundai operates in Ulsan the world's largest
integrated automobile manufacturing facility,[2] which is capable of producing 1.6
million units annually. The company employs about 75,000 people around the
world. Hyundai vehicles are sold in 193 countries through some
6,000 dealerships and showrooms worldwide. In 2012, Hyundai sold over 4.4
million vehicles worldwide. Popular models include the Sonata and Elantra mid-
sized sedans.[13]
The Asan Foundation, established by Chung Ju-yung in 1977 with 50 percent of the
stock of Hyundai Construction, subsidizes medical services in Korea primarily
through the Asan Medical Center and six other hospitals. The foundation has
sponsored conferences on Eastern ethics and funded academic research into
traditional Korean culture. In 1991, it established the annual Filial Piety Award.
By the mid-1990s Hyundai comprised over 60 subsidiary companies and was active in a
diverse range of activities including automobile manufacturing, construction, chemicals,
electronics, financial services, heavy industry and shipbuilding.[4] In the same period it
had total annual revenues of around US$90 billion and over 200,000 employees

Recent Vehicles (2016 and later)

 Hyundai Accent
 Hyundai Azera
 Hyundai Azera Limited
 Hyundai Elantra
 Hyundai Elantra GT
 Hyundai Elantra Limited
 Hyundai Elantra SE
 Hyundai Equus
 Hyundai Genesis AWD
 Hyundai Genesis Coupe
 Hyundai Genesis RWD
 Hyundai Ioniq
 Hyundai Ioniq Blue

48
  Hyundai Ioniq Electric
 Hyundai Ioniq Plug-in Hybrid
 Hyundai Kona AWD
 Hyundai Kona FWD
 Hyundai Santa Fe AWD
 Hyundai Santa Fe FWD
 Hyundai Santa Fe Sport AWD
 Hyundai Santa Fe Sport FWD
 Hyundai Santa Fe Sport Ultimate AWD
 Hyundai Santa Fe Sport Ultimate FWD
 Hyundai Santa Fe Ultimate AWD
 Hyundai Santa Fe Ultimate FWD
 Hyundai Sonata
 Hyundai Sonata Hybrid
 Hyundai Sonata Hybrid SE
 Hyundai Sonata Limited
 Hyundai Sonata Plug-in Hybrid
 Hyundai Sonata SE
 Hyundai Sonata Sport Limited
 Hyundai Tucson AWD
 Hyundai Tucson Eco AWD
 Hyundai Tucson Eco FWD
 Hyundai Tucson FWD
 Hyundai Veloster

Older Vehicles (2015 and before)

 Hyundai Accent (SOHC)
 Hyundai Accent (Sporty)
 Hyundai Accent Blue
 Hyundai Accent/Brio
 Hyundai Elantra Blue
 Hyundai Elantra Coupe
 Hyundai Elantra Hatchback

49
  Hyundai Elantra Touring
 Hyundai Elantra Wagon
 Hyundai Entourage
 Hyundai Excel
 Hyundai Genesis
 Hyundai Genesis R Spec
 Hyundai Genesis R-Spec
 Hyundai J-Car/Elantra
 Hyundai Pony Excel
 Hyundai Precis
 Hyundai Santa Fe 2WD
 Hyundai Santa Fe 4WD
 Hyundai Santa Fe Sport 2WD
 Hyundai Santa Fe Sport 4WD
 Hyundai Santa Fe Ultimate 2WD
 Hyundai Santa Fe Ultimate 4WD
 Hyundai Scoupe
 Hyundai Sonata (Y-3)
 Hyundai Sonata Hybrid Limited
 Hyundai Tiburon
 Hyundai Tiburon (Coupe)
 Hyundai Tucson 2WD
 Hyundai Tucson 4WD
 Hyundai Veracruz 2WD
 Hyundai Veracruz 4WD
 Hyundai XG300
 Hyundai XG350

Six new Hyundai models by 2020

 Hyundai is gearing up to take the competition to the next level in the ever-
growing Indian car market. The company already sells a slew of models in
India, right from the Rs 3.65 lakh Eon hatchback to the Rs 21.3 lakh Tucson
SUV, along with the popular Verna sedan and the Creta SUV. By 2020, the

50
 line-up will include new models, including an EV, and updated versions of
existing cars.
 The first of the new launches will be a small hatchback that is expected to hit
showrooms in the coming months. A Maruti Suzuki Celerio and Tata Tiago
rival, the model will take the place of the Eon in Hyundai's line-up.
 The new hatchback will be built on a modified HA platform that
underpinned the now-discontinued i10 hatchback. Powering the car will be
an updated version of the original Hyundai Santro’s ‘Epsilon’ four-cylinder
petrol engine.
 A manual transmission will be standard, but in a first for Hyundai, the option
of an automated manual transmission (AMT) will also be available. There
are talks that this new model could resurrect the popular Santro name in the
Indian market. Come 2019, Hyundai will start sales of the Kona EV in India.
 The five-seat electric derivative of the Hyundai Kona will be assembled in
India from CKD kits and will be priced at about Rs 25 lakh. It will initially
be sold in 15 cities across India, with Hyundai targeting to sell 50-60 units
per month. The India-bound Kona EV will get a 39.2kWh battery pack and a
300km range.
 Its electric motor churns out 134hp and 395Nm of torque that allows the
Kona to do the 0-100kph sprint in 9.7sec, with a top speed of 155kph. The
EV's styling is similar to that of the standard model but subtle differences
like the absence of exhausts and a closed grille help differentiate it. Also, it
gets minor tweaks on the inside like the addition of a digital dashboard.
 Hyundai will also step into the booming compact SUV market in India in
2019. The carmaker showcased a compact SUV concept called Carlino at the
2016 Auto Expo, but there's been little news of the model since. Sources tell
us that development of this future Ford Ecosport, Tata Nexon and Maruti
Suzuki Vitara Brezza fighter is well underway and this new SUV will create
its own niche in the market just like the Creta. Additionally, this new SUV
will also form the basis for an all-new model from the Kia stable which will
hit the Indian market after the SP Concept-based SUV is launched.
 Higher up the SUV ladder is the Tucson. Hyundai has unveiled the mid-
cycle update for the Tucson internationally and is expected to bring it to
India too. The refreshed Tucson, apart from getting styling tweaks and

51
 feature additions, also gets a new diesel engine with mild-hybrid tech.
However, it remains to be seen whether the Indian market will get this
engine or not. The Tucson takes on the likes of the Jeep Compass and the
Volkswagen Tiguan in the Indian market.
 Hyundai's stylish executive sedan for India, the Elantra is due for an update
too. While the refreshed model is not out yet, one can expect minor styling
tweaks with more features being added. The front and rear bumpers will get
major revisions while the headlights will see LED units with projector beam
setup. At the back, the license plate will move to the rear bumper and the
tail-lamps will feature reworked LED inserts. The Elantra facelift is expected
to hit our shores sometime next year and will take on the likes of the Skoda
Octavia and the Toyota Corolla which is also expected to see an all-new
model along with a badge-engineered sibling sold by Maruti.
 Apart from the above, Hyundai could also bring its flagship Santa Fe
SUV back to the Indian market. The previous generation model met with
moderate success initially but the incoming of the Tucson did hurt sales. The
latest-gen Santa Fe has radical styling with a Kona-like nose and larger
dimensions for more interior room. It also features various high-tech safety
features like automatic emergency braking. If launched in India, the Santa Fe
could take on the likes of the Ford Endeavour, Toyota Fortuner and the
Skoda Kodiaq.
 The company is also testing the Hyundai i30 hathcback in India however
there is no news of the model making it to our shores anytime soon.
 Along with new model launches, Hyundai is also aiming to increase
production capacity by 50,000 units at its Chennai plant, up from 7 lakh units
to 7.5 lakh units per annum.
 The production capacity enhancement and new models are sure to help
India’s second-largest carmaker at a time when chief rival Maruti Suzuki is
growing at a rapid pace, and there's the threat of new competition from Kia
Motors too.

52
HYUNDAI MAN POWER:
Department Own Contract Total
Sales 57 0 57
Service 126 49 185
Spaces 16 0 16
Finance &
98 0 98
HR/Administration
Total 296 49 345
Table 3.1

RECRUITMENT PROCESS AT HYUNDAI:

The recruitment process involves both internal and external methods.
Internal methods namely are employee referrals, promotions, intercompany
transfers.

PROMOTIONS:
Posts falling vacant due to be filled will be notified within the division/office, giving
educational qualifications and experience laid down for the post and the extent to
which these will be relaxed for promotion and inviting applications from eligible
employees in lower group, who have rendered the requisite qualifying service and
who have requisite higher post.
External methods of recruitment followed by the organization are employment
exchange, paper advertisements and campus recruitment.

EMPLOYMENT EXCHANGE:
All vacancies are to be notified to the Local Employment Exchange. If employment
exchanges are unable to sponsor the suitable candidates within the prescribed time
limits, the vacancies may be advertised in the press on a local/regional
advertisement the vacancies may be advertised on India Basis. A minimum of two
weeks’ notice is too given to the Local Employment Exchange for sponsoring
suitable candidates.

53
PAPER ADVERTISEMENTS:
Of the external methods this method is mostly adopted by the organization. This
method of recruitment involves advertising the requirements of personnel in two of
the leading newspapers one being in English language and other being in regional
language. For recruitments in Hyderabad, Eenadu and Deccan Chronicle are the two
leading newspapers that the requirement of personnel is advertised.

SELECTION PROCESS AT HYUNDAI:

After the recruitment process next step is the selection process in employing a
suitable candidate into the organization. At Hindustan Aeronautics Limited the
selection process mainly includes test/interviews. If a candidate passes through the
different rounds of interviews/test then he is employed into the organization. The
Personnel Department of each division or the corporate office will screen the
applications received and categorize them to those that satisfy prescribed minimum
educational qualification and experience and those do not.

PERSONAL MANAGER INTERVIEW:

This is the first round of interview for the candidate. The Personal manager checks
the knowledge of the candidate in the applied field along with his positive attitude,
communication skills and so on. On personal dissatisfaction the manager can call the
candidate for another round of interview. He prepares an evaluation report on the
candidates' performance in the interview.

BOARD DIRECTORS INTERVIEW:

After the personal manager interview, the next in line is the Board Directors
Interview. There are 4 directors who take the seat of interviewer. Questions about
family background, health details, academic performance and activities, likes and
dislikes, attitudes and capabilities etc. Are all questioned. The interview conducted
by the Board directors can take any shape from stress interview to formal or
informal interview depending on the kind of department they are being recruited for.
All the directors prepare an evaluation report individually on the candidate’s
performance in relation to personality, intelligence, attitudes, skills and knowledge
and soon...

54
VERIFICATION OF DATE OF BIRTH, CHARACTER AND
ANTECEDENTS
The secondary school certificate is the accepted document required for verification
of date of birth. However, if this document is not available, the candidate should
produce a RESUME. In that he/she mention all study details of them.

APPOINTMENT OF SELECTED CANIDIDATES

Candidates who are selected for appointment to post will be issued with a letter
proposing to offer the post or offering the post. If they accept appointment offer they
are to be reply in the form.

SALES TEAM PERFORMANCE BONUS POINTS:

Universal Factors Sub-Factors No. of Points Total points

Job Knowledge &

Product Information 100
Judgment

Communication Skills 75

GDMS Up gradation 100 350

Accessories Selling Skills 25

Finance Dealing Skills 50

Sales Personality Presentation Skills 50

Confidence Level 50

Voice & Body Culture 100 300

Appearance 50
Selling Skills 50

Code Of Conduct Time Management 50

Obeying Orders 100

Alertness 75 350
Company Dress 50

Attendance Record 75

Table 3.2

55
Hyundai Motor India Limited (HMIL) is a wholly owned subsidiary of Hyundai
Motor Company (HMC), South Korea and is the largest passenger car exporter and
the second largest car manufacturer in India. HMIL presently markets 6 models of
passenger cars across segments. The A2 segment includes the Santro, i10 and the
i20, the A3 segment includes the Accent and the Verna, the A5 segment includes the
Sonata Transform and the SUV segment includes the Santa Fe.

HMIL’s fully integrated state-of-the-art manufacturing plant near Chennai boasts of

the most advanced production, quality and testing capabilities in the country. To
cater to rising demand, HMIL commissioned its second plant in February 2008,
which produces an additional 300,000 units per annum, raising HMIL’s total
production capacity to 600,000 units per annum.
In continuation with its commitment to providing Indian customers with cutting-
edge global technology, HMIL has set up a modern multi-million dollar research
and development facility in the cyber city of Hyderabad. It aims to become a centre
of excellence for automobile engineering and ensure quick turnaround time to
changing consumer needs.

As HMC’s global export hub for compact cars, HMIL is the first automotive
company in India to achieve the export of 10 lakh cars in just over a decade. HMIL
currently exports cars to more than 110 countries across EU, Africa, Middle East,
Latin America, Asia and Australia. It has been the number one exporter of passenger
car of the country for the sixth year in a row.
To support its growth and expansion plans, HMIL currently has a 316 strong dealer
network and 640 strong service points across India, which will see further expansion
in 2010.

Mr. Han Woo Park joined Hyundai Motor Company in Seoul, South Korea, in 1982
in the finance department and ever since he has been involved with costing, auditing
and the financial operation of the company.

He joined Hyundai Motor India Limited in 2003 as the Chief Financial Officer and
since then he has played a pivotal role in HMIL as he was involved in all aspects of
the company in his capacity as a CFO.

56
Mr. Park has a vast experience and understanding of Hyundai Motor India Ltd and
the Indian culture and has successfully led his team for the last seven years. Mr.
Park holds a degree in Business Administration from the University Of Dankookin
Seoul South Korea.
Prior to his becoming the Managing Director of HMIL he held the position of CFO
and Senior Executive Director. Mr. Park lives in Chennai with his wife. He has two
children, a son and a daughter. The son is studying at University of Texas, Austin
and the daughter is studying at SUNY Buffalo. Mr. Park was born in South Korea
on January 29, 1958.

Hyundai Motor India Engineering (HMIE) is a fully owned subsidiary of Hyundai

Motor Company, South Korea, which has set up the R&D Centre in Hyderabad.
HMIE is a centre with one of the most advanced research and development facilities
which focuses on state of the art product and design engineering and rigorous
quality enhancement. The new R&D Centre at Hyderabad in India is Hyundai Motor
Company’s fourth over as R&D center.

Set up with an investment of Rs.184crores, the new 200,000 square-foot facility

R&D Centre is aimed at further accelerating local content development and enable
Hyundai to respond even more quickly to changing customer needs across the
world. The R&D Centre will further facilitate the development of India as
Hyundai’s global hub for manufacturing and engineering of small cars. The new
R&D Centre in Hyderabad will support all back-end operations like computer aided
engineering (CAE), computer aided design (CAD) and help the R & D work taking
place across Hyundai’s car line-up. The R&D Centre will help in developing
vehicles which includes their styling, design engineering and vehicle test &
evaluation. The R&D Centre will play a pivotal role for cars manufactured in India
in order to satisfy the specific needs of the Indian customers.

Hyundai Motor Company’s other overseas R&D centers are located in the United
States, Germany, Japan & Korea.

57
Management Philosophy With the spirit of creative challenge, we will strive to
create a more affluent lifestyle for humanity, and contribute to the harmony and co-
prosperity with shareholders, customers, employees and other stakeholders in the
automobile industry. The spirit of creative challenge has been a driving force in
leading HMC to where it is today. It is the permanent key factor for HMC to
actively respond to change in the management system and seek creative and self–
innovative system. With the spirit of creative challenge, we create profits, the
primary objective of a private enterprise. Furthermore, we take responsibility for the
environment and society we belong to, and offer sustainable mobility in order to
implement our corporate philosophy and provide benefits to all stakeholders
including shareholders, customers, executives, employees, suppliers, and
communities.

Vision we announced "Innovation for Customers" as our mid–to long–term vision

with five core strategies: global orientation, respect for human values, customer
satisfaction, technology innovation, and cultural creation. We desire to create an
automobile culture of putting customer first via developing human–centered and
environment–friendly technological Innovation.

Fig 3.1

58
Management Policy Based on a respect for human dignity, we make efforts to meet
the expectations of all stakeholders including customers and business partners by
building a constructive relationship amongst management, labor, executives and
employees. Also, we focus on communicating our corporate values both internally
and externally, and gaining confidence from all stake holders.

Fig 3.2

Mid-and Long-term Strategies we developed five mid–and long–term strategies:

global management, higher brand values, business innovation, environmental
management, and strengthening product competitiveness. Especially, we selected
environmental management

As one of our strategies to meet the needs of our stakeholders and the society we
belong to. We also intend to promote sustainability development and preservation of
the environment.

59
MOST LIKED SMALL CAR IS SANTROXING

Fig 3.3

Table 3.3

60
Table 3.4

61
NEW ARRIVALS:

HYUNDAI VERNA 2018

HYUNDAI CRETA 2017

62
63
  EON

 SANTRO XING

 I10

64
  I20

 ACCENT

 FLUIDIC VERNA

65
 HYUNDAI REVENUE COST
TABLE-I (2017-2018)
Cost estimated Actual for the
Variance
SL.NO PARTICULARS for the 2017-18 year 2017-18
(Rs in Crores)
(Rs in Crores) (Rs in Crores)
1 Sales

Fixed (Finished goods) 22548.69 21727.05 821.64

Variable (Spare parts) 3177.84 3054.54 123.3

Fuel price adjustment 159.68 154.51 5.17

Own Consumption 20.25 12.28 9.97

Total of 1 25866.46 24926.38 940.08

2 Average incentives 2789.65 2657.84 151.81

3 Other income 450.25 446.38 3.87

GRAND TOTAL
29126.36 28030.6 1275.76
(1+2+3)

Table 4.1
INTERPRETATION
 The data pertaining to the generation and consumption have been obtained
from the year 2017-18 and represented in table -1. The aspect included is
total generation in (Crores Rs) and utilization for auxiliary consumption
respectively.
 During the year 2017-18 the sales, fixed costs, variable cost, own
Consumption was decreased when compared to the estimated cost, so sales
consumption is 12.28 crores respectively.
 During the year 2017-18 the average incentive are 2657.84and the other
Incomes are 446.38 crores respectively.
 Finally with regarded to the result in revenue cost of HYUNDAI.
28030.6 Crores in the year 2017-18 respectively.

66
 HYUNDAI REVENUE COST
TABLE-II (2016-17)
Cost estimated for Actual for the
Variance
SL.NO PARTICULARS the 2016-17 year 2016-17
(Rs in Crores)
(Rs in Crores) (Rs in Crores)

1 Sales

Fixed (Finished goods) 21524.32 20446.16 878.16

Variable (Spare parts) 3531.4 3021.95 509.45

Fuel price adjustment 239.71 149.18 130.53

Own Consumption 23.54 13.91 13.63

Total of 1 25138.97 23609.2 1709.77

2 Average incentives 2837.31 2516.56 320.75

3 Other income 487.56 398.38 89.18

GRAND TOTAL
28443.84 26524.16 1919.7
(1+2+3)

Table 4.2
INTERPRETATION
 The data pertaining to the generation and consumption have been obtained
from the year 2016-17 and represented in table -1. The aspect included is
total generation in (Crores Rs) and utilization for auxiliary consumption
respectively.
 During the year 2016-17 the sales, fixed costs, variable cost, own
Consumption was decreased when compared to the estimated cost, so sales
consumption is 13.91 Crores respectively.
 During the year 2016-17 the average intensive are 2516.56 and the other
Incomes are 398.38 Crores respectively.
 Finally with regard to the result in revenue cost of HYUNDAI.
26524.16 crores in the year 2016-17 respectively.

67
 HYUNDAI REVENUE COST
TABLE-III (2015-16)
Cost estimated for Actual for the
Variance(Rs
SL.NO PARTICULARS the 2015-16(Rs in year 2015-16(Rs
in crores)
crores) in crores)

1 Sales

Fixed (Finished goods) 20987.34 20032.81 954.53

Variable (Spare parts) 3854.24 3467.74 386.5

Fuel price adjustment 40.24 33.43 6.81

Own Consumption 62.21 52.82 9.39

Total of 1 24944.03 23586.8 1557.23

2 Average incentives 5216.36 4546.5 667.86

3 Other income 425.67 347.46 78.21

GRAND TOTAL
30584.06 28480.76 2123.3
(1+2+3)

Table 4.3
INTERPRETATION
 The data pertaining to the generation and consumption have been obtained
from the year 2015-16 and represented in table -1. The aspect included is
total generation in (Crores Rs) and utilization for auxiliary consumption
respectively.
 During the year 2015-16 the sales, fixed costs, variable cost, own
Consumption was decreased when compared to the estimated cost, so sales
consumption is 23586.8 Crores respectively.
 During the year 2015-16 the average incentives are 45.46 % and the other
Incomes are 347.46 Crores respectively. Finally with regard to the result in
revenue cost of HYUNDAI MOTOCORP PVT 284.80 % in the year 2015-
16 respectively.

68
 HYUNDAI REVENUE COST
TABLE-IV (2014-15)
Cost estimated for Actual for the
Variance
SL.NO PARTICULARS the 2014-15 year 2014-15
(Rs in crores)
(Rs in crores) (Rs in crores)

1 Sales

Fixed (Finished goods) 18167.25 16796.9 1550.35

Variable (Spare parts) 2845.16 2500.51 344.63

Fuel price adjustment 35.61 28.2 7.41

Own Consumption 59.67 41.36 18.31

Total of 1 21287.67 19366.97 1720.7

2 Average incentives 4858.17 4527.23 330.94

3 Other income 317.51 238.27 79.24

GRAND TOTAL
26263.35 24152.47 2150.88
(1+2+3)

Table 4.4
INTERPRETATION
 The data pertaining to the generation and consumption have been obtained
from the year 2014-15 and represented in table -2. The aspect included is
total generation in (Crores Rs) and utilization for auxiliary consumption
respectively.
 During the year 2014-15 the sales, fixed costs, variable cost, own
Consumption was decreased when compared to the estimated cost, so sales
consumption is 19366.97 Crores respectively.
 During the year 2014-15 the average incentives are 45.27.23 Crores and the
other Incomes are238.27 Crores respectively.
 Finally with regard to the result in revenue cost of HYUNDAI.
Decreased 24152.47 Crores in the year 2014-15 respectively.

69
 HYUNDAI REVENUE COST
TABLE-V (2013-14)
Cost estimated Actual for the
Variance
SL.NO PARTICULARS for the 2013-14 year 2013-14
(Rs in crores)
(Rs in crores) (Rs in crores)

1 Sales

Fixed (Finished goods) 16583.67 15084.39 1699.28

Variable (Spar parts) 3025.31 2713.57 315.74

Fuel price adjustment 19.67 13.16 8.53

Own Consumption 42.25 32.48 9.77

Total of 1 17670.9 17839.58 1831.32

2 Average incentives 4145.81 3647.23 478.58

3 Other income 408.51 290.69 137.82

GRAND TOTAL (1+2+3) 22205.22 19777.5 2427.72

Table 4.5
INTERPRETATION
 The data pertaining to the generation and consumption have been obtained
from the year 2013-14 and represented in table -3. The aspect included is
total generation in (Crores Rs) and utilization for auxiliary consumption
respectively.
 During the year 2013-14 the sales, fixed costs, variable cost, own
Consumption was decreased when compared to the estimated cost, so sales
consumption is 17839.58 Crores respectively.
 During the year 2013-14 the average incentives are decreased 3647.23
Crores and the other Incomes are 290.69 Crores respectively.
 Finally with regard to the result in revenue cost of HYUNDAI.
Decreased 19777.5 Crores in the year 2013-14 respectively.

70
 HYUNDAI INDUSTRIES LIMITED
Operational Expenditure Cost for the Year 2016-17
TABLE – I
Cost estimated for Actual for the Variance
SL.NO PARTICULARS the 2017-18 year 2017-18 ( Rs in Crores)
( Rs in Crores) ( Rs in Crores)

AMOUNT AMOUNT AMOUNT

1 VARIABLE COST 3177.84 3054.54 123.3

OPERATIVE
2 295.68 254.85 40.83
MAINTENANCE COST

3 FINANCE CHARGES

Deprecation 1400 1307.37 92.63

Interest on fixed capital 252.31 220.79 31.52

Total of -3 1652.31 1528.16 144.17

GRAND TOTAL
4905.83 4637.55 268.28
(1+2+3)

Table 4.6
INTERPRETATION
 Observed from the above table that the operational expenditure cost of
HYUNDAI in the year 2017-18. Maintenance, employee cost, stationary &
general expenses, rebate and share of other expenses is all are fluctuating
with the expenses of the year 2017-18. However the total operating
maintenance costs are 25.48 % decreasing respectively.
 In finance charges depreciation and interest on fixed capital, has been
included
 The total finance charges recording decreasing of 15.28 % in the year 2017-
18 respectively. The overall costs results of HYUNDAI are earning more
profits.

71
 HYUNDAI INDUSTRIES LIMITED
Operational Expenditure Cost for the Year 2016-17
TABLE – II
Cost estimated for Actual for the
Variance
SL.NO PARTICULARS the 2016-17 year 2016-17
( Rs in Crores)
( Rs in Crores) (Rs in Crores)

AMOUNT AMOUNT AMOUNT

1 VARIABLE COST 3531.4 3021.95 509.45

OPERATIVE
2 282.59 235.32 47.27
MAINTENANCE COST

3 FINANCE CHARGES 0

Deprecation 1452.36 1361.75 130.61

Interest on fixed capital 252.31 203.62 48.69

Total of -3 1704.67 1545.37 179.3

GRAND TOTAL (1+2+3) 5318.66 4602.64 716.02

Table 4.7
INTERPRETATION
 Observed from the above table that the operational expenditure cost of
HYUNDAI MOTOCORP PVT the year 2016-17. Maintenance, employee
cost, stationary & general expenses, rebate and share of other expenses is all
are fluctuating with the expenses of the year 2016-17. However the total
operating maintenance costs are 2.35 % decreasing respectively.
 In finance charges depreciation and interest on fixed capital, has been
included. The total finance charges recording decreasing of 15.45 % in the
year 2016-17 respectively. The overall costs results of HYUNDAI earning
more profits.

72
 HYUNDAI INDUSTRIES LIMITED
Operational Expenditure Cost for the Year 2015-16
TABLE – III
Cost estimated Actual for the
Variance
SL.NO PARTICULARS for the 2015-16 year 2015-16
( Rs in Crores)
( Rs in Crores) ( Rs in Crores)

AMOUNT AMOUNT AMOUNT

1 VARIABLE COST 3547.54 3467.74 79.8

OPERATIVE
2 MAINTENANCE 216.57 193.95 20.62
COST

3 FINANCE CHARGES 0

Deprecation 1367.58 1297.34 50.24

Interest on fixed capital 165.24 165.77 19.47

Total of -3 1514.82 1443.13 69.71

GRAND TOTAL
5074.93 4904.8 170.15
(1+2+3)

Table 4.8
INTERPRETATION
 Observed from the above table that the operational expenditure cost of
HYUNDAI in the year 2015-16. Maintenance, employee cost, stationary &
general expenses, rebate and share of other expenses is all are fluctuating
with the expenses of the year 2015-16. However the total operating
maintenance costs are 1.93 % decreasing respectively.
 In finance charges depreciation and interest on fixed capital, has been
included the total finance charges recording decreasing of 14.43% in the year
2015-16 respectively. The overall costs results of HYUNDAI earning more
profits.

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 HYUNDAI INDUSTRIES LIMITED
Operational Expenditure Cost for the Year 2014-15
TABLE – IV
Cost estimated Actual for the
Variance
SL.NO PARTICULARS for the 2014-15 year 2014-15
( Rs in Crores)
( Rs in Crores) ( Rs in Crores)

AMOUNT AMOUNT AMOUNT

1 VARIABLE COST 2816.51 2500.51 316

OPERATIVE
2 MAINTENANCE 157.54 145.16 12.38
COST

3 FINANCE CHARGES

Deprecation 521.27 402.38 118.89

Interest on fixed capital 387.54 340.16 47.38

Total of -3 908.81 742.52 166.29

GRAND TOTAL
3860.86 3368.17 492.69
(1+2+3)

Table 4.9
INTERPRETATION
 Observed from the above table that the operational expenditure cost of
HYUNDAI the year 2014-15. Maintenance, employee cost, stationary &
general expenses, rebate and share of other expenses is all are fluctuating
with the expenses of the year 2014-15. However the total operating
maintenance costs are 1.45 % decreasing respectively.
 In finance charges depreciation and interest on fixed capital, has been
included the overall costs results of HYUNDAI earning more profits.

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 HYUNDAI INDUSTRIES LIMITED
Operational Expenditure Cost for the Year 2013-14
TABLE – V
Cost estimated Actual for the
Variance
SL.NO PARTICULARS for the 2013-14 year 2013-14
( Rs in Crores)
( Rs in Crores) ( Rs in Crores)

AMOUNT AMOUNT AMOUNT

1 VARIABLE COST 2954.21 2713.57 242.64

OPERATIVE
2 65.34 48.16 17.2
MAINTENANCE COST

3 FINANCE CHARGES 0

Deprecation 245.51 191.47 54.04

Interest on fixed capital 451.27 371 80.27

Total of -3 696.78 562.47 154.31

GRAND TOTAL (1+2+3) 3716.33 3322.18 394.17

Table 4.10
INTERPRETATION
 Observed from the above table that the operational expenditure cost of
HYUNDAI the year 2013-14. Maintenance, employee cost, stationary &
general expenses, rebate and share of other expenses is all are fluctuating
with the expenses of the year 2013-14. However the total operating
maintenance costs are 4.81% decreasing respectively.
 The total finance charges recording decreasing of 5.62% in the year 2013-14
respectively.
The overall costs results of HYUNDAI earning more profits.

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 BALANCE SHEET OF HYUNDAI FROM 2014 – 2018
As at As at As at As at As at
March 31, March 31, March 31, March 31, March 31,
Particulars
2018 (Amt. 2017 (Amt. 2016 (Amt. 2015 (Amt. 2014 (Amt.
In Crores) In Crores) In Crores) In Crores) In Crores)
ASSETS
Non-current assets
(a) Property, plant
4,495.03 3654.64 2,667.30 2,818.29 2,236.65
and equipment
(b) Capital work-in-
386.5 325.23 309.99 289.78 176.65
progress
(c) Intangible assets 103.82 129.07 101.42 94.4 76.68
(d) Intangible assets
194.46 328.14 404.08 0 223.54
under development
(e) Financial assets
(I) Investments 1,522.31 1029.51 913.4 889.5 784.85
(ii) Loans 23.13 26.7 30.09 29.2 23.67
(iii) Other Financial
25.39 23.38 18.57 20 19.62
Assets
(f) Deferred tax
- - 90.01 0 0
assets (net)
(g) Income Tax assets
332.5 227.72 85.19 90 72.66
(net)
(h) Other non-
658.35 848.09 699.99 566.52 425.68
current assets
Total Non - Current
7,741.49 6592.48 5,320.04 4,797.69 4,040.00
Assets
Current assets
(a) Inventories 708.58 761.99 861.39 635.12 485.24
(ii) Trade receivables 1,551.75 1282.07 1,371.82 1,635.25 1,235.97
(iii) Cash and cash
74.06 74.68 127.22 124.23 112.98
equivalents
(iv) Bank balances 121.33 104.41 88.56 75.69 56.72

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other than (iii) above
(v) Loans 21.73 23.21 23.86 20.31 17.65
(vi) Other Financial
25.17 23.31 15.59 18.32 16.98
Assets
(c) Other current
523.83 562.09 582.23 625.12 526.32
assets
Total Current Assets 7,570.51 6303.33 5,548.30 5,390.88 4,816.14
Total Assets 12895.8 10868.3 8,856.14
EQUITY AND
LIABILITIES
Equity
(a) Equity Share
39.94 39.94 39.94 39.94 39.94
capital
(b) Other equity 8794.17 7,335.62 7,253.12 6,520.14
Total equity 8834.11 7,375.56 7,293.06 6,560.08
Non-controlling
67.38 54.63 45.59 57.25 53.63
interests
LIABILITIES
Non-current
liabilities
(a) Financial
liabilities
(I) Borrowings 207.9 145.98 12 53.21 46.13
(b) Provisions 75.62 67.8 45.55 39.79 25.17
(c) Deferred tax
468.9 221.77 - - -
liabilities (net)
Total Non - Current
752.42 435.55 57.55 93 71.3
Liabilities
Current liabilities
(a) Financial
liabilities
(I) Borrowings 40.08 84.06 38.76 35.74 25
(ii) Trade payables 3,266.20 2675.34 2,600.31 2,095.09 1,689.12

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(iii) Other financial
371.21 276.02 254.77 222.31 210.23
liabilities
(b) Other current
456.63 506.3 474.8 369.12 229.14
liabilities
(c) Provisions 42.57 29.8 21 23 17.64
Total Current
4,176.69 3571.52 3,389.64 2,745.26 2,171.13
Liabilities
Total Equity and
15312 12895.8 10868.3 8,856.14
Liabilities

78
FINDINGS
 The year 2017-18 the average incentives are 26.57 % the other Income 4.46
% respectively.
 The year 2016-17 the average incentives are 25.16 % the other Income 3.98
% respectively.
 The year 2015-16 the average incentives are 44.46 % the other Income 3.47
% respectively.
 The year 2014-15 the average incentives are 45.27 % the other Income 2.38
% respectively.
 The year 2013-14 the average incentives are 36.47 % the other Income 2.90
% respectively.
 The year 2017-18. However the total operating maintenance costs are 2.54%
decreasing respectively.
 The year 2016-17. However the total operating maintenance costs are 2.35%
decreasing respectively.
 The year 2015-16. However the total operating maintenance costs are 1.93%
decreasing respectively
 The year 2014-15. However the total operating maintenance costs are 1.45%
decreasing respectively.
 The year 2013-14. However the total operating maintenance costs are 4.81%
decreasing respectively.

79
SUGGESTIONS
 The management has to increase credit period to 100 days. So that company can
earn profits.
 The management can offer more incentives for prompt payment of credit. So
that receivables are paid promptly by dealers.
 Management can be little bit liberal in credit policies so that more profits are
achieved.
 Relaxing credit standards will enable to increases the customers.

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CONCLUSION
Although a relatively young discipline, credit risk management has matured rapidly.
Improved risk measurement and reporting techniques paired with comprehensive
credit risk policies can provide extremely effective protection against credit risk
losses. The best risk management techniques are operational and legal, with
collateral providing the best financial risk mitigation. Credit insurance and credit
default swaps offer financial protection against default, but each at its own cost—
which must be compared to the benefits of reducing the specific risk it is intended to
mitigate. In view of these limitations, we believe that an alternative approach is now
needed which should have two components. First we believe that the regulatory
capital regime should seek directly to assess the extent to which a firm's earnings are
vulnerable to stress losses of any type - a measure we refer to as regulatory equity at
risk - and should then establish a capital requirement which is sufficient to provide a
high level of assurance that the firm could survive such a stress event and still
remain solvent during a workout period. Secondly we argue that there needs to be
much more explicit regulatory oversight of the liquidity management arrangements
in place at the firm, since effective liquidity management arrangements rather than
capital provides the primary protection against any stress events affecting the firm.

81