A Study on the Adequacy and Efficacy of Working Capital in Automobile Industry in India

Indian automobile industry has come a long way from the era of the Ambassador car to Tata Manza. The industry is highly competitive with a number of global and Indian companies present today. It has been growing at a rate of around 18% per annum for the last five years. India is projected to be the third largest auto industry by 2030 after the US and China. The study attempts to examine the efficacy and adequacy of working capital in the Indian automobile sector for five years by analyzing the annual reports of the companies for financial year 2004 to 2008. The companies, viz., Tata Motors, Hero Honda, TVS, Maruti Udyog and Bajaj Auto Ltd., were randomly chosen. The major observation is that almost all the selected companies are working with negative working capital and adopting aggressive approach towards working capital management, except for Maruti Udyog and TVS that are found to be conservative in their approach and striking a right balance between liquidity and profitability aspect. The industry has faced the brunt of recession during 2003-2007 as indicated by the sales figure of these companies, but since 2009 the industry has been upbeat again, recording the highest ever sales in the financial year 2009-10.