Someone has rightly said that practical knowledge is far better than classroom
teaching. During this project I fully realized this and I came to know that
financial analysis is very necessary for each and every company for analysing
the records of financial condition.
The subject of my study is Financial Analysis of Mahindra & Mahindra Pvt.
Ltd., which has slowly but steadily evolved from a beginner to a corporate giant
earning laurels and kudos throughout.
The report contains first of all brief introduction about the company. Finally
there comes data presentation and analysis in the end of my project report. I also
put forward some of my suggestion hoping that they will help Mahindra &
Mahindra Pvt. Ltd. Move a step forward to being the very best.
ACKNOWLEDGEMENT
Farheen Anjum
MBA 2nd Year
Roll No.1643870027
DECLARATION
Signature
Farheen Anjum
MBA 2nd Year
Roll No.1643870027
TABLE OF CONTENT
AUTOMOBILE INDUSTRY
The Indian auto industry is one of the largest in the world. The industry
accounts for 7.1 per cent of the country's Gross Domestic Product (GDP).
The Two Wheelers segment with 81 per cent market share is the leader of
the Indian Automobile market owing to a growing middle class and a young
population. Moreover, the growing interest of the companies in exploring
the rural markets further aided the growth of the sector. The overall
Passenger Vehicle (PV) segment has 13 per cent market share.
India is also a prominent auto exporter and has strong export growth
expectations for the near future. In April-March 2016, overall automobile
exports grew by 1.91 per cent. PV, Commercial Vehicles (CV), and Two
Wheelers (2W) registered a growth of 5.24 per cent, 16.97 per cent, and
0.97 per cent respectively in April-March 2016 over April-March 2015.* In
addition, several initiatives by the Government of India and the major
automobile players in the Indian market are expected to make India a
leader in the 2W and Four Wheeler (4W) market in the world by 2020.
Market Size
The industry produced a total 14.25 million vehicles including PVs,
commercial vehicles (CVs), three wheelers (3W) and 2W in April–October
2015, as against 13.83 in April–October 2014, registering a marginal
growth of 3.07 per cent, year-to-year.
The sales of PVs grew by 8.51 per cent in April–October 2015 over the
same period in the previous year. The overall CVs segment registered a
growth of 8.02 per cent in April–October 2015 as compared to same period
last year. Medium and Heavy Commercial Vehicles (M&HCVs) registered
very strong growth of 32.3 per cent while sales of Light Commercial
Vehicles (LCVs) declined by 5.24 per cent during April–October 2015, year-
to-year.
In April–October 2015, overall automobile exports grew by 5.78 per cent.
PVs, CVs, 3Ws and 2Ws registered growth of 6.34 per cent, 17.95 per cent,
18.59 per cent and 3.22 per cent, respectively, in April–October 2015 over
April–October 2014.
Investments
In order to keep up with the growing demand, several auto makers have
started investing heavily in various segments of the industry during the last
few months. The industry has attracted foreign direct investment (FDI)
worth US$13.48 billion during the period April 2000 to June 2015,
according to data released by Department of Industrial Policy and
Promotion (DIPP).
Some of the major investments and developments in the automobile sector
in India are as follows:
Background
Mahindra & Mahindra Limited (M&M), the flagship company of the US$ 3
billion Mahindra Group, was set up in 1945 to make general-purpose utility
vehicles for the Indian market. It soon branched out into manufacturing
agricultural tractors and LCV and later expanded its operations from
automobiles and tractors to other sectors. The company has recently
started a new division, Mahindra Systems and Automotive Technologies
(MSAT) in order to focus on developing components and to offer
engineering services.
M&M has two main operating divisions – Automotive division and Farm
Equipment division.The company entered into collaboration with Willys
Overland Corporation (now part of the Daimler Chrysler group) to import
and assemble the Willys Jeep for the Indian market.Thereafter, in 1965 the
company started producing LCV. It went on to develop its manufacturing
technology to indigenously produce vehicles within a short time of signing
the collaboration agreement with Willys.Today, the Automotive Division of
M&M manufactures and markets MUV, LCV and three-wheelers.
In 2005, the company entered into a joint venture with Renault of France
for the manufacture of a mid-sized sedan, Logan, a newly developed vehicle
that meets all the European regulations for emissions and safety.The Logan
is expected to be launched in the Indian market in 2007. M&M has also
launched a joint venture with International Truck & Engine Corporation,
one of the leading commercial vehicle producers in the USA, for
manufacture of trucks and buses in India.
The Farm Equipment division was established in 1963 in the form of a
joint venture with International Harvester Inc., and Voltas Limited, and
christened as the International Tractor Company of India (ITCI). In 1977,
ITCI merged with M&M and became its Tractor Division. After M&M's
organisational restructuring in 1994, this division was re-christened the
Farm Equipment Sector Division.Today M&M is the largest manufacturer of
tractors in India. It designs, develops, manufactures and markets tractors
as well as implements which are used in conjunction with tractors.
The promoters of the company along with persons acting in concert hold
22.97% of the Company’s shares. The total foreign investment in equity
constitutes 46.91%, the largest contributor being FIIs with 34.45%
(excluding Aranda Investments Mauritius Pte. Ltd, as it is included in
persons acting in concert). Domestic Financial Institutions including
insurance companies hold 15.26% of the equity with the remaining being
held by public and other corporate bodies.
We Have Always Been
global
Since our beginning in 1945, we've been connected with the world through
partnerships, growing presence in multiple geographies, a diverse and
multinational workforce, and the boundless ambition to integrate ourselves
with global communities.
Asia
With our roots firmly planted in India, we began reaching out to the farthest
corners of the Asian continent early with our automotive and farm equipment
products. Today, we finance rural prosperity; build sustainable cities; defend
land, water and air; help families get together on memorable vacations; and
drive prosperity through strategic partnerships with leading Asian and
Australian companies
Europe
Our diverse businesses are playing a key role in supporting Europe's vibrant
economy. We have recently deployed our fleet of electric cars in the region and
our subsidiaries, SsangYong Motors and Peugeot MotoCycles, have been a part of
Europe's automotive industries for several decades. Mahindra Racing competes
with Europe's best in the Moto3 and Formula E racing arenas and our IT business
is at the forefront of the digital revolution. From manufacturing a wide range of
high quality parts for European companies including Volvo, Land Rover, Daimler
and Renault, to transforming lives and landscapes in Serbia, Turkey and
Macedonia, we are helping write the next chapters in Europe’s comeback story
Our products are driving positive change in the lives of consumers across the
South America. Take a stroll through the roads of Central and South America
and you might just witness a Mahindra Reva Electric car buzzing past you on
its way to a sustainable future. Visit a dignitary in Guyana and you might
notice our Rakshak armoured vehicles standing guard. In Chile and Brazil, our
tractors tackle the tricky local topography to deliver a whole host of farming
functions and solutions and our Powerol diesel generators ensure
uninterrupted power supply in areas with unreliable electric grids. We also sell
a whole range of diesel vehicles across the continent and provide IT solutions
to South America’s rapidly globalizing economy.
Mahindra’s Leaders
Mahindra’s leaders set the tone and lead the charge in our aspiration to be
one of the world’s 50 most admired global brands by 2021. They direct our
focus on technology and innovation, chart our global expansion, and lay the
markers for our growth.
Our leadership’s ability to manage our operations and finances the world over,
build and groom our global talent pool, and lead our endeavours in new
markets and geographies help us to constantly move forward and offer our
customers only the very best.
In everyday life human being has to face many problems viz. social,
economical, financial problems. These problems in life call for acceptable
and effective solutions and for this purpose, research is required and a
methodology applied for the solutions can be found out.
DATA COLLECTION:
Primary Data:
Secondary Data:
Data was collected from books, magazines, web sites, going through the
records of the organization, etc. It is the data which has been collected by
individual or someone else for the purpose of other than those of our
particular research study. Or in other words we can say that secondary
data is the data used previously for the analysis and the results are
undertaken for the next process.
Secondary data consists of data collected from secondary source such as:
Newspaper
Magazines
Journals
And the sources of unpublished data are many they may be found in diaries
letters scholars” research must be very careful in using secondary data.
Meaning
Research methodology is a careful investigation or inquiry and especially
for search for new fact in any branch of knowledge is called a research
methodology.
The research work is a combined word of two words first is re and second
is Search means to search again and search means to search so the total meaning
means search for the new factor to modify and facts in any branch of
knowledge. The main function of research is to add new knowledge in simple
words research can be defined as critical investigation search for truth factor for
certainty.
Step in Research Process:-
RESEARCH DESIGN
A research design is purely & simply the framework or plan for a study that
guides the collection and analysis of the data. A good research design has the
characteristics problem definition, specific methods of data collection and
analysis time required for research project and estimate of expenses to be
incurred.
1. Exploratory research:-
3. Sampling plan:-
5. Sample size:-
The present project has been completed taking 10 units in Sagar city. The
unit taken completely reflects the total class of people Woking in MUL in
sagar city.
6. Sampling method:-
6. Sampling procedure:-
There is low coast even then the universe is large and is widely spread
geographically.
Questions being used in questionnaires are both open ended and close
ended questions.
SAMPLE DESIGN
LIMITATIONS OF RESEARCH
This is the first in a new AAII Journal series on financial statement analysis.
The goal is to enhance your ability to make a sound judgment about a
company’s financial strength and future prospects by showing you the
benefits of using financial statements in your personal investment
research.
Given the varied financial knowledge of our readers, I will address many
topics that some may find very basic. However, to build a strong
understanding of advanced topics, you need a solid foundation. As we
progress through this series, I expect to touch on more advanced topics
when explaining how I personally use financial statements to analyze a
firm. In this introductory article, I explain the major components of each
financial statement and why they matter in security analysis.
What is 'Financial Analysis?
Financial analysis is the process of evaluating businesses,
projects, budgets and other finance-related entities to determine
their performance and suitability. Typically, financial analysis is
used to analyse whether an entity is stable, solvent, liquid or
profitable enough to warrant a monetary investment. When
looking at a specific company, a financial analyst conducts
analysis by focusing on the income statement, balance
sheet and cash flow statement.
Method
Past Performance - Across historical time periods for the same firm
(the last 5 years for example),
Future Performance - Using historical figures and certain
mathematical and statistical techniques, including present and future
values, This extrapolation method is the main source of errors in
financial analysis as past statistics can be poor predictors of future
prospects.
Comparative Performance - Comparison between similar firms.
These ratios are calculated by dividing a (group of) account balance(s),
taken from the balance sheet and / or the income statement, by another, for
example :
Net income / equity = return on equity (ROE)
Net income / total assets = return on assets (ROA)
Stock price / earnings per share = P/E ratio
Comparing financial ratios is merely one way of conducting
financial analysis. Financial ratios face several theoretical
challenges:
20
18.04 17.83
15
12.92 12.98
10
0
Return on Assets Return on Invested Capital Return on Net Worth
20115-16 2014-2015
2. ACTIVITY/ TURNOVER RATIO
Activity/Turnover Ratio
60
50.3 50.51
50
40
30
20
13.01
10.36
10
1.48 1.332 2.067 1.92
0
Total Asset Turnover Invested Capital Inventory Turnover Working Capital
Ratio Turnover Ratio Ratio Turnover Ratio
2015-16 2014-15
30 28.06
D 25 22.78
20.2
A
20
Y
S 15
10
0
Average Collection Period Day’s Inventory
2015-16 2014-15
3. LIQUIDITY RATIO
Liquidity Ratio
1.2 1.1 1.09
1
0.8 0.77
0.8
0.6
0.4
0.2
0
Current Ratio Acid Test Ratio
2015-16 2014-15
4. SOLVENCY RATIO
Ratio 2015-16 2014-15
Debt Equity Ratio 0.317 1.23
Debt to Total Invested Capital 0.24 0.52
Interest Coverage Ratio 34.86 24.57
Solvency Ratio
40
34.86
35
30
24.57
25
20
15
10
5 1.23
0.317 0.24 0.52
0
Debt Equity Ratio Debt to Total Invested Interest Coverage Ratio
Capital
2015-16 2014-15
54
52
50 48.97
48
46
44
2015-16 2014-15
2015-16 2014-15
2015-15 2015-16
1 0.95
0.8
0.6
0.4
0.2
0
2015-16 2014-15
2015-16 2014-15
6. PROFITABILITY RATIO
PROFITABILITY RATIO
25 23.26
21.09
20
15
12.62
11.69
10 8.15
6.62
0
Gross Profit Ratio Net Profit Ratio Operating Profit Ratio
2015-16 2014-15
Main Revenue Generating Activities
The main revenue generating activities of Mahindra & Mahindra Ltd. are:
Opportunity to Cross-Sale
a) The company’s farm division recorded sales of 236666 tractors against
the 214325 tractors sold in the previous year, recording a growth of
10.4%.
b) The Mahindra Powered Brand, the company achieved a gross revenue of
Rs.1000 crore. This achievement was despite the fact that the telecom
segment DG sales accounting for only 19% of revenues.
Cash flow generated from operating activities helps the firm to maintain its
operating capabilities, repay loans and make new investments without accessing
to external/alternative source of financing.
The cash flows generated from operating activities have increased
approximately by 52% i.e. increased from Rs.2734.95 to Rs.4145.71 due to
following reasons:
Cash receipts from sale of goods and rendering services i.e. sales revenue
increased by Rs.8511.09 from 2011-12 to 2012-13.
Cash payments to and behalf of employees i.e. Employee benefit expense
increased by Rs.164.67 from 2011-12 to 2012-13.
Cash payments to acquire fixed assets worth Rs.1374.69 in 2011-12 and Rs.1435.62
in 2012-13.
Cash receipts from disposal of fixed assets worth Rs.34.27 in2011-12 and Rs.46.32 in
2012-13.
Cash payments to acquire investments both current and non-cuurent worth
Rs.22271.87 in 2011-12 and Rs.41769.42 in 2012-13.
Cash receipts from sale of both current and non-current investments worth
Rs.21207.57 in 2011-12 and Rs.40486.87 in 2012-13.
Interest and dividend received on investments of Rs.270.28 in 2011-12 and Rs.325.22
in 2012-13.
Cash flow generated from financing activities helps in predicting the claims of
fund providers on future cash flows. The cash used in financing activities have
increased approximately by 300% i.e. increased from Rs.306.15 to Rs.1221.89
due to following reasons:
4145.71
4000
3000 2734.95
2000
Net Flow of funds
1163.96 1136.11
1000
0
Operating Activities Investing Activities Financing Activities
-1000
-2000
-1885.33
-3000
-2895.95
-4000
2015-16 2014-15
Financial Health of the Company
2. Managers (Efficiency)
The managers are concerned about the return on investment, activity ratio,
liquidity ratio and profitability ratio in order to measure the degree of efficiency
of their operations. The return on investment has decreased marginally which
plays an important role in wealth creation for shareholders. The activity ratios
like total asset turnover ratio and inventory turnover ratio have shown a increase
of 15-20% which indicates that the management is able to use its assets
effectively and activity ratios like average collection period and day’s inventory
have decreased which implies that the operational activities of the management
are effective as they are able to generate good revenues from its resources.
(E) Investments:
Long term investments are valued at cost. Current investments are valued at the
lower of cost and fair value, determined by category of investment.
(F) Inventories:
Inventories comprise all costs of purchase, conversion and other costs incurred
in bringing the inventories to their present location and condition.
Raw materials and bought out components are valued at the lower of cost
or net realisable value. Cost is determined on the basis of the weighted
average method.
Finished goods produced and purchased for sale, manufactured
components and work-in progress are carried at cost or net realisable
value whichever is lower. Excise duty is included in the value of finished
goods inventory.
Stores, spares and tools other than obsolete and slow moving items are
carried at cost. Obsolete and slow moving items are valued at cost or
estimated net realisable value, whichever is lower.
(G) Foreign Exchange Transactions:
Transactions in foreign currencies (other than firm commitments and highly
probable forecast transactions) are recorded at the exchange rates prevailing on
the date of transaction. Monetary items are translated at the year-end rates.
(N) Leases:
The Company’s significant leasing arrangements are in respect of operating
leases for premises (residential, office, stores, godowns, computer hardware
etc.). The aggregate lease rentals payable are charged as rent.
Significant growth is made by the company during the ten years under study as
depicted in above chart showing profitability ratio of the company. This
indicates good profit margins on products of the company.
Company has witnessed steady growth in its profit margins with an exception of
Financial Year 2007-08 & 2008-09. This may be due to various reasons such as:
1. Operational Inefficiencies
2. Lowering of profit margins
3. High cost of funds
4. High taxation
Nonetheless, company has created significant wealth for its stakeholders and
provided handsome return on investment. Return on net worth has grown from
6.83 in 2001-02 to an average of 21.47 and has touched the highest of 30.10 in
2006-07.
Company, despite of having a good track record, has a challenging task ahead to
maintain the profitability. Profitability of the company is bound to grow
manifolds if it company manages to control the aforesaid factors successfully.
BIBLIOGRAPHY
BIBLIOGRAPHY