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EVA_Indian Automobile Industry

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Corporate performance is affected by various factors ranging from company specific, industry specific and economic variables. There had been wide acceptance on the objective of the firm to maximize the value. Among the set of popular value based management, Economic Value Added (EVA) is the most prominent. Therefore, in this study, an attempt has been made to find the EVA for major automobile companies in India and to derive the relation between EVA, NRIO and share price of the company in Indian Stock market with statistical tools.

Text of EVA_Indian Automobile Industry

EVA analysis Automobile Industry

EVA analysis Automobile Industry07/20/2015

EVA analysis Automobile IndustryAdvanced Financial management - Project

Abstract:

Corporate performance is affected by various factors ranging from company specific, industry specific and economic variables. There had been wide acceptance on the objective of the firm to maximize the value. Among the set of popular value based management, Economic Value Added (EVA) is the most prominent. Therefore, in this study, an attempt has been made to find the EVA for major automobile companies in India and to derive the relation between EVA, NRIO and share price of the company in Indian Stock market with statistical tools.

Submitted to,

Mr. Vivek Saxena, Course-In-charge, NIIT University.

Submitted by,

Group 4

Divya NairP301313CMG426Leoprabhu EP301313CMG443Sanjeev RP301313CMG469Suresh VenkatesanP301313CMG479Ujjawal MishraP301313CMG481Vignesha SudanRP301313CMG487

Contents1.Introduction - Indian Automobile Industry:51.1 Market Size51.2 Government Initiatives51.3 Road Ahead62.Two Wheeler Segment Hero Moto Corp62.1 Company Profile62.2 Business performance82.3 EVA Calculation:92.4Correlation102.5 Inference:103.Two Wheeler Segment TVS Motor Company113.1 Company Profile:113.2 Business performance123.3 EVA Calculations123.4 Correlation143.5 Inference144.Passenger Vehicle segment Mahindra & Mahindra144.1 Company background144.2 Business performance154.3 EVA Calculations154.4 Correlation164.5 Inference175.Passenger Vehicle segment TATA Motors175.1 Company Profile175.3 EVA Calculation:185.4 Correlation:195.5 Inference:206.Commercial Vehicle segment Force Motors206.1 Company background & Performance:206.2 Business segment of the company:216.3 EVA Calculation:216.5 Inference:227.Commercial Vehicle segment - Ashok Leyland227.1 Company Profile227.2 Business Performance:237.3 EVA - Calculations237.4 Correlation257.5 Inference:258.Conclusion26

1. Introduction - Indian Automobile Industry:

The Indian auto industry is one of the largest in the world with an annual production of 21.48 million vehicles in FY 2013-14. The automobile industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP). An expanding middle class, a young population, and an increasing interest of the companies in exploring the rural markets have made the two wheelers segment (with 80 per cent market share) the leader of the Indian automobile market. The overall passenger vehicle segment has 14 per cent market share. India is also a substantial auto exporter, with solid export growth expectations for the near future. Various initiatives by the Government of India and the major automobile players in the Indian market is expected to make India a leader in the Two Wheeler and Four Wheeler market in the world by 2020.

1.1 Market SizeSales of commercial vehicles in India grew 5.3 per cent to 52,481 units in January 2015 from a year ago, according to Society of Indian Automobile Manufacturers (SIAM).Sales of cars also grew for a third month in a row to 169,300 units in January 2015, up 3.14 per cent from the year-ago period. Car market leader Maruti Suzuki India witnessed 8.6 per cent higher sales at approximately 118,551 units in February 2015, out of which 107,892 were sold in domestic market and 10,659 units were exported. Hyundai Motor India Ltd (HMIL) reported a 2.4 per cent growth in total sales at 47,612 units in February, compared with 46,505 units in the same month last year. In the two-wheeler segment, Hero MotoCorp witnessed sales of 484,769 units in February 2015.TVS Motor Co posted 15 per cent higher sales at 204,565 units against 177,662 units. Bajaj Auto sold a total of 243,000 two and three-wheelers segment.

1.2 Government InitiativesThe Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced in February last year to 8 per cent from 12 per cent to boost the Make in India initiative of the Indian government.Some of the major initiatives taken by the Government of India are:

Under the Union budget of 2015-16, the Government has announced to provide credit of Rs 850,000 to farmers, which is expected to boost the tractors segment. The government is aligning to ensure that at least one family member is economically strong to support the family. This is expected to improve the sentiments of entry-level two-wheelers. The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle, electric vehicle and also made mandatory of 5 per cent thanol blending in petrol. The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country. The Automobile Mission Plan for the period 20062016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.

1.3 Road AheadIndia is probably the most competitive country in the world for the automotive industry. It does not cover 100 per cent of technology or components required to make a car but it is giving a good 97 per cent, highlighted Mr Vicent Cobee, Corporate Vice-President, Nissan Motors Datsun. The vision of AMP 2006-2016 sees India, to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016. The Japanese auto maker Maruti Suzuki expects the Indian passenger car market to reach four million units by 2020, up from 1.8 million units in 2013-14.

2. Two Wheeler Segment Hero Moto Corp2.1 Company Profile

Hero MotoCorp Limited is the World's single largest two-wheeler motorcycle company. The company is engaged in the manufacture of two wheelers motorcycles and its parts. The company has three manufacturing facilities namely Dharuhera, Gurgaon at Haryana and Haridwar at Uttarakhand. The company is based in New Delhi, India.The company offers a range of bikes starting from CD Dawn, CD Deluxe, Splendor Plus, Splendor NXG, Passion and Passion Prao. The 125 cubic centimeter segment offers Glamour, Super Splendor and Glamour F1. It also has an offering called Achiever in 135 cubic centimeter segment. In the 150 cubic centimeter and above the company offers brands like Hunk, CBZ X-treme, Karizma and the Karizma ZMR. It also offers a 100 cubic centimeter scooter, Pleasure.Hero MotoCorp Limited was incorporated in the year 1984 with the name Hero Honda Motors Ltd. The company was established as a joint venture company between Honda Motor Company of Japan and Hero Group. In the year 1983, they signed a joint collaboration agreement and formed the company. The joint venture between India's Hero Group and Honda Motor Company, Japan has not only created the world's single largest two wheeler company but also one of the most successful joint ventures worldwide.In the year 1985, the company commenced their commercial production at Dharuhera plant in Haryana and introduced their first motorcycle, CD 100 in the market. In the year 1989, they launched the new motorcycle model, Sleek in the market and in the year 1991, they introduced new motorcycle model, CD 100 SS in the market. In the year 1995, the company introduced their extraordinary product, Splendor in the market.In the year 1997, the company inaugurated their second manufacturing facility at Gurgaon in Haryana. Also, they introduced new motorcycle model, Street in the market. In the year 1999, they launched Hero Honda CBZ, the first 150cc motorcycle in the Indian two wheeler industry. In the year 2001, the company introduced new models, Passion and Joy in the market. In the next year, they introduced new models, Dawn and Ambition in the market.In the year 2003, the company launched new motorcycle models namely, CD Dawn, Splendor+ and Passion Plus in the market. Also, they launched Hero Honda Karizma, the industry's first 223cc motorcycle. In the year 2004, they introduced new models, Ambition 135 and CBZ* in the market. During the year, they renewed the joint technical agreement with the Honda Motors Company, Japan.In the year 2005, the company launched Super Splendor, CD Deluxe, Glamour and Achiever in the market. In the year 2006, the company forayed into scotter segment and launched 100cc gearless scotter, Pleasure in the market. In the year 2007, the company launched Splendor NXG, CD Deluxe, Passion Plus and Hunk in the market.During the year 2007-08, the company commissioned their third plant at Haridwar in Uttarakhand with an initial installed capacity of 500,000 units. This plant had lean manufacturing and practices that ensure efficiency. During the year, the company launched new models (including variants) including Splendor NXG, Hunk, New Super Splendor, New Passion Plus, Commemorative Splendor+ and a refreshed version of Pleasure. During the year 2008-09, the company increased the installed capacity of Motorised 2 wheelers upto 350CC engine by 1800000 Nos to 5200000 Nos. Also, they launched eight models: Passion Pro (100 cubic capacity-4 Stroke), CBZ-Extreme (150 cubic capacity - 4 Stroke), Pleasure New Aesthetics, Splendor NXG (Self Start), CD Deluxe (Self Start), Glamour FI, Glamour (Carb) and HUNK Special Edition. Also, they launched new motorcycle model, Karizma -