Mahindra and Mahindra Ltd Financial Analysis

8/10/2019 Mahindra and Mahindra Ltd Financial Analysis

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FINANCIAL ANALYSIS OF

MAHINDRA AND MAHINDRA

LIMITEDTeam members:

Ayan Saha

Ankita Rai

Amrit Sidhu

T.V. Shankaran

Nikhil Thomas

Madhav Maheshwari

Anandamayee Agrawal


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Company Formation

Steel trading company in 1945 as Mahindra &

Mohammed Changed its name to Mahindra & Mahindra in

1948

Manufacturing and selling larger MUVs


3/21

Road to Success

1991 :Commander range of vehicles

1996 :Mahindra Ford India Limited was established

2002 : Scorpio, world-class Sports Utility Vehicle

2007 :Logan and Scorpio the highest selling Sedan andSUV

2010 :Mahindra & Mahindra and MitsubishiAgricultural Machinery tie-up to deliver FarmTech

prosperity 2013 :Mahindra and Mahindra has inked partnership

with Snapdeal to sell its two-wheelers on the site


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Shareholding of Promoter and

Promoter GroupCATEGORY

OFSHAREHOLDER

NO. OF SHARE-

HOLDERS

TOTAL NO.OF

SHARES

TOTAL SHAREHOLDING AS A % OF TOTAL NO.OF SHARES(Total number of

shares=615,892,384)

1) Indian

Individuals / Hindu

Undivided Family

22 3,998,552 0.65

Bodies Corporate 8 71,128,386 11.55

Any Others (Specify) 8 79,737,027 12.95

M&M Benefit Trust 1 51,835,214 8.42

ESOP Trust 4 25,870,943 4.2

Employees Welfare

Fund3

2,030,870 0.33

Sub Total 38 154,863,965 25.14

(2) Foreign

Individuals (Non-

Residents Individuals /

Foreign Individuals)

1 651,772 0.11

Sub Total 1 651,772 0.11

Total shareholding of

Promoter andPromoter Group (A)

39 155,515,737 25.25


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Financial Statement Analysis

Horizontal Analysis

Vertical Analysis

Trend Analysis DuPont Analysis

Ratio Analysis


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Horizontal AnalysisBalance SheetParticulars Mar'14 (Rs in crores) Mar'13 (Rs in crores) Change (%)

Liabilities 12 Months 12 MonthsShare Capital 295.16 295.16 0.00

Reserves & Surplus 16496.03 14363.76 14.84

Net Worth 16791.19 14658.92 14.55

Secured Loan 294.1 266.67 10.29

Unsecured Loan 3451.06 2960.4 16.57

TOTAL LIABILITIES 20536.35 17885.99 14.82

Assets

Gross Block 10242.58 8602.96 19.06

(-) Acc. Depreciation 4365.63 3645.1 19.77

Net Block A 5876.95 4957.86 18.54

Capital Work in Progress B 1228.44 863.48 42.27

Investments C 11379.85 11833.46 -3.83

Inventories 2803.63 2419.77 15.86

Sundry Debtors 2509.84 2208.35 13.65

Cash and Bank 2950.39 1781.41 65.62Loans and Advances 4539.55 3389.26 33.94

Total Current Assets 12803.41 9798.79 30.66

Current Liabilities 8678.28 7662.13 13.26

Provisions 2074.02 1905.47 8.85

Total Current Liabilities 10752.3 9567.6 12.38

NET CURRENT ASSETS D 2051.11 231.19 787.20

Misc. Expenses 0 0 0.00TOTAL ASSETS(A+B+C+D+E) 20536.35 17885.99 14.82


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Horizontal AnalysisProfit & LossYear Mar '14 (Rs in crores) Mar '13 (Rs in crores) Change (%)

INCOME:

Gross Sales 43120.18 43412.65 -0.67

Excise Duty 2611.51 2971.49 -12.11Net Sales 40508.5 40411.16 0.24

Other Income 717.99 549.17 30.74

TOTAL INCOME 41226.49 40990.33 0.58

EXPENDITURE:

Manufacturing Expenses 221.35 206.39 7.25

Material Consumed 29614.77 30587.96 -3.18

Personal Expenses 2163.72 1866.45 15.93

Administrative Expenses 3787.45 3071.06 23.33

TOTAL EXPENDITURE 35787.29 35731.86 0.16

Operating Profit 4721.21 4709.3 0.25

EBITDA 5439.2 5258.47 3.44

Depreciation 863.34 710.81 21.46

EBIT 4575.86 4547.66 0.62

Interest 259.22 191.19 35.58

EBT 4316.64 4356.47 -0.91

Taxes 611.08 1094.27 -44.16

Profit and Loss for the Year 3705.56 3262.2 13.59

Non Recurring Items 52.79 90.62 -41.75

REPORTED PAT 3758.35 3352.82 12.10

KEY ITEMS

Equity Dividend 758.21 798.17 -5.01

Equity Dividend (%) 256.88 270.41 -5.00

Shares in Issue (Lakhs) 6158.92 6139.81 0.31EPS - Annualised (Rs) 61.02 54.61 11.74


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Vertical AnalysisBalance SheetParticulars Mar'14 Mar'13

Liabilities

Share Capital 1.437256377 1.650230152

Reserves & Surplus 80.3260073 80.30732434

Net Worth 81.76326368 81.95755449

Secured Loan 1.432094798 1.49094347

Unsecured Loan 16.80464153 16.55150204

TOTAL LIABILITIES 100 100

Assets

Gross Block 49.87536734 48.09887515

(-) Acc. Depreciation 21.25806192 20.37963792

Net Block 28.61730541 27.71923724

Capital Work in Progress 5.98178352 4.827689158

Investments 55.41320634 66.16049769

Inventories 13.65203651 13.52885694

Sundry Debtors 12.22145123 12.34681446

Cash and Bank 14.36667178 9.95980653Loans and Advances 22.10495049 18.94924463

Total Current Assets 62.34511001 54.78472257

Current Liabilities 42.25814227 42.83872461

Provisions 10.09926301 10.65342204

Total Current Liabilities 52.35740528 53.49214665

NET CURRENT ASSETS 9.987704728 1.292575921

Misc. Expenses 0 0TOTAL ASSETS(A+B+C+D+E) 100 100


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Vertical AnalysisProfit & LossYear Mar '14 Mar '13

INCOME:

Gross Sales 104.59 105.90

Excise Duty 6.33 7.24Net Sales 98.26 98.58

Other Income 1.74 1.33

TOTAL INCOME 100.00 100

EXPENDITURE:

Manufacturing Expenses -0.54 -0.47

Material Consumed -71.83 -69.58

Personal Expenses -5.25 -4.25

Selling Expenses 0.00 0Administrative Expenses -9.19 -6.99

Expenses Capitalised 0.00 0

Provisions Made 0.00 0

TOTAL EXPENDITURE -86.81 -81.28

Operating Profit 11.45 10.71

EBITDA 13.19 11.96

Depreciation -2.09 1.62

Other Write-offs 0.00 0.00EBIT 11.10 10.34

Interest 0.63 0.43

EBT 10.47 9.91

Taxes -1.48 2.49

Profit and Loss for the Year -8.99 7.42

Non Recurring Items 0.13 0.21

Other Non Cash Adjustments 0.00 0.00

Other Adjustments 0.00 0.00

REPORTED PAT 9.12 7.63


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Trend AnalysisBalance Sheet of Mahindra and Mahindra ------------------- in Rs. Cr. -------------------

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of Funds

Total Share Capital 104.3 104.3 104.08 103.77 100Equity Share Capital 104.3 104.3 104.08 103.77 100

Reserves 219.14 190.81 157.77 133.1 100

Networth 214.44 187.2 155.43 131.71 100

Secured Loans 48.81 44.26 66.42 67.59 100

Unsecured Loans 151.51 129.97 121.79 84.02 100

Total Debt 130.03 112.04 110.21 80.58 100

Total Liabilities 191.74 166.99 143.27 117.96 100

Application Of Funds

Gross Block 210.48 176.79 154.17 120.38 100

Less: Accum. Depreciation 172.02 143.63 126.73 107.39 100

Net Block 252.4 212.92 184.07 134.55 100

Capital Work in Progress 89.38 62.83 57.82 56.29 100

Investments 177.86 184.95 161.15 139.5 100

Inventories 235.84 203.55 198.38 142.51 100

Sundry Debtors 199.49 175.53 158.04 100.17 100

Cash and Bank Balance 620.91 374.89 250.1 129.35 100Total Current Assets 282.81 219.35 189.42 122.14 100

Loans and Advances 223.13 166.59 146.75 154.26 100

Fixed Deposits 0 0 0 0 1268.06

Total CA, Loans & Advances 205.69 157.42 136.88 107.75 100

Current Liabilities 227.03 200.44 175.83 136.65 100

Provisions 115.44 106.06 102.17 93.59 100

Total CL & Provisions 191.35 170.27 152.45 122.89 100

Net Current Assets 338.73 38.18 -7.5 -32.65 100

Miscellaneous Expenses 0 0 0 0 4.12Total Assets 191.74 166.99 143.27 117.96 100


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Du Pont Analysis

Particulars Mar'14 Mar'13

Net Profit 3705.56 3262.20

Net Sales 40508.50 40441.16Profit Margin (%) 9.15 8.07

Total Assets 19211.70 16615.65

Asset Turnover 2.11 2.43

Return on Assets (%) 19.29 19.63

Equity 295.16 294.84

Leverage 65.09 56.35

Return on Equity 12.55 11.06


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Ratio AnalysisParticulars Mar'14 Mar'13

Liquidity Measurement Ratios

Current Ratio 1.19 1.02Quick Ratio 0.93 0.77

Receivable Turnover 16.14 18.31

Avg Collection Period 22.31 19.66

Inventory Turnover 14.45 16.71

Profitability Indicator Ratios

Operating Profit Margin (%) 11.45 11.488

Profit Margin Analysis (%) 9.15 8.067Asset Turnover 2.11 2.43

Return On Assets (%) 19.29 19.63

Return On Equity 12.55 11.06

Debt Ratios

Debt-Equity Ratio 0.22 0.22

Liabilities-Equity Ratio 0.22 0.22

Interest Coverage Ratio 17.65 23.79Operating Performance Ratios

Fixed-Asset Turnover 4.03 4.76

Investment Valuation Ratios

Earnings per Share 61.02 54.61

Book value per Share 272.63 238.75

Price/Book Value Ratio 3.60 3.59

Price/Earnings Ratio 16.07 15.69

Dividend Yield (%) 1.26 1.52

Dividend per Share 12.31 13.00


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Ratio Analysis

The company has a current ratio

which is close to the industry

average ; whereas the quick ratio

is very high than the industryaverage.

This indicates that the company

is in a good position to pay its

current liabilities hence ensuring

that operations are notdisrupted.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2010 2011 2012 2013 2014 Industry

Avg.

Current Ratio

0

0.1

0.2

0.3

0.4

0.5

0.6

0.70.8

0.9

1

2010 2011 2012 2013 2014 Industry

Avg.

Quick Ratio

Liquidity Analysis


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Ratio Analysis

The average inventory holding

period of the company is only

25.25 days as opposed to

industry average of 27.56 days.This signifies better inventory

management as it results in

lesser storage costs.

Liquidity Analysis Contd.

RTO of the company is very high

in comparison with the industry

indicating that receivables are

rapidly being converted in to

cash.

0

24

6

8

10

12

14

16

18

20

2010 2011 2012 2013 2014 Industry

Avg.

Inventory Turnover

0

5

10

15

20

25

2010 2011 2012 2013 2014 Industry

Avg.

Account Receivable Turnover


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Ratio Analysis

Total Asset Turnover is well above the

industry average due to Mahindras

effective management of inventories

and receivables among other factors

Profitability Analysis

Profit margin is not on par with the

industry margin. There is a

considerable difference( roughly 3%).

There has not been much difference in

the net sales of 2013 and 2014. This

indicates that Mahindra must take an

aggressive approach towards sales.

0

0.5

1

1.5

2

2.5

2010 2011 2012 2013 2014 Industry

Avg.

Total Assets Turnover

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014 Industry Avg.

Profit Margin


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Ratio Analysis

Debt ratio is well below the

industrial average, indicating

the company is not taking

too many risks and hence is

following a laid backapproach. This reflection can

be seen in the low profit

margin.

Interest cover is a little less

than industry average and

the reason can be attributed

to the unsecured loans taken

by the company.

Solvency Analysis

0

0.1

0.2

0.3

0.4

0.5

0.6

2010 2011 2012 2013 2014 Industry

Avg.

Debt to Equity ratio

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 IndustryAvg.

Interest Coverage


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Ratio Analysis

The ratio is a little below the

industry average indicating

that the growth prospects are

weak. The decreasing profitmargin trend over last 5 years

supports this value.

Capital Market Standing

In spite of following a down

trend in profits, the company

has managed to give out

dividend yield that is greater

than industry value. This might

encourage the shareholders to

invest more money in the

companysstock.

14.5

1515.5

16

16.5

17

17.5

18

2013 2014 Industry Avg.

Price to Earnings ratio

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2013 2014 Industry Avg.

Dividend Yield


18/21

Competitor Analysis Four wheeler automobile industry:

o M&M has witnessed a decline of 5.3 % in sales over the financial years 13 and 14

Small segment two wheeler automobile industry :

WAY TO GO ?


19/21

Recommendations

1. Dividends given is well above the industry average. This can be compromised and

profits can be re-invested in to the business instead .

2. Bonds can be issued as they come at a much cheaper interest rate. Brand name

of Mahindra will convince buyers to settle for a low interest rate.

3. Mahindra must take an aggressive approach towards sales by increasing

advertising costs of its two-wheelers( which is very less currently) and promotionof upcoming launches .

4. New two wheeler models can be launched targeting the Mid-segment .

5. Exports can be increased by leveraging the fact that economic recovery is gaining

strength across the globe and the value of Indian rupee has picked up.


20/21

Future Plans

Change from frugal engineering methods to quality initiative

Increasing competitionmarket shares for Utility Vehicles fell from 47% to41%

Launching soft-roaders to recoup market share to meet the emergingchallenge from rivals who base performance on quality andstandardization

Customer satisfaction and good service to customer is current salesstrategy

R&D is given prime importance with quality review each month

Tie-ups within Pininfarnia (Design and Engineering Firms) and setting upinternational technical centers that support Indian product development

by providing world class technology CRUSADE - First time right, Every time right and delightful customer

experience

Sales wars are not fought in show rooms, but in R&D.


21/21

References

http://csimarket.com/Industry/industry_Mana

gementEffectiveness.php?ind=405

http://www.moneycontrol.com/financials/ma

hindramahindra/ratios/MM#MM

http://pages.stern.nyu.edu/~adamodar/New_

Home_Page/datafile/pedata.html

http://pages.stern.nyu.edu/~adamodar/New_

Home_Page/datafile/divfund.htm
http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=405http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=405http://www.moneycontrol.com/financials/mahindramahindra/ratios/MMhttp://www.moneycontrol.com/financials/mahindramahindra/ratios/MMhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.htmlhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.htmlhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/divfund.htmhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/divfund.htmhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/divfund.htmhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/divfund.htmhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.htmlhttp://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/pedata.htmlhttp://www.moneycontrol.com/financials/mahindramahindra/ratios/MMhttp://www.moneycontrol.com/financials/mahindramahindra/ratios/MMhttp://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=405http://csimarket.com/Industry/industry_ManagementEffectiveness.php?ind=405

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