Group2 1MBA SecL Mahindra

Mahindra & Mahindra

Financial Management Assignment

On

Analysis of Financial Function

Of

Mahindra & Mahindra

By Group 2; 1st MBA Section L

Name Registration No Contribution

Ameen N Abbas 1321305 Investment Decision

Anuj S Pillai 1321307 Financial Performance

Angha Anushree 1321343 Financing Mix

Vidhan Sanghvi 1321340 Dividend History

Vishnu Santosh S 1321341 Working Capital management

Riya Das 1321359 Capital Market Performance

Group 2; 1st MBA Section L

Mahindra & Mahindra

Table of Contents:

1. Introduction to Mahindra & Mahindra

2. Financial Performance

3. Investment Decisions

4. Financing Mix

5. Working Capital Management

6. Dividend History

7. Capital Market Performance & Comparison

8. Learning Outcome

9. References


Mahindra & Mahindra

1. Introduction

Mahindra & Mahindra (M&M) is a US $ 19 billion multinational-multi sector company

headquartered in Mumbai, India. The journey began in the year 1945, by J.C Mahindra &

K.C Mahindra who started a steel company with Ghulam Mohammed in Mumbai as

Mahindra & Mohammed. Later, Mahindra brothers carried the journey forward and named

the company as Mahindra & Mahindra (M&M).

The groups chairman is Mr. Anand Mahindra and group CFO is Mr. Bharat Doshi. The

total shareholding of promoter and promoter group is 25.35 %, total public shareholding is

69.42 % and 5.22% shares are being held by custodians and against which depository

receipts have been issued.

M&M has three key products that the company produces are, Passenger Vehicles, Light

commercial vehicles & Tractors. It is also prominent in sectors such as aerospace,

aftermarket, components, consulting services, defense, energy, financial services, logistics,

real estate, retail and two-wheelers.

The Group revenues have grown more than 12 times, group profits by 60 times. It employs

a workforce of more than 1, 55,000 employees in over 100 countries. It is listed on The

Stock Exchange, Mumbai, and National Stock Exchange of India Ltd., Luxembourg Stock

Exchange, and London Stock Exchange

2. Financial Performance


M&M Group’s Farm & Automotive

divisions have shown good performance

in the last financial year. The gross

revenue from sale of products has

increased by 26.5% from Rs. 33893

crores in 2012 to Rs. 42,874 crores in

2013. The profit for the year 2013 stands

at Rs. 3353 crores when compared to

previous years which was Rs. 2879

crores.

The current ratio of the group is on the

rise which indicates its increase in the

ability to pay back its debts. The

operating profit margin has remained

almost constant. Return on capital

employed for the year 2013 is at 25.42 %

compared to previous year’s 23.58%.

The PAT had an increase of 16.5% at

Rs. 3,353 crores as against Rs. 2,879

crores in the previous year

Mahindra & Mahindra

Financial Summary of Mahindra & Mahindra

Financial Summary FY 13 FY 12 FY 11 FY 10 FY 09Net Sales 40,441.16 31,835.20 23,477.53 18,516.33 13,081.08Other Income 639.79 574.99 563.13 285.09 132.65PBDIT 5,349.09 4,344.78 4,004.33 3,301.89 1,417.20PBDT 5,157.90 4,182.03 3,933.47 3,145.04 1,283.08PBT 4,447.09 3,605.89 3,519.61 2,774.26 991.57PAT 3,352.82 2,878.89 2,662.10 2,087.75 836.78Equity Share Capital 295.16 294.52 293.62 282.95 272.62Net worth 19,960.70 16,770.21 14,284.08 9,214.81 6,995.95Total Current Assets 18,354.07 15,983.48 10,915.59 7,429.08 8,313.23Total CL & Provisions 27,983.38 23,644.32 13,235.99 8,768.89 9,607.71

Profitability RatiosOperating Profit Margin (%) 11.64 11.84 14.65 16.29 9.81Return On Capital Employed (%) 25.42 23.58 26.96 27.7 13.99

Liquidity And Solvency RatiosCurrent Ratio 1.02 0.95 0.86 1.11 0.9Quick Ratio 0.77 0.66 0.61 0.86 0.83


Mahindra & Mahindra

Efficiency RatioInventory Turnover Ratio 17.94 14.99 15.64 17.91 14.56Debtors Turnover Ratio 19.27 19.05 17.97 16.09 12.77Asset Turnover Ratio 2.44 2.27 2 1.85 1.61

The rise in the net sales figure is due to automotive and farm divisions increase in the sales

volume. M&M has been successful in retaining an almost constant operating profit margin

(%). The Current ratio has improved marginally from 0.95 in the year 2012 to1.02 at

present year, which indicates that the company is improving and strengthening its sources

of funds to pay back its short term obligations.

3. Investment Decision

Buyout of Navistar Inc.’s stake in Truck and Engine Joint Venture

In 2005 Mahindra and Navistar Inc entered into Joint Venture Agreement and set up

Mahindra Navistar Automotives Limited. The Company again, along with Navistar Inc.

and its affiliates had entered into a Joint Venture Agreement and set up Mahindra Navistar

Engines Private Limited which was renamed as Mahindra Heavy Engines Private Limited

(MHEPL) from 4th June 2013.In both this venture the Equity Share was 51% with


The Return on capital employed has gone

up 1.84 points, indicating the company is

doing continuous improvements in terms

of using the capital available.

M&M has been using its inventory

efficiently; its Inventory turnover ratio has

increased by 2.95 points.

Mahindra & Mahindra

Mahindra. It bought both the share holdings of Navistar Inc for 173 crore INR to become

the sole owner of MTBL and MHEPL.

Rights Issue of EPC Industry’ Limited

During the year 2013, EPC Industries Limited (“EPC”) which is a subsidiary of the

Company engaged in the business of manufacturing and marketing micro irrigation

systems, successfully completed its Rights Issue. The proceeds of the issue will be utilised

towards funding the procurement of plant and machinery, working capital requirements

and for general corporate purposes.

Buyout of BAE Systems Plc. stake in Land Systems Joint Venture

Mahindra Defence Systems Limited decided to purchase the whole shareholding of BAE

Systems Plc.(previously Mahindra share was 74%), by which DLSI becomes wholly

subsidiary of Mahindra.

Joint Venture with Telephonics Corporation

Mahindra entered into joint venture agreement with Telephonics Corporation which will

provide Indian Civil Sector and Indian Ministry of Defence with surveillance systems

radar and communication system. In addition it will also provide Homeland Security, Air

Traffic Management services.

Mahindra Defence Systems Limited=74%

Telephonics Corporation=26%.

‘Offer for Sale’ of shares held in Mahindra Holidays & Resorts India Limited

As per the notification from the Department of Economic Affairs of the ministry of

Finance, minimum public holdings of listed companies must be 25% (previously 10%).

Hence Mahindra holding 82.69% in Mahindra Holidays & Resorts India Limited

(“MHRIL”), sold an aggregate of 34, 00,000 Equity Shares of Rs. 10 each representing

4.02%of the then Equity Share Capital of MHRIL during the year. This was done through

an ‘Offer for Sale of Shares by Promoters through the Stock Exchange Mechanism’, in

accordance with the Securities and Exchange Board of India Circulars. After the end of the

Financial Year, MHRIL allotted 41,41,084 Equity Shares of Rs. 10 each. The

shareholding of the Company in MHRIL therefore reduced to 75%.


Mahindra & Mahindra

Further Equity Investment in Ssangyong Motor Company

Mahindra increased share in Ssangyong Motor Company from 69.63% to 72.85% by

buying a Preferential Issue of 1,45,45,455 Equity Shares at 80 billion Korean Won(5500

Korean Won per share).

Imported Technology for the last 2 years

1. Electric Vehicle Technology 2011- In the process of Absorption

2. Advanced Engine Technologies 2011- Technology Absorbed

3. Advanced Propulsion Technologies 2011- In the process of Absorption

4. Duel Fuel Technology 2012- In the process of Absorption

5. Technology for NVH Improvement 2012- In the process of Absorption

6. Hybrid Vehicle Technology 2012 -In the process of Absorption

7. CNG Injection Technology 2013 -In the process of Absorption

8. Hydrogen Fuel Technology 2013- In the process of Absorption

9. Duel Clutch Transmission Technology 2013- In the process of Absorption

10. Advanced Engine Exhaust After Treatment Technology 2013- In the process of

Absorption

11. Vehicle Comfort & Handling Technology 2013- In the process of Absorption

Expenditure on R&D:

The Company spent Rs. 1,060.54 crores (including Rs. 449.78 crores on Capital

Expenditure) for Research & Development work during the year, which was

approximately 2.41% of the total turnover.

Technology absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, adaption and innovation to be

globally competitive the company continually absorb advance technologies (eg: Euro 5

norms). The Company focus on alternate fuel technologies like CNG, Hydrogen and other

fuel cells.


Mahindra & Mahindra

2. Benefits derived as a result of the above efforts:

• Launch of Quanto - New class, Versatile Sporty, distinct SUV.

• Launch of XUV500 in Chile, Brazil and Europe.

• Launch of Genio Pick-up in Chile and Europe.

• Launch of Scorpio with L6 compliant emission norms in Brazil.

• Launch of Maxximo Plus Mini-truck with pioneering Fuel Smart Technology and class

leading performance.

• Build a knowledge base for the Company.

• Emphasis on value analysis/value engineering and innovative cost reduction ideas to cut

down costs.

4. Financing Mix

The company has been a debt free company for the last five years. It has been meeting its expansion and growth needs from its internal sources of financing. The financing mix of the company for the past 5 years is as follows (Table A):


Mahindra & Mahindra

Table A: Financing Mix Of Mahindra and Mahindra

Table B: Financing Mix Of Ta

Debt to equity ratio is the ratio of total liabilities of a business to its shareholders’ equity.

Debt -Equity= Total Liabilities/ Shareholders’ Equity

In the case of Mahindra and Mahindra lower values of debt-equity ratio indicates less

amount of debt. It means that the lenders does not rely more on external lenders. Low debt

equity also show that there is low chances of risk in terms of interest rate and credit rating

whereas higher debt equity shows higher risk. A debt-equity ratio of 1.00 means that half

of the assets of a business are financed by debts and half by the shareholders equity.


Time Debt-Equity Ratio

2009 0.562010 0.372011 0.232012 0.292013 0.24

Table B: Financing Mix Of Tata Motors

Time Debt-Equity ratio2009 0.752010 0.572011 0.82012 1.122013 1.06

A value higher than 1.00 means that

more assets are financed by debt that

those financed by money of shareholders

and vice versa. The higher values of

debt-equity can be seen in one of the

closest competitor of Mahindra and

Mahindra that is Tata Motors (Table B)

where the debts were higher in 2009 but

reduced to a great extent till 2013.

Mahindra & Mahindra

5. Working Capital Management

Parameter 2012-2013 2011-12

Current ratio 1.47 1.68

Quick ratio 1.48 1.37

Interest Cover 3.23 3.29

Inventory turnover ratio 8.79 8.42

Debtors turnover ratio 13.06 12.02

Working Capital(in Rs.CR) 7917 7101.99

Average inventory holding period

40.96 42.75

Average Debt Collection Period

27.56 29.95

Operating Cycle(days) 68.52 72.7

Gross Working Capital(Current Assets in Rs.CR)

34020 28940

Working capital =Current Assets-Current Liabilities


Current ratio has decreased by 12.5% y-

o-y. The reason for this phenomenon is a

substantial increase in current assets

(19.33% ↑) and current liabilities (17.55

% ↑).

The company has managed to reduce the

operating cycle by nearly 4 days. This is

a positive change seen in M&M in the

area of Working Capital Management.

Inventory turnover ratio has decreased

due to better materials planning and

control.

But debtors’ turnover ratio has seen a

rise due to growth in volume of auto

sales.

Working capital essentially means the

money needed for day-to-day operations

of the company like administrative

expenses. If a company has more

working capital, it is essentially losing

the interest money if that working capital

money was saved elsewhere.

Mahindra & Mahindra

Working capital management can be subdivided into

Management of Debtors Management of Cash Management of Creditors Management of Inventory

Working capital has increased by 11.47 % y-o-y. One of the reasons is increase in

personnel costs due to hiring at new plant (AP) and new R&D centre (Chennai).

6. Dividend History

Mahindra & Mahindra Yearly Dividend Payment

For the current financial year Mahindra and Mahindra declared a dividend of Rs 13/share on 18/07/2013


Mahindra & Mahindra

Dividend Yield

MAHINDRA AND MAHINDRAParticulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09

Dividend Per Share 13 12.5 11.5 9.5 10

Earnings Per Share 56.8 48.88 45.33 36.89 30.69

Dividend

Payout(DPS/EPS) 0.22887 0.25573 0.2537 0.25752 0.32584


Particulars Mahindra Maruti

Dividend Yield 1.49% 0.57%

For the year ending March 2013,

Mahindra and Mahindra have declared

an equity dividend of 260.00%

amounting to Rs 13 per share. At the

current share price of Rs 871.50 these

results in a dividend yield of 1.49%.

For the year ending March 2013, Maruti

Suzuki India has declared an equity

dividend of 160.00% amounting to Rs 8

per share. At the current share price of

Rs 1410.80 these results in a dividend

yield of 0.57%.

The dividends declared by Mahindra and

Mahindra have increased YoY with a

steady pace boosting investor confidence

regarding stability even during economic

slowdown. Also the dividends declared

by Maruti Suzuki have increased YoY

but with instability. During the year 2010

a dividend of Rs 6/share was declared as

compared to Rs 3.5/share during the year

2009.

Thus there was a 71.42% growth in the

dividend declared by company in

2010(2.5/3.5*100).

Thus higher dividends are always

welcomed by investors but the investor’s

expectations would increase by leaps and

bounds. In case the company fails to

deliver the same during subsequent years

then investors might want to pull back

their money from the shares of the

company. Hence such dividend payments

should be carefully made.

Mahindra & Mahindra

MARUTI SUZUKIParticulars Mar '13 Mar '12 Mar '11 Mar '10 Mar '09Dividend Per Share 8 7.5 7.5 6 3.5

Earnings Per Share 79.19 56.6 79.21 86.45 42.18Dividend Payout(DPS/EPS) 0.101023 0.132509 0.094685 0.069404 0.082978

Earnings per share

Dividend Per Share


Mahindra & Mahindra

7. Capital market performance & comparison


The stock price change percentage is a

relevant indicator for computing stock

performance. The price change

percentage of Mahindra & Mahindra Ltd.

over the last month is 5.58%.This is

slightly lower than the median of its peer

group 7.04%. According to this

benchmark, Mahindra & Mahindra

limited stock performance over the last

month is slightly below its peer

group's..Mahindra & Mahindra limited's

stock price change percentage is slightly

higher than the average of its sector

(Commercial Vehicles & Trucks) 4.68%.

According to this benchmark, Mahindra

& Mahindra limited stock performance

for the last month is slightly above its

sector's.

Mahindra & Mahindra Limited stock

price change percentage is slightly lower

than the average of its index (BSE

SENSEX) 8.42%. According to this

benchmark, Mahindra & Mahindra

Limited stock performance for the last

month is slightly below its index. The

return on equity is good as compared to

its peers and so is the price earning

multiple.

A dividend of Rs. 12.50 per Ordinary

(Equity) Share and also a Special

Dividend of Re. 0.50 per Ordinary

(Equity) Share aggregating Rs. 13.00 per

Ordinary (Equity) Share was paid of the

face value of Rs. 5 each, payable to those

Shareholders whose names appear in the

Register of Members as on the Book

Closure Date. The Special Dividend is

recommended in view of the profit made

by the Company on sale of part of its

shareholding in Mahindra Holidays &

Resorts India Limited, a subsidiary of the

Company.

The dividends paid by Mahindra and

Mahindra over the years have been far

better than that of its major competitor

Maruti Suzuki. But, the Earnings per

share on a share of Mahindra and

Mahindra is much lower as compared to

that of Maruti Suzuki (both of face value

of Rs 5/share). So the top management of

Mahindra and Mahindra should focus

more on enhancing the EPS of the

company.

Mahindra & Mahindra

Mahindra & Mahindra capital market performance

Today 1 Month 3 Months 1 Year 3 YearsM&M -2.61% 4.32% -11.15% 0.43% 23.10%

Sensex -0.32% 7.21% 6.58% 6.21% -0.94%

NIFTY -0.31% 7.34% 3.52% 3.52% -2.40%

Share Prices Of Mahindra & Peers

M&M

Prices in Rs

Date Open High Low Close VolumeAdj

Close*01-Apr-13 1,280.00 1,288.4 1,262.0 1,283.80 2,80,400 1,276.36

29-Mar-13 1,281.20 1,281.2 1,281.2 1,281.20 0 1,273.77

28-Mar-13 1,287.00 1,315.8 1,271.7 1,281.20 8,40,300 1,273.77

Tata Motors


Close*01-Apr-13 24.42 24.48 23.82 23.84 12,89,100 23.6728-Mar-13 24.96 24.99 24.15 24.41 22,12,400 24.24

Maruti Suzuki


Close*01-Apr-13 866 867 847.4 854.35 57,200 854.3529-Mar-13 861.15 861.15 861.15 861.15 0 861.1528-Mar-13 860 868.4 840.55 861.15 65,600 861.15


Mahindra & Mahindra

Bombay Stock Exchange performance

BSE price movementsCompany Last Traded Price Change Growth

Mahindra & Mahindra 856 6.3 0.74Ashok Leyland 15.21 0.43 2.91

Bajaj Auto 2001.95 -3.15 -0.16Bosch 8520 -80.1 -0.93

Cummins India 409.8 8.65 2.16Exide Inds 133.6 3.8 2.93

Hero MotoCorp 2017.8 -17.35 -0.85Maruti Suzuki 1396 3.3 0.24

Motherson Sumi 227 -1.35 -0.59MRF 12850 11.1 0.09

Tata Motors 343.1 0.3 0.09

Average Price earning multiple

COMPANY NAME PE MULTIPLEM&M 14.72

MARUTI SUZUKI 16.44TATA MOTORS 94.4

Mahindra & Mahindra Ltd. Benchmark

1

Month3

Months12

Months YTDCompany Mahindra & Mahindra ... 5.58% -15.12% -14.18% -20.95%Sector Commercial Vehicles & Trucks 4.68% 8.82% 12.67% 7.79%Index BSE SENSEX 8.42% 6.58% 6.21% 1.40%

Mahindra & Mahindra Ltd. Peer Group

1 Month 3 Months 12 Months YTD

Mahindra & Mahindra 5.58% -15.12% -14.18% -20.95%

Tata Motors Ltd. 15.29% 16.27% 8.96% -5.13%

DRB-HICOM Bhd 0.53% -0.81% 5.79% -8.92%

Hino Motors Ltd. 7.86% 9.39% 114.46% 61.66%Isuzu Motors Ltd. 9.47% 1.53% 33.01% 12.53%

Navistar 6.23% 31.67% 70.87% 68.99%

8. Learning Outcomes


Mahindra & Mahindra

The analysis of Mahindra & Mahindra Group helped us in the following ways and areas

i. It helped us in analyzing the annual report in detail, and getting to know the various

segments within.

ii. The comparison of financial figures gave us an idea of the performance of the

company and their use of inventory, assets, etc.

iii. The Capital market performance analysis helped us in understanding the

company’s performance at the stock market.

iv. The study helped us in understanding the company’s dividend history, EPS, etc.

v. The working capital management gave us the idea on how the company is

managing its capital to generate profit.

vi. We learned us a team how to distribute work and learn from each other.

9. References

Mahindra & Mahindra. (2013, September). Retrieved from Mahindra Group: http://www.mahindra.com/

Mahindra & Mahindra. (2013). M&M AR 2013. Mumbai: Mahindra & Mahindra.

Money Control. (2013, september). Retrieved from http://www.moneycontrol.com

Yahoo Finance. (2013, September). Retrieved from http://in.finance.yahoo.com/

Economic Times. (2013, September). Retrieved from A times of India Group: http://economictimes.indiatimes.com


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Group2 1MBA SecL Mahindra