group2 1mba secl mahindra
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Financial ManagementTRANSCRIPT
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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%.
Group 2; 1st MBA Section L
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.
Group 2; 1st MBA Section L
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):
Group 2; 1st MBA Section L
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.
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
Mahindra & Mahindra
7. Capital market performance & comparison
Group 2; 1st MBA Section L
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
Date Open High Low Close VolumeAdj
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
Date Open High Low Close VolumeAdj
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L
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
Group 2; 1st MBA Section L