indus motor company ltd (financial analysis)

Submitted to: Sir Wasim Ullah

MBA 19(A)

1/20/2009

Indus Motor Company Ltd (Financial analysis)


Table of ContentsIntroduction................................................................................................................................3Company Profile:.......................................................................................................................3Core Value:................................................................................................................................4Bankers:......................................................................................................................................4Auditors......................................................................................................................................5Legal Advisor.............................................................................................................................5FINANCIAL ANALYSIS:........................................................................................................7

1. Current Ratio...................................................................................................................72. Quick Ratio.....................................................................................................................73. Average Collection Period..............................................................................................74. Fixed Assets Turnover....................................................................................................75. Debt Ratio.......................................................................................................................76. Debt-to-Equity Ratio.......................................................................................................87. Gross Profit Ratio............................................................................................................88. Net Profit Margin............................................................................................................89. Return on Assets (ROA).................................................................................................810. Return on Equity (ROE)..............................................................................................8

Cross Sectional Analysis............................................................................................................9

Graduate School of Management (International Islamic University Islamabad)


Toyota Indus Motor Company

Driving forward with trust

Introduction

Indus Motor Company is one of the Automobile Companies which formed with the help if house of Habib, Toyota Motor Corporation, Toyota Tsusho Corporation. It manufactures and Imports Cars and enjoys a healthy share in the market. It is competing with the Honda, Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain Strategic Competitive Advantage which is its Production Strength, Ability to produce Quality cars with respect to low cost and Research and Development in Hybrid and Bio Fuel Cars. But recently Company is in Stabilization mode trying to improve its functional area, consolidation of resources and maintaining SCA. In our Opinion it is the best move made by IMC to Survive the Financial Holocaust. Indus Motors is the country's second largest auto manufacturer, after the Pak Suzuki Motors, located near Bin Qasim Karachi, having an assembling capacity of 55,000 units per annum. Its core business is to manufacture and market cars. In addition, the company also sells auto parts and accessories. Its product line includes 9 variants of Toyota Corolla, 8 variants of Daihatsu Cuore and 2 variants of Toyota Hilux. The company also offers six different imported vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.

Company Profile:

Name of the Company : Indus Motor Company Limited.

Industry Type : Automobile Industry(Cyclical)

Major Investors :

1. House of Habib. 2. Toyota Motor Corporation Japan (TMC). 3. Toyota Tsusho Corporation Japan.



Vision:

To be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology

Core Value:

Customer satisfaction Team Work Ethics & Practices

Bankers:1. ABN Amro Bank2. Askari commercial Bank Limited3. Bank Alfalah Limited4. Bank Al-Habib limited5. The Bank of Tokyo-Mitsubishi UFJ, limited6. Citibank N.A.7. Habib Bank AG Zurich8. Habib Bank Limited9. Hong Kong & Shanghai Banking Corporation10. Metropolitan Bank Limited11. MCB Bank Limited12. National Bank Limited13. Soneri Bank Limited14. Standard Chartered Bank15. Union Bank Limited16. United Bank Limited


Achieving market Leadership by Delivering Value to Customers by:1. Following our “Customer first” philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers.2. Enhancing the quality an reach of our 3S Dealership Network3. Employing customer insight and feedback for continuous corporate renewal, including producer development, improving service and customer care.Bringing Toyota quality to Pakistan1. Maximizing QRD (Quality, Reliability and Durability) by built-in-engineering,2. Transferring Technology and promoting Indigenization at IMC and Vendor.3. Raising the bar I all corporate functions to meet Toyota Global Standards.Optimizing Cost by Kaizen 1. Fostering a Kaizen culture and mindset at IMC, its Dealers an Vendors. 2. Implementing Toyota Production System.3. Removing waste in all areas and operating in the lowest cost quartile of the industry.

Achieving market Leadership by Delivering Value to Customers by:1. Following our “Customer first” philosophy in manufacturing and providing high quality vehicles and services that meet the needs of Pakistani customers.2. Enhancing the quality an reach of our 3S Dealership Network3. Employing customer insight and feedback for continuous corporate renewal, including producer development, improving service and customer care.Bringing Toyota quality to Pakistan1. Maximizing QRD (Quality, Reliability and Durability) by built-in-engineering,2. Transferring Technology and promoting Indigenization at IMC and Vendor.3. Raising the bar I all corporate functions to meet Toyota Global Standards.Optimizing Cost by Kaizen 1. Fostering a Kaizen culture and mindset at IMC, its Dealers an Vendors. 2. Implementing Toyota Production System.3. Removing waste in all areas and operating in the lowest cost quartile of the industry.


Auditors

M/s A.F. Ferguson & Co.

Legal Advisor

M/s A.K. Brohi & CompanyM/s Mansoor Ahmed Khan & Co.M/s Mahmud & Co.M/s Sayeed & Sayeed Co.


FINANCIAL ANALYSIS:

All the value from balance sheet and profit & lost account are in Rupees and in billions.

1. Current Ratio = Current Assets = 2.56 Current Liabilities

EXPLANATION :

IMC has comfortable current ratio, thanks to its large cash balance. Company is in position to meet its current obligations.

2. Quick Ratio = Current Assets – Inventories = 1.86 Current Liabilities

EXPLANATION:

IMC acid test ratio showed that it has not sufficient liquid asset to meet is current obligations.

3. Average Collection Period = Accounts Receivable = 18 days Annual Credit Sales / 365

EXPLANATION:

Average collection period is satisfactory; it recovers its receivables in 5 Days

4. Fixed Assets Turnover = Total Sales = 10.27 Total fixed Assets

EXPLANATION:

Asset turnover ratio shows the level of sales generated with respect to productive capacity. The level and trend of sales is growing with respect to its investment in assets

5. Debt Ratio = Total Debt = 27.5% Total Assets

EXPLANATION:

Indus Motor Company has sufficient assets to cover its debts.

6. Debt-to-Equity Ratio = Total Debt = 0.4005 Total Equity

EXPLANATION:

IMC is less leverage compare to other companies to finance there assets. The risk born by IMC is lower as compared to other companies

7. Gross Profit Ratio = Gross Profit = 9.29% SalesEXPLANATION:

Gross profit ratio of IMC shows that the firm’s production and procurement efficiency is better than the industry Competitors.

8. Net Profit Margin = Net Income =5.53% Sales EXPLANATION:

The Profit Margin Ratio is used as a Measure of Profitability. Ratio shows that company earned 2.25 % on its sales.

9. Return on Assets (ROA) = EBIT = 25.76% Total Assets

EXPLANATION:

10. Return on Equity (ROE) = Net Income = 6.12%

Stockholders' Equity

EXPLANATION:

The Return On Equity measures the profits after taxes, IMC ROE ratio shows that it has sufficient assets relative to shareholders investment.

Cross Sectional Analysis

RATIOS TOYOTA HONDA PAK-SUZUKICurrent Ratio 2.56 1.21 0.95Quick Ratio 1.86 0.93 0.63Average Collection Period

18 8 9

Fixed Assets Turnover Ratio

20.28 0.81 1.23

Debt Ratio 27.5% 55.0 44.0Debt-to-Equity Ratio

0.4005 0.80 0.75

Gross Profit Ratio 9.29% 5.21 4.24Net Profit Margin 5.53% 2.21 2.22Return on Assets (ROA)

25.76% 5.2 2.3

Return on Equity (ROE)

6.12% 26.0 28.2

IMC ratio shows that it has more returns on equity as compared to Toyota and also very closes to Mitsubishi. means it has sufficient assets relative to shareholders investment

Cross sectional analysis of ROA shows that toyota generates 6.30% on its investment in assets as compared to competitors

This analysis shows that company earned 2.25 % on its sales. Honda and Mitsubishi’s earnings are also very close to each other.

Firm’s production and procurement efficiency is better than the industry Competitors.

Toyota is highly leverage and risk born by the company is higher as compared to other companies

Company can easily cover its debts as compared to its competitors.

Asset turnover ratio shows the level of sales generated with respect to productive capacity. The level and trend of sales is growing with respect to its investment in assets

Quick ratio analysis shows that it has sufficient liquid asset to meet are current obligations.

Average collection period is satisfactory; it recovers its receivables in 18 Days

Company is in position to meet its current obligations as compared to its competitors.

EXPLAINATION:

IMC financial analysis reflects that sufficient financial resources to meet its obligations. The financial managersof the company are doing a prudent and efficient job. The Asset management activities, investing activities, Financing activities and cash flows are well managed. Despite electricity shortage and liquidity crunch are on the reasons which affects the industry of Pakistan but IMC has managed this problem with surprising efficiency.

indus motor company ltd (financial analysis)

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