CAPITAL STRUCTURE

The term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of risk / reward payoff for shareholders. This is true for Fortune 500 companies and for small business owners trying to determine how much of their startup money should come from a bank loan endangering the business. Equity Capital: This refers to money put up and owned by the shareholders (owners). Typically, equity capital consists of two types: 1.) Contributed capital, which is the money that was originally invested in the business in exchange for shares of stock or ownership and 2.) Retained earnings which represents profits from past years that have been kept by the company and used to strengthen the balance sheet or fund growth, acquisitions, or expansion. Many consider equity capital to be the most expensive type of capital a company can utilize because its "cost" is the return the firm must earn to attract investment. A speculative mining company that is looking for silver in a remote region of Africa may require a much higher return on equity to get investors to purchase the stock than a firm such as Procter & Gamble, which sells everything from toothpaste and shampoo to detergent and beauty products. without

Debt Capital: The debt capital in a company's capital structure refers to borrowed money that is at work in the business. The safest type is generally considered long-term bonds because the company has years, if not decades, to come up with the principal, while paying interest only in the meantime. Other types of debt capital can include short-term commercial paper utilized by giants such as Wal-Mart and General Electric that amount to billions of dollars in 24-hour loans from the capital markets to meet day-to-day working capital requirements such as payroll and utility bills. The cost of debt capital in the capital structure depends on the health of the company's balance sheet - a triple AAA rated firm is going to be able to borrow at extremely low rates versus a speculative company with tons of debt, which may have to pay 15% or more in exchange for debt capital. Other Forms of Capital: There are actually other forms of capital, such as vendor financing where a company can sell goods before they have to pay the bill to the vendor, that can drastically increase return on equity but don't cost the company anything. This was one of the secrets to Sam Walton's success at Wal-Mart. He was often able to sell Tide detergent before having to pay the bill to Procter & Gamble, in effect, using PG's money to grow his retailer. In the case of an insurance company, the policyholder "float" represents money that doesn't belong to the firm but that it gets to use and earn an investment on until it has to pay it out for accidents or medical bills, in the case of an auto insurer. The cost of other forms of capital in the capital structure varies greatly on a case-by-case basis and often comes down to the talent and discipline of managers.

MARUTI SUZUKI LTD.

Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan. Maruti Suzuki has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.5 million (1,500,000) vehicles annually. The company plans to expand its manufacturing capacity to 1.75 million by 2013. The Company offers 15 brands and over 150 variants ranging from people's car Maruti 800 to the latest Life Utility Vehicle, Ertiga. The portfolio includes Maruti 800, Alto, Alto K10, A-star, Estilo, WagonR, Ritz, Swift, Swift DZire, SX4, Omni, Eeco, Kizashi, Grand Vitara, Gypsy and Ertiga. In an environment friendly initiative, in August 2010 Maruti Suzuki introduced factory fitted CNG option on 5 models across vehicle segments. These include Eeco, Alto, Estilo, Wagon R and Sx4. With this Maruti Suzuki became the first company in India to introduce factory fitted CNG vehicles. In terms of number of cars produced and sold, the Company is the largest subsidiary of Suzuki Motor Corporation. Cumulatively, the Company has produced over 10 million vehicles since the roll out of its first vehicle on 14th December, 1983. Maruti Suzuki is the only Indian Company to have crossed the 10 million sales mark since its inception. In 2011-12, the company sold over 1.13 million vehicles including 1,27,379 units of exports. The Company employs over 9000 people (as on 31st March, 2012). Maruti Suzuki's sales and service network is the largest among car manufacturers in India. The Company has been rated first in customer satisfaction in the JD Power survey for 12 consecutive years. Besides serving the Indian market, Maruti Suzuki also exports cars to several countries in Europe, Asia, Latin America, Africa and Oceania We began our operations in 1983, with the first Maruti 800 rolling out from our Gurgaon plant. Over the next two decades Maruti Suzuki car models led by Maruti 800 brought about a revolution in the Indian car market

TATA MOTORS LTD.

Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1,65,654 crores (USD 32.5 billion) in 2011-12. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is the world's fourth largest truck and bus manufacturer. The Tata Motors Groups over 55,000 employees are guided by the vision to be ''best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics.'' Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 7.5 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand (Gujarat) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company's dealership, sales, services and spare parts network comprises over 3,500 touch points. With over 4,500 engineers and scientists, the company's Engineering Research Centre, established in 1966, has enabled pioneering technologies and products. The company today has R&D centres in Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, India's first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. Within two years of launch, Tata Indica became India's largest selling car in its segment. In 2005, Tata Motors created a new segment by launching the Tata Ace, India's first indigenously developed mini-truck. In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the world have been looking forward to. The Tata Nano has been subsequently launched, as planned, in India in March 2009. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families.

Tata Motors is equally focussed on environment-friendly technologies in emissions and alternative fuels. It has developed electric and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing processes, significantly enhancing resource conservation. Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.

ANALYSIS OF CAPITAL STRUCTURE

MARUTI SUZUKI LTD. DEBT EQUITY RATIO : The objective of debt equity ratio is to arrive at an idea of the amount of capital supplied to the enterprise by the proprietors and of the assets as cushion or cover available to its creditors on liquidation. This ratio is sufficient to assets of the soundness of long term financial position. It also indicates the extent to which the firm depends upon outsiders for its existence . In other words, it portrays the proportion of total funds acquired by a firm by way of loans.

MARUTI SUZUKI LTD.

DEBT EQUITY RATIO

2011-2012 Debt equity ratio= debt(total long term loans)/ equity (shareholders fund) Debts = 1262.20 cr Equity=15674.50 cr D/E =1262.20/15674.50 = 0.08 2010-2011 Debts =309.30 Equity=14308.8 D/E= 0.02

2009-2010 Debts =821.40 Equity=12182.60 D/E=0.06

TATA MOTORS
DEBT EQUITY RATIO

2011-2012 Debt equity ratio= debt(total long term loans)/ equity (shareholders fund) Debts = 38704.07cr Equity=32698.50cr D/E =38704.07/32698.50 = 1.18

2010-2011 Debt equity ratio= debt(total long term loans)/ equity (shareholders fund) Debts = 32791.41Cr Equity=19171.47CR D/E =1.71

2009-2010 Debt equity ratio= debt(total long term loans)/ equity (shareholders fund) Debts = 35192.36 Equity=8397.63cr D/E =4.19

RETURN ON INVESTMENT (ROI) OR RETURN ON CAPITAL EMPLOYED RATIO

Return on capital employed or return on investment judges the overall performance of the enterprise. It measures how efficiently the sources of the profitability of any concern with the result that the performance of different industries may be compared. This ratio also helps in judging the performance efficiency of different departments or units within the enterprise. ROI=(profit before interest , tax and dividend/ capital employed )*100

MARUTI SUZUKI LTD.

2011-2012 ROI = 13.02% 2010-2011 ROI=21.09% 2009-2010 ROI = 27.94%

TATA MOTORS
RETUTN ON INVESTMENT 2011-2012 ROI = 24.29% 2010-2011 ROI= 25.24% 2009-2010 ROI = 9.37%

EARNING PER SHARE

It is the earnings of the company attribute to the equity shareholders dividend by the number of equity shares. In other words, this ratio measures the earnings available to an equity shareholder on per share basis Earning per share = Net profit after tax-preference dividend/no of equity shares

MARUTI SUZUKI LTD.

2011-2012 NO. OF SHARES = 2889.10 lakhs Profits available to equity shareholders = 1633.49cr EPS= Rs. 56.54

2010-2011 NO.OF SHARES = 2889.10 LAKHS Profits available to equity shareholders =2307.23CR EPS=RS.79.86 2009-2010 NO.OF SHARES = 2889.10 LAKHS Profits available to equity shareholders=2545.00CR EPS=Rs.88.09

TATA MOTORS

EARNING PER SHARE 2011-2012 NO. OF SHARES = 31735.47 lakhs Profits available to equity shareholders = 13573.26 cr EPS= Rs. 42.77

2010-2011 NO. OF SHARES = 31735.47 lakhs Profits available to equity shareholders = 4611.16 cr EPS= Rs. 145.30

2009-2010 NO. OF SHARES =31735.47 lakhs Profits available to equity shareholders = 15762.91cr EPS= Rs. 44.11

ITNER COMPANY ANALYSIS

2012-2011 DEBT QUITY RATIO TATA MOTORS has high ratio as compared to MARUTI SUZUKI which indicates TATA MOTORS has risky financial position. RETURN ON INVESTMENT TATA MOTORS has higher RATE as compared to MARUTI SUZUKI which indicates TATA MOTORS has MORE return than MARUTI SUZUKI LTD. EARNING PER SHARE MARUTI SUZUKI LTD has higher EPS as compared to TATA MOTORS so equity shareholders will like to invest more in this company.

2010-2011 DEBT QUITY RATIO TATA MOTORS has VERY high ratio as compared to MARUTI SUZUKI which indicates TATA MOTORS has risky financial position. RETURN ON INVESTMENT TATA MOTORS has higher RATE as compared to MARUTI SUZUKI which indicates TATA MOTORS has MORE return than MARUTI SUZUKI LTD. EARNING PER SHARE In this year TAT MOTORS has higher EPS as comapres to MARUTI SUZUKI LTD. Showing better satisfaction among the investors of TATA MOTORS as compared to investors of Maruti

2009-2010 DEBT QUITY RATIO TATA MOTORS has SIGNIFICANTLY high ratio as compared to MARUTI SUZUKI which indicates TATA MOTORS has risky financial position. RETURN ON INVESTMENT MARUTI SUZUKI has higher RATE as compared to TAT MOTORS which indicates MARUTI SUZUKI has MORE return than TATA MOTORS EARNING PER SHARE MARUTI SUZUKI LTD has higher EPS as compared to TATA MOTORS so equity shareholders will like to invest more in this company.

ANALYSIS OF CAPITAL STRUCTURE OF MARUTI SUZUKI LTD. AND TATA MOTORS LTD.

SUBMITTED TO: MS. JASPREET

SUBMITTED BY: Rahul Garg BCOM II A 344