1.

COMPANY PROFILE

Mahindra & Mahindra Limited (M&M) is an Indian multinational

automobile manufacturing corporation headquartered in Mumbai, Maharashtra,
India. It is one of the largest vehicle manufacturers by production in India and the
largest seller of tractors across the world. It is a part of Mahindra Group, an Indian
conglomerate.
It was ranked as the 10th most trusted brand in India, by The Brand Trust
Report, India Study 2014. It was ranked 21st in the list of top companies of India
in Fortune India 500 in 2011. Its major competitors in the Indian market include
Maruti Suzuki, Tata Motors, Ashok Leyland, Toyota, Hyundai, Mercedes-Benz
(Merc) and others.

2. History

Mahindra & Mahindra was established on October 2, 1945 when K.C.

Mahindra visited the United States of America as Chairman of the India
Supply Mission. He met Barney Roos, inventor of the rugged 'general
purpose vehicle' or Jeep and had a flash of inspiration: wouldn't a vehicle
that had proved its invincibility on the battlefields of World War II be ideal
for India's rugged terrain and its kutcha rural roads. Swift action followed
thought. The Mahindra brothers joined hands with a distinguished
gentleman called Ghulam Mohammed. And, Mahindra & Mohammed was set
up as a franchise for assembling jeeps from Willys, USA.
Two years later, India became an independent nation and Mahindra &
Mohammed changed its name to Mahindra & Mahindra. Ghulam Mohammed
migrated to Pakistan postpartition and became the first Finance Minister of
Pakistan.
Mahindra & Mahindra is the only Indian company among the top three
tractor manufacturers in the world. The Group has a leading presence in key
sectors of the Indian economy. The Group employs over 50,000 people and
has several stateoftheart facilities in India and overseas.
Mahindra & Mahindra has comprehensive manufacturing facilities with
high level of vertical integration. Catering to the Sector's diverse customer
base spanning rural and semi urban customers, defense requirements and
luxurious urban utility vehicles or SUVs. These manufacturing plants keep
abreast with the latest technology to meet the growing market
expectations. These manufacturing facilities have some of the best
technologies and equipment in India and provide for a very challenging and
satisfying work environment. Its plants in Mumbai and Nasik manufacture
multiutility vehicles and engines are produced at the Igatpuri plant. Utility
Vehicles, Light commercial vehicles and 3 wheelers are manufactured at the
Zaheerabad plant in Andhra Pradesh and threewheelers at the Haridwar
plant.
2

3. Automobiles
Mahindra & Mahindra, branded on its products usually as 'Mahindra',
produces SUVs, saloon cars, pickups, commercial vehicles, and two wheeled
motorcycles and tractors. It owns assembly plants in India, Mainland China
(PRC), the United Kingdom, and has three assembly plants in the United
States. Mahindra maintains business relations with foreign companies like
Renault SA, France.
M&M has a global presence and its products are exported to several
countries. Its global subsidiaries include Mahindra Europe S.r.l. based in
Italy, Mahindra USA Inc., Mahindra South Africa and Mahindra (China)
Tractor Co. Ltd.
Mahindra started making passenger vehicles firstly with the Logan in
April 2007 under the Mahindra Renault joint venture. M&M will make its
maiden entry into the heavy trucks segment with Mahindra Navistar, the
joint venture with International Truck, USA.
Mahindra produces a wide range of vehicles including MUVs, LCVs and
three wheelers. It manufactures over 20 models of cars including larger,
multi-utility vehicles like the Scorpio and the Bolero. It formerly had a joint
venture with Ford called Ford India Private Limited to build passenger cars.
At the 2008 Delhi Auto Show, Mahindra executives said the company is
pursuing an aggressive product expansion program that would see the
launch of several new platforms and vehicles over the next three years,
including an entry-level SUV designed to seat five passengers and powered
by a small turbo diesel engine. True to their word, Mahindra & Mahindra
launched the Mahindra Xylo in January 2009, and as of June 2009, the Xylo
has sold over 15000 units.

Also in early 2008, Mahindra commenced its first overseas CKD

operations with the launch of the Mahindra Scorpio in Egypt, in partnership
with the Bavarian Auto Group. This was soon followed by assembly facilities
in Brazil. Vehicles assembled at the plant in Bramont, Manaus, include
Scorpio Pik Ups in single and double cab pick-up body styles as well as
SUVs.
Mahindra planned to sell the diesel SUVs and pickup trucks starting in
late 2010 in North America through an independent distributor, Global
Vehicles USA, based in Alpharetta, Georgia. Mahindra announced it will
import pickup trucks from India in knockdown kit (CKD) form to circumvent
the Chicken tax. CKDs are complete vehicles that will be assembled in the
U.S. from kits of parts shipped in crates. On 18 October 2010, however, it
was reported that Mahindra had indefinitely delayed the launch of vehicles
into the North American market, citing legal issues between it and Global
Vehicles after Mahindra retracted its contract with Global Vehicles earlier in
2010, due to a decision to sell the vehicles directly to consumers instead of
through Global Vehicles. However, a November 2010 report quoted John
Perez, the CEO of Global Vehicles USA, as estimating that he expects
Mahindras small diesel pickups to go on sale in the U.S. by spring 2011,
although legal complications remain, and Perez, while hopeful, admits that
arbitration could take more than a year. Later reports suggest that the
delays may be due to an Mahindra scrapping the original model of the truck
and replacing it with an upgraded one before selling them to Americans In
June 2012, a mass tort lawsuit was filed against Mahindra by its American
dealers, alleging the company of conspiracy and fraud.
Mahindra & Mahindra has a controlling stake in Mahindra Reva Electric
Vehicles. In 2011, it also gained a controlling stake in South Korea's
SsangYong Motor Company.
Mahindra has launched its relatively heavily publicized SUV, XUV 500,
code named as W201 in September 2011. The new SUV by Mahindra has
been designed in-house and it is developed on the first global SUV platform
that could be used for developing more SUVs. In India, the new Mahindra
XUV 500 comes in a price range between Rs 11.40 lakh to Rs 15 lakh. The
company is expected to launch 3 products in CY'15 (2 SUVs and 1 CV) and
an XUV 500 hybrid. M&Ms two wheeler segment will launch a new scooter
in Q1FY'15. Besides India, the company also targets Europe, Africa,
4

Australia and Latin America for this model.[36] Mahindra President Mr Pawan
Goenka stated that the company plans to launch six new models this fiscal.
The company launched CNG version of its mini truck Maxximo on 29 June
2012. A new version of Verito in diesel and petrol options was launched by
the company on 26 July 2012 to compete with Maruti's Dzire and Toyota
Kirloskar Motor's Etios.

4. Milestones

2000: The Company adopted a new logo.

Mahindra Auto Specialties Limited established a new 100% subsidiary.
Mahindra & Mahindra set up its first satellite tractor plant at Rudrapur.
A new age tractor, Mahindra Arjun 605 DI (60 HP), launched.
Bolero GLX (a utility vehicle) launched in response to the needs of urban
consumers.
2001: Champion, a 3wheeler diesel vehicle, launched.
Mahindra MaXX launched, a multiutility vehicle positioned with the
caption 'Maximum Space, Maximum Comfort'.
Mahindra & Mahindra tied up with Renault for Petrol Engines.
A separate division established to provide Defense Solutions.
Mahindra Special Services Group established to provide Information
Security.
Mahindra Infrastructure Developers Limited established for development
and management of infrastructure projects.
Mahindra Life spaces Developers Limited established for development of
corporate property.
2002: Scorpio launched, a new generation, worldclass sports utility
vehicle that redefined the SUV market and lived up to its positioning:
'Nothing else will do'.
2003: Invader launched a sporty open top vehicle.
A second tractor assembly plant set up in USA.
MaXX Pik Up launched.

 India's first Turbo tractor launched Mahindra Sarpanch 595 DI Super

Turbo.
Mahindra & Mahindra ventured into Industrial engine business.
An alliance formed between Mahindra Defense & Lockheed Martin
Information Systems, UK, for defense products.
Mahindra Engineering Services established.

2004: Mahindra World Tractor(75 HP) launched in the International

market.
Systech (earlier known as MSAT) established, to focus on developing
components as well as offering engineering services.
Bolero and Scorpio launched in Latin American, Middle East and South
African markets.
Signed MoU to enter into joint venture with Jiangling Motor Company
Group (JMCG) of China, to acquire tractor manufacturing assets from
Jiangling Tractor Company, a subsidiary of Jiangling Motor Company
Group.
Mahindra & Mahindra became the first Indian company to achieve sales
of one million tractors.
2005: Acquired 51% stake in SAR Transmission Private Limited, a
company engaged in manufacture of gears and transmission shafts.
Farm Equipment Sector launched operations in Australia.
Mahindra & Mahindra became the first Indian auto manufacturer to
launch the Common Rail Diesel Engine (CRDe), offering it in the
Scorpio.
Acquired 80% stake in the joint venture with Jiangling Motors i.e. in
Mahindra (China) Tractor Company.
Mahindra Renault Limited established a joint venture with Renault to
manufacture and market Logan, a midsized sedan, in India.
Mahindra International Limited established a joint venture with
International Truck and Engine Corporation to manufacture trucks & buses
in India.
2006: Announced plans to set up a 3000 acres Special Economic Zone
in Jaipur.
6

 The Mahindra United football team won the Federation Cup trophy.
Mahindra & Mahindras fifth fullscale automotive plant opened in
Hardiwar Industrial Estate to manufacture threewheeler.
The Scorpio Hybrid was unveiled at the Delhi Auto Expo along with 9
other prototype vehicles.
Mahindra & Mahindra acquired the Stokes Group of UK, the largest
automotive forgings company in the UK.
Mahindra Finance became the first Mahindra Group Company in 23 years
to be listed publicly and was oversubscribed 27 times.
BMW entered Mahindra World City, Chennai.
The All New Scorpio with 43 new features was launched.
Mahindra Life spaces announced plans to set up a Special Economic
Zone spreading over 3000 acres in Pune.
Scorpio was chosen for the Gondwanaland Expedition a landmark
assignment for the vehicle.
Mahindra Holidays & Resorts India Limited (the 'Company'), a leisure
hospitality provider offering quality family holidays and part of the Mahindra
Group of Companies.
Mahindra & Mahindra's Farm Equipment Sector (FES) showcased India's
first biodiesel .
Mahindra & Mahindra launched the Scorpio Vseries.
On Nov. 1, 2007, a wholly owned affiliate of Navistar International
Corporation (Other OTC: NAVZ), signed a joint venture agreement with
Mahindra & Mahindra to produce diesel engines for medium and heavy
commercial trucks and buses in India.
Logan was the highest selling sedan and Scorpio the highest selling UV
in July 2007.
Mahindra launched the Mahindra PikUp (double cab) in Chile in July
2007.
2008: Mahindra enters into JV with TMI Pacific in Australia
Project Ingenio is now Mahindra XYLO
Mahindra introduces FuelSmart system in Bolero and Scorpio
SUVs
Tech Mahindra receives the Frost and Sullivan 2008 Growth Excellence
Award
Anand Mahindra receives Harvard Business School Alumni Achievement
Award
7

 Mahindra launches first Sustainability Report with highest GRI

Rating
Mahindra First Choice Services launches first CarXSpace outlet in
Chennai
Mahindra to enter the twowheeler industry.
Mahindra Tractors launch Indias first biodiesel tractor
Mahindra Intertrade inaugurates a worldclass Electrical Steel processing
plant in Vadodara
2009: Mahindra launches the Xylo January 13
Mahindra launches the New, Mighty Muscular Scorpio March 6
Tech Mahindra declared highest bidder for Satyam April 14
2013: Mahindra XUV500 sets a new record in the Limca Book of
Records
Mahindra launches its innovative customer care initiative, Mahindra
QWIK
2014 Mahindra Group expands its footprint in the United States
Mahindra Two Wheelers debuts in Uganda
Mahindra signs MoU with Government of Bhutan to promote usage of
Electric Vehicles in the country

5. Profit & loss account

(Rs crore)
Mar '
14

Mar '
13

Mar '
12

Mar '
11

Mar '
10

Income
Operating
income

40,508. 40,441. 31,853. 23,460. 18,516.

50
16
52
26
33

Expenses
Material
consumed
Manufacturing
expenses
Personnel
expenses
Selling
expenses
Adminstrative
expenses
Expenses
capitalised
Cost of sales

29,614. 30,587. 23,661. 16,402. 12,437.

77
96
61
65
87
221.35 206.39 175.78 143.93 217.89
2,163.7 1,866.4 1,701.7 1,431.5 1,199.8
2
5
8
2
5
-

- 802.02

3,787.4 3,071.0 2,543.6 2,027.8

901.45
5
6
3
3
-

-59.55

35,787. 35,731. 28,082. 20,005. 15,499.

9

Mar '
14

Mar '
13

Mar '
12

Mar '
11

Mar '
10

29

86

80

93

53

Operating
profit

4,721.2 4,709.3 3,770.7 3,454.3 3,016.8

1
0
2
3
0

Other
recurring
income

717.99 549.17 465.79 434.15 317.99

Adjusted
PBDIT

5,439.2 5,258.4 4,236.5 3,888.4 3,334.7

0
7
1
8
9

Financial
expenses

259.22 191.19 162.75

Depreciation

863.34 710.81 576.14 413.86 370.78

Other write
offs
Adjusted PBT
Tax charges
Adjusted PAT
Nonrecurring
items
Other non
cash

72.49 156.85

4,316.6 4,356.4 3,497.6 3,402.1 2,807.1

4
7
2
3
6
611.08

1,094.2
727.00 857.51 759.00
7

3,705.5 3,262.2 2,770.6 2,544.6 2,048.1

6
0
2
2
6
52.79

90.62 108.27 117.48

10

-32.90
72.49

Mar '
14

Mar '
13

Mar '
12

Mar '
11

Mar '
10

adjustments
Reported net
profit

3,758.3 3,352.8 2,878.8 2,662.1 2,087.7

5
2
9
0
5

Earnings
before
appropriation

13,710. 11,257. 9,087.4 7,250.4 5,453.0

27
36
3
7
7

Equity
dividend
Preference
dividend
Dividend tax
Retained
earnings

758.21 798.17 767.48 706.08 549.52

104.04

92.98 101.13

96.56

74.23

12,848. 10,366. 8,218.8 6,447.8 4,829.3

02
21
2
3
2

11

6. Balance sheet
(Rs crore)
Mar ' 14 Mar ' 13 Mar ' 12 Mar ' 11 Mar ' 10
Sources of funds
Owner's fund
Equity share
capital
Share application
money
Preference share
capital
Reserves &
surplus
Loan funds
Secured loans
Unsecured loans
Total
Uses of funds
Fixed assets
Gross block
Less :
revaluation

295.16

295.16

294.52

293.62

282.95

0.02

8.01

16,496.03 14,363.76 11,876.57 10,019.75

7,527.60

294.10 266.67
400.18 407.23
602.45
3,451.06 2,960.40 2,774.04 1,913.87 2,277.70
20,536.35 17,885.99 15,345.31 12,634.49 10,698.71

10,242.58 8,602.96 7,502.36 5,858.26

12

4,866.18
11.67

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

reserve
Less :
accumulated
4,365.63 3,645.10
depreciation
Net block
5,876.95 4,957.86
Capital work-in1,228.44 863.48
progress
Investments
11,379.85 11,833.46
Net current
assets
Current assets,
12,803.41 9,798.79
loans & advances
Less : current
liabilities &
10,752.30 9,567.60
provisions
Total net current
2,051.11 231.19
assets
Miscellaneous
expenses not
written
Total
20,536.35 17,885.99
Notes:
Book value of
unquoted
8,014.42 8,206.29
investments
Market value of
quoted
26,284.66 17,757.90
investments
Contingent
6,421.09
87.20
liabilities
13

Mar ' 10

3,216.34 2,725.35

2,537.77

4,286.02 3,132.91

2,316.74

794.73

773.68

1,374.31

10,310.46 8,925.63

6,398.02

8,520.77 6,707.56

6,224.56

8,566.67 6,905.29

5,619.04

-45.90

-197.73

605.52

4.12

15,345.31 12,634.49 10,698.71

6,674.89 5,479.48

4,806.15

14,508.74 15,867.63 12,216.75

2,307.66 1,893.85

2,020.79

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

Number of
equity shares
outstanding
(Lacs)

6158.92 6139.81

14

6139.75 6139.40

Mar ' 10
5659.08

7. FINANCIAL RATIO ANALYSIS

Financial statement analysis is a judgmental process. One of the primary
objectives is identification of major changes in trends, and relationships and
the investigation of the reasons underlying those changes. The judgment
process can be improved by experience and the use of analytical tools.
Probably the most widely used financial analysis technique is ratio analysis,
the analysis of relationships between two or more line items on the financial
statement. Financial ratios are usually expressed in percentage or times.
Generally, financial ratios are calculated for the purpose of evaluating
aspects of a company's operations and fall into the following categories:
liquidity ratios measure a firm's ability to meet its current obligations.
profitability ratios measure management's ability to control expenses and to
earn a return on the resources committed to the business. leverage ratios
measure the degree of protection of suppliers of long-term funds and can
also aid in judging a firm's ability to raise additional debt and its capacity to
pay its liabilities on time. efficiency, activity or turnover ratios provide
information about management's ability to control expenses and to earn a
return on the resources committed to the business. A ratio can be computed
from any pair of numbers.
Given the large quantity of variables included in financial statements, a
very long list of meaningful ratios can be derived. A standard list of ratios or
standard computation of them does not exist. The following ratio
presentation includes ratios that are most often used when evaluating the
credit worthiness of a customer. Ratio analysis becomes a very personal or
company driven procedure. Analysts are drawn to and use the ones they
are comfortable with and understand.

15

Working Capital
Working capital compares current assets to current liabilities, and serves as
the liquid reserve available to satisfy contingencies and uncertainties. A high
working capital balance is mandated if the entity is unable to borrow on
short notice. The ratio indicates the short-term solvency of a business and
in determining if a firm can pay its current liabilities when due.
Formula
Current Assets
- Current Liabilities

Mar ' 14

= 12,803.41 -10,752.30

Mar ' 13 = 9,798.79 - 9,567.60

Mar ' 12 = 8,520.77 - 8,566.67
Mar ' 11 = 6,707.56 - 6,905.29
Mar ' 10 = 6,224.56 - 5,619.04

Mar ' 14
2,051.11

Mar ' 13
231.19

Mar ' 12
-45.90

Mar ' 11
-197.73

Mar ' 10
605.52

Acid Test or Quick Ratio

A measurement of the liquidity position of the business. The quick ratio
compares the cash plus cash equivalents and accounts receivable to the
current liabilities. The primary difference between the current ratio and the
quick ratio is the quick ratio does not include inventory and prepaid
expenses in the calculation. Consequently, a business's quick ratio will be
lower than its current ratio. It is a stringent test of liquidity.

16

 Formula
Cash + Marketable Securities + Accounts Receivable
Current Liabilities

Current Ratio
Provides an indication of the liquidity of the business by comparing the
amount of current assets to current liabilities. A business's current assets
generally consist of cash, marketable securities, accounts receivable, and
inventories. Current liabilities include accounts payable, current maturities
of long-term debt, accrued income taxes, and other accrued expenses that
are due within one year. In general, businesses prefer to have at least one
dollar of current assets for every dollar of current liabilities. However, the
normal current ratio fluctuates from industry to industry. A current ratio
significantly higher than the industry average could indicate the existence of
redundant assets. Conversely, a current ratio significantly lower than the
industry average could indicate a lack of liquidity.

Formula
Current Assets
Current Liabilities

Mar ' 14

= 12,803.41 /10,752.30

Mar ' 13 = 9,798.79 /9,567.60

Mar ' 12 = 8,520.77 /8,566.67
Mar ' 11 = 6,707.56 /6,905.29
Mar ' 10 = 6,224.56 /5,619.04
Mar ' 14

Mar ' 13

Mar ' 12

Mar ' 11

Mar ' 10

1.19

1.02

0.99

0.97

1.11

17

Cash Ratio
Indicates a conservative view of liquidity such as when a company has
pledged its receivables and its inventory, or the analyst suspects severe
liquidity problems with inventory and receivables.
Formula
Cash Equivalents + Marketable Securities
Current Liabilities

Profitability Ratios
Net Profit Margin (Return on Sales)
A measure of net income dollars generated by each dollar of sales.
Formula
Net Income *
Net Sales
* Refinements to the net income figure can make it more accurate than this
ratio computation. They could include removal of equity earnings from
investments, "other income" and "other expense" items as well as minority
share of earnings and nonrecurring items.
Return on Assets
Measures the company's ability to utilize its assets to create profits.
Formula
Net Income *
(Beginning + Ending Total Assets) / 2
Operating Income Margin
A measure of the operating income generated by each dollar of sales.
Formula
Operating Income
Net Sales
18

Return on Investment
Measures the income earned on the invested capital.
Formula
Net Income *
Long-term Liabilities + Equity
Return on Equity
Measures the income earned on the shareholder's investment in the
business.
Formula
Net Income *
Equity

Return on Assets
A combination of financial ratios in a series to evaluate investment return.
The benefit of the method is that it provides an understanding of how the
company generates its return.
Formula
Net Income *
Sales

Sales
Assets

Assets
Equity

Gross Profit Margin

Indicates the relationship between net sales revenue and the cost of goods
sold. This ratio should be compared with industry data as it may indicate
insufficient volume and excessive purchasing or labor costs.
Formula
Gross Profit
Net Sales

19

Efficiency Ratios
Cash Turnover
Measures how effective a company is utilizing its cash.
Formula
Net Sales
Cash

Sales to Working Capital (Net Working Capital Turnover)

Indicates the turnover in working capital per year. A low ratio indicates
inefficiency, while a high level implies that the company's working capital is
working too hard.
Formula
Net Sales
Average Working Capital

Total Asset Turnover

Measures the activity of the assets and the ability of the business to
generate sales through the use of the assets.
Formula
Net Sales
Average Total Assets

20

Fixed Asset Turnover

Measures the capacity utilization and the quality of fixed assets.
Formula
Net Sales
Net Fixed Assets
Days' Sales in Receivables
Indicates the average time in days, that receivables are outstanding (DSO).
It helps determine if a change in receivables is due to a change in sales, or
to another factor such as a change in selling terms. An analyst might
compare the days' sales in receivables with the company's credit terms as
an indication of how efficiently the company manages its receivables.
Formula
Gross Receivables
Annual Net Sales / 365

Accounts Receivable Turnover

Indicates the liquidity of the company's receivables.
Formula
Net Sales
Average Gross Receivables
Accounts Receivable Turnover in Days
Indicates the liquidity of the company's receivables in days.
Formula
Average Gross Receivables
Annual Net Sales / 365
Days' Sales in Inventory
Indicates the length of time that it will take to use up the inventory through
sales.
Formula
Ending Inventory
Cost of Goods Sold / 365
21

Inventory Turnover
Indicates the liquidity of the inventory.
Formula
Cost of Goods Sold
Average Inventory
Inventory Turnover in Days
Indicates the liquidity of the inventory in days.
Formula
Average Inventory
Cost of Goods Sold / 365
Operating Cycle
Indicates the time between the acquisition of inventory and the realization
of cash from sales of inventory. For most companies the operating cycle is
less than one year, but in some industries it is longer.
Formula
Accounts Receivable Turnover in Days
+ Inventory Turnover in Day
Days' Payables Outstanding
Indicates how the firm handles obligations of its suppliers.
Formula
Ending Accounts Payable
Purchases / 365

Payables Turnover
Indicates the liquidity of the firm's payables.
Formula
Purchases
Average Accounts Payable

22

Payables Turnover in Days

Indicates the liquidity of the firm's payables in days.
Formula
Average Accounts Payable
Purchases / 365

Bad-Debt to Accounts Receivable Ratio

Bad-debt to Accounts Receivable ratio measures expected uncollectibility on
credit sales. An increase in bad debts is a negative sign, since it indicates
greater realization risk in accounts receivable and possible future write-offs.
Formula
Bad Debts
Accounts Receivable

Bad-Debt to Sales Ratio

Bad-debt ratios measure expected uncollectibility on credit sales. An
increase in bad debts is a negative sign, since it indicates greater realization
risk in accounts receivable and possible future write-offs.
Formula
Bad Debts
Sales

Book Value per Common Share

Book value per common share is the net assets available to common
stockholders divided by the shares outstanding, where net assets represent
stockholders' equity less preferred stock. Book value per share tells what
each share is worth per the books based on historical cost.
Formula
(Total Stockholders' Equity - Liquidation Value of Preferred Stocks Preferred Dividends in Arrears)
Common Shares Outstanding
23

Current-Liability Ratios
Current-liability ratios indicate the degree to which current debt payments
will be required within the year. Understanding a company's liability is
critical, since if it is unable to meet current debt, a liquidity crisis looms. The
following ratios are compared to industry norms.
Formulas
Current to Non-current =
Current to Total =

24

Current Liabilities
Non-current Liabilities
Current Liabilities
Total Liabilities

8. IMPORTANCE
Ratio analysis is an important technique of financial analysis. It is a
means for judging the financial health of a business enterprise. It
determines and interprets the liquidity, solvency, profitability,etc. of a
business enterprise.

It becomes simple to understand various figures in the financial

statements through the use of different ratios. Financial ratios simplify,
summaries, and systemize the accounting figures presented in financial
statements.

With the help of ratio analysis, comparison of profitability and financial

soundness can be made between one industry and another. Similarly
comparison of current year figures can also be made with those of
previous years with the help of ratio analysis and if some weak points are
located, remedial measures are taken to correct them.

If accounting ratios are calculated for a number of years, they will reveal
the trend of costs, sales, profits and other important facts. Such trends
are useful for planning.

Financial ratios, based on a desired level of activities, can be set as

standards for judging actual performance of a business. For example, if
owners of a business aim at earning profit @ 25% on the capital which is
the prevailing rate of return in the industry then this rate of 25%
becomes the standard. The rate of profit of each year is compared with
this standard and the actual performance of the business can be judged
easily.
Ratio analysis discloses the position of business with different viewpoint.
It discloses the position of business with liquidity viewpoint, solvency
view point, profitability viewpoint, etc. with the help of such a study, we
can draw conclusion regarding the financial health of business
25

enterprise.

9. SUMMARY OF RATIOS
Mar '
14

Mar '
13

Mar '
12

Mar '
11

Mar '
10

Adjusted EPS (Rs)

60.17 53.13 45.13 41.45 36.19
Adjusted cash EPS
74.18 64.71 54.51 48.19 42.74
(Rs)
Reported EPS (Rs)
61.02 54.61 46.89 43.36 36.89
Reported cash EPS
75.04 66.18 56.27 50.10 43.44
(Rs)
Dividend per share 14.00 13.00 12.50 11.50
9.50
Operating profit per
76.66 76.70 61.41 56.26 53.31
share (Rs)
Book value (excl
rev res) per share 272.63 238.75 198.23 167.99 137.95
EPS (Rs)
Book value (incl rev
res) per share EPS 272.63 238.75 198.23 167.99 138.15
(Rs)
Net operating
income per share
657.72 658.67 518.81 382.13 327.20
EPS (Rs)
Free reserves per
- 120.24
share EPS (Rs)
Profitability ratios
Operating margin
11.65 11.64 11.83 14.72 16.29
(%)
Gross profit margin
9.52 9.88 10.02 12.96 14.29
26

(%)
Net profit margin
9.11
(%)
Adjusted cash
11.08
margin (%)
Adjusted return on
22.06
net worth (%)
Reported return on
22.38
net worth (%)
Return on long
22.28
term funds (%)
Leverage ratios
Long term debt /
0.22
Equity
Total debt/equity
0.22
Owners fund as %
81.76
of total source
Fixed assets
2.11
turnover ratio
Liquidity ratios
Current ratio
1.19
Current ratio (inc.
1.19
st loans)
Quick ratio
0.93
Inventory turnover
14.45
ratio

8.17

8.90 11.14 11.08

9.69 10.35 12.38 12.84

22.25 22.76 24.67 26.23
22.87 23.65 25.81 26.74
25.50 23.85 27.52 27.73

0.21

0.26

0.22

0.46

0.22

0.26

0.22

0.36

81.95 79.31 81.62 73.05

2.43

2.28

2.01

1.85

1.02

0.99

0.97

1.11

1.02

0.99

0.96

1.11

0.77

0.71

0.72

0.86

16.71 13.51 13.85 17.91

27

10. CONCLUSION

Ratios make the related information comparable. A single figure by itself

has no meaning, but when expressed in terms of a related figure, it yields
significant interferences. Thus, ratios are relative figures reflecting the
relationship between related variables. Their use as tools of financial
analysis involves their comparison as single ratios, like absolute figures,
28

are not of much use.

Ratio analysis has a major significance in analyzing the financial

performance of a company over a period of time. Decisions affecting
product prices, per unit costs, volume or efficiency have an impact on the
profit margin or turnover ratios of a company.

Financial ratios are essentially concerned with the identification of

significant accounting data relationships, which give the decisionmaker insights into the financial performance of a company.

The analysis of financial statements is a process of evaluating the

relationship between component parts of financial statements to obtain a
better understanding of the firms position and performance.

The first task of financial analyst is to select the information relevant

to the decision under consideration from the total information contained
in the financial statements. The second step is to arrange the information
in a way to highlight significant relationships. The final step is
interpretation and drawing of inferences and conclusions. In brief,
financial analysis is the process of selection, relation and evaluation.

Ratio analysis in view of its several limitations should be considered only

as a tool for analysis rather than as an end in itself. The reliability and
significance attached to ratios will largely hinge upon the quality of data
on which they are based. They are as good or as bad as the data itself.
Nevertheless, they are an important tool of financial analysis.

29

11. BIBLIOGRAPHY

30

1. Mahindra & Mahindra' Official Website

2. WWW.Business world.com

3. WWW.Autowold.com

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