Analysis of Mahindra & Mahindra Limited

Analysis of Non Financial Information:

BASIC DETAILS

Sector

Automobile

CMP

Rs 940.40

NIFTY

5995.00

Mkt. Capn.

Rs. 57,717.26 Cr

Face Value

Rs.10.00

Book Value

197.18

BSE Code

500520

NSE Code

M&M

52 week
High/Low

Rs.976.00/Rs.621.05

(Table 1)

Key Points:

The company is one of the top Tractor selling brands in the world.
The company has a huge market share for its tractors and passenger cars.
The company is planning to invest Rs.250Cr. in Aerospace
The group is going to decide on bidding to acquire Korean SUV Maker Ssangyong

Motor by July.
The company is going to market many new variants in its motorcycle segment by the
end of the year.
The companys foray into the electronic vehicles segment is having a greater future
growth prospects.
The company plans to open 300 outlets in various parts of the country in the next 3
years.
The Mahindra Group:
The Mahindra & Mahindra, a company established in the year 1945 as a franchise for
assembling Jeeps now a US $7.1 billion Indian multinational employing over 1 lakh people
across the globe. The Mahindra Group today is an embodiment of global excellence and
enjoys a strong corporate brand image. The company enjoys a leadership position in utility
vehicles, tractors and information technology, with a significant and growing presence in
financial services, tourism, infrastructure development, trade and logistics.
The Management:
The Mahindra Group is being managed by eminent persons from various industries who
bring diverse experience and expertise to the Board. The present group is headed by Mr.
Keshub Mahindra as the Chairman and Mr. Anand G. Mahindra as the Vice Chairman
Managing Director.
Mahindra & Mahindra Limited:
The Mahindra & Mahindra Ltd., is in the automobile business which includes:
1.

Automotive Sector: The Mahindra Groups Automotive Sector is in the business of

manufacturing and marketing utility vehicles and light commercial vehicles, including threewheelers. It is the market leader in utility vehicles in India since its inception, and currently
accounts for about a half of Indias market for utility vehicles. Over the years, the Group has

developed a large product portfolio catering to a diverse customer base spanning rural
and semi-urban customers, defense requirements and luxurious urban utility vehicles.
The Group exports its products to several countries in Europe, Africa, South America,
South Asia and the Middle East. The Automotive Sector continues to be a leader in the utility
vehicle segment with a diverse portfolio that includes mass transport as well as new
generation vehicles.
Mahindra & Mahindras foray into the three wheeler segment with Alpha and Champion
has also made it a leader in its category.
The International Operations of the Automotive Sector focuses on the international
business. Mahindra Renault (MRPL) announced the launch of Logan, Indias first wide body
car, sporting a host of class-defying features at an aggressive price.
Mahindra Navistar Automotives Ltd. (MNAL), a joint venture between Mahindra &
Mahindra Limited and International Truck and Engine Corporation, will manufacture trucks
and buses for India and export markets. It will also provide component sourcing and
engineering services to International Truck and Engine Corporation.
M&M has a growing global footprint and has established itself in markets across the world
as one of the worlds most prestigious auto brands. The emphasis is now on establishing a
solid local presence in these countries as this was the key to long-term success and building
trust with the customer. With subsidiaries in South Africa, Europe and Australia and a strong
presence in over 15 countries, it aspires to be globally renowned in Utility vehicles.
The Mahindra Group entered into the two wheeler market by acquiring the assets of
Kinetic Motor Company Limited. The company has a partnership with Taiwans Sanyang
industry Company Limited which is a leading manufacturer of two wheelers. The company
has recently made an entry into the electric vehicles segment by acquiring a major stake in
Reva.
2.

Farm Equipments Sector: The Mahindra group's Farm Equipment Sector (FES) is

amongst the top three tractor brands in the world. It has won the Japan Quality Medal in 2007.
It also holds the distinction of being the first tractor company globally to win the Deming
Application Prize in 2003. FES is the first tractor company worldwide to win these honors.
This shows the strong focus of FES on Quality and Customer Satisfaction. Today, the
domestic market share of FES is around 42%. (Mahindra brand: 30% and Swaraj brand: 12%).

FES has a subsidiary agricultural tractor manufacturing company in India known as

Mahindra Gujarat Tractor Limited (MGTL).
The international operations of the Farm Equipment Sector are spread across six
continents and in around 25 countries. FES has state-of-the-art manufacturing plants in India and
China with a combined capacity to produce more than 1,70,000 tractors a year. Besides, these
plants there are assembly plants in USA and Australia. FES has more than 1000 dealers worldwide.
In 2008, Mahindra acquired the majority stake in 3rd largest tractor company in China, with
forming a Joint Venture (JV) with Jiangsu Yueda Yancheng Tractor Manufacturing Co. Ltd.
(Yancheng Tractor), a leading Chinese tractor manufacturer.

Analysis of Financial Information:

Mahindra and Mahindra
Previous Years
Balance Sheet
------------------- in Rs. Cr. ------------------Mar '12

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities

Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans &
Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)

Mar '11

12 mths

12 mths

294.52
294.52
0
0
11,799.26
10.91
12,104.69
400.18
2,774.04
3,174.22
15,278.91
Mar '12

293.62
293.62
33.97
0
9,974.62
11.18
10,313.39
407.23
1,998.06
2,405.29
12,718.68
Mar '11

12 mths

12 mths

8,063.18
3,552.36
4,510.82
922.26
10,310.46
2,358.39
1,988.36
630.57
4,977.32
2,767.19
557.86
8,302.37

5,849.27
2,841.73
3,007.54
1,364.31
9,325.29
1,694.21
1,354.72
447.62
3,496.55
2,653.52
167.02
6,317.09

0
6,921.73
1,845.27
8,767.00
-464.63
0
15,278.91

0
5,289.67
2,005.88
7,295.55
-978.46
0
12,718.68

2,633.99
205.32

2,632.10
174.85

(Table 2)

Profit & Loss account of Mahindra and Mahindra

------------------- in Rs. Cr. ------------------Mar '12
Mar '11

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing
Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses

Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)

12 mths

12 mths

34,353.63
2,518.43
31,835.20
574.99
597.33
33,007.52

25,569.55
2,092.02
23,477.53
563.13
202.23
24,242.89

24,258.94
175.78
1,603.81
125.81

16,604.88
143.93
1,445.56
98.33

1,811.88
760.05
-73.53
28,662.74
Mar '12

1,735.63
261.1
-50.87
20,238.56
Mar '11

12 mths

12 mths

3,769.79
4,344.78
162.75
4,182.03
576.14
0.00
3,605.89
0.00
3,605.89
727.00
2,878.89
4,403.80
0
767.48
101.13

3,441.20
4,004.33
70.86
3,933.47
413.86
0.00
3,519.61
0.00
3,519.61
857.51
2,662.10
3,633.68
0
706.08
96.56

5,890.30
48.88
250
205.32
(Table 3)

5,872.47
45.33
230
174.85

Financial Highlights:

On looking at the balance sheet (table 1) we can see that in 2 the debts (both
secured and unsecured) have increased by more than 31 % when compared with
the previous year. There is also a huge increase in Fixed Assets and Investments
when compared with the figures of 2008.

On looking at the income statement (table 3) we can see that the sales revenue has
increased when compared with the previous year and there is an s ma l l in cr e as e
in the operating profits which is mainly because of huge increase in the cost of
materials compared with previous yr 2011. As a result there is a less increase in the
Net Profits .

Analysis of Key Ratios:

To better understand the financial position of the firm the following ratios are considered:
(Table 4)
Ratios

2012

2011

Net profit Margin (%)

8.92

9.45

Debt Equity Ratio

0.26

0.23

Return on Equity (%)

23.80

25.92

Earnings Per Share (EPS) (Rs.)

48.88

45.33

Price Earnings Ratio (P/E)

18.24

10.58

Dividend Per Share (DPS) (Rs.)

25.14

26.09

Dividend Payout Ratio (%)

32.58

24.92

Book Value Per Share (Rs.)

205.32

174.85

Graphs of Key Ratios:

1.

Debt-Equity Ratio:

Inference: The Debt-Equity Ratio is the ratio between outsider funds and owners funds. A
Debt-Equity ratio of 1:2 represents high safety margin to the creditors. In table 4 we can see
that the Debt-Equity Ratio has increased since 2011-12 which means that the debt is
increasingly used for every rupee of own funds.

2.

Return on Equity:

Inference: The Return on Equity Ratio measures the returns on the equity funds employed by
the business. The table 4 shows that the company made lesser returns on the equity funds
employed in the business compared to previous yr.

3.

Price Earnings Ratio:

Inference: This ratio brings out the relationship between the current prices and the EPS. It
shows the amount an investor is willing to pay per rupee of the earnings of the company. In
the table 4 we can see that in the year 2012 the investor is ready to pay Rs.18.24 per rupee
of earnings. There is a rise in P/E ratio with previous yr.

4.

Dividend Per Share (DPS):

Inference: This ratio shows the earnings that are distributed to the equity shareholders on a
per share basis. The company has declared less dividend when compared with the previous
years of 2011.

5.

Dividend Payout Ratio:

Inference: This ratio shows the percentage of profits earned that are distributed as dividends
to equity shareholders. In the table we can see that the company has declared more
percentage of earnings as dividends in 2012 .

6.

Book Value Per Share:)

Inference: This ratio shows the claim of the shareholders on a per share basis. This ratio
shows the worth of a share according to the books. we can see that the Book value per
share is increased in 2012.

Analysis of Technical Indicators

Relative Strength Index (RSI):

(Figure 1)

In the above chart the price line and the 14 day RSI line are plotted. The RSI line shown at
the bottom of the chart is used to identify the overbought and over sold situations. If RSI
crosses above 70 level the stock is considered to be overbought and so there are chances
for trend reversal. If the RSI falls below 30 level the stock is considered to be oversold and
hence undervalued. So there are chances for a trend reversal. An RSI between 50 and
70 is considered bullish while below 50 is considered to be bearish.
Inference: The various overbought and oversold conditions in the figure 1 are identified
using and marks respectively.

In the figure we can also see that the RSI level is above 50 and is also rising. This shows that
there is a bullish momentum.

Rate of Change (ROC):

overbou

overso

(Figure 2)

The rate of change is a pure momentum oscillator which shows the rate of change in
prices of the stock over a fixed period of time. In the above chart the price line is shown at
the top and 10 days Rate of Change is shown at the bottom.
The ROC value oscillates above and below zero levels which shows the percentage
change in the price. These values are also used to find the overbought and oversold
conditions. Generally the ROC value above 10 is considered to be overbought and below 10
is considered to be oversold. An ROC value above zero or moving from below to above zero
level is considered to be bullish. It is considered bearish when the ROC value goes below
zero or when it moves from above zero to below zero level.

Inference:
From the figure 2 we can see that the ROC value is increasing after touching the zero value.
Hence the momentum is considered bullish.

Moving Average Convergence and Divergence (MACD):

(Figure 3)

The price curve and the MACD curve (red line) are plotted on the figure 15. The MACD
chart is plotted along with the MACD signal line (blue line) and MACD histogram (black
shaded region). The chart is plotted to identify the strongest momentum i.e. bullish or
bearish. This can be identified using signal line crossovers and centerline crossovers.

Signal line crossovers: It is considered bullish if the MACD line crosses above the
signal line (its nine day EMA). If the converse happens it is considered bearish

Centerline Crossovers: It is considered bullish if MACD crosses above the centerline.

If the converse happens the momentum is considered bearish.

MACD indicator is highly volatile and hence it is always considered along with other
indicators.

Inference:

The various Bullish and bearish signals are identified in the figure 3
using and marks as bullish and bearish respectively, and various selling
and buying signals has been showed.
In the above chart we can see that in month of Jan the MACD
curve is above its Signal line and crosses the center line at this point
investor can make a short position to gain profit till Feb when MACD
line fall below the signal line to form a reverse trend at this point
investor must quit its position.

If investor want to go for the long term position then we can see in the
end month of May, when MACD crosses the signal line above after a
long low, this is the time to buy a stock for both short and long term at
this point price is 645 and in the start of Oct12, we can see MACD again
fallen below its signal line after long upward trend therefore investor
should cut his position to book long term profit, at this point price is
Rs.865.

After Oct,12 we can see MACD didnt shown any good position for
buying at end of Oct it again stood up but fall shortly and till Dec we can
see MACD is continuously falling below its signal line to form bearish
pattern at this stage more and more selling has taken place.
In Jan,13 Again MACD has crosses the signal line above now again
investor can go for long term position