CHAPTER I: INTRODUCTION

TABLE OF CONTENTS
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Sr No. 1 2 3 4 5

PARTICULARS ACKNOWLEDGMENT EXECUTIVE SUMMARY LIST OF TABLES LIST OF FIGURES CHAPTER I : Introduction 1.1 Basic Theoretical Concepts and Contexts of the Topic 1.2 Literature Review 1.3 Need for the study 1.4 Statement of the Problem 1.5 Objectives of the Project 1.6 Research Hypotheses 1.7 Scope of the Study CHAPTER II : 2.1 Current status of the company 2.2 Future plans of the Organization 2.3 Any other relevant information of the Organization CHAPTER III : Research Design and Methodology 3.1 Sampling Design 3.2 Source and methods of Data collection

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3.3 Methods of data analysis and statistical Techniques 3.4 Key concepts and definitions 3.5 Limitation of the Study CHAPTER IV : Data Presentation, Analysis and interpretation 4.1 Getting data ready for analysis 4.2 Data analysis 4.3 Interpretation of results 4.4 Discussion on results derived 4.5 Research Questions Answered CHAPTER V : 5.1 Main Findings 5.2 Policy Suggestions 5.3 Scope for further research 10 11 BIBLIOGRAPHY : ANNEXURE

LIST OF TABLES Table No. Table No. 3.14.1 Table No. 3.14.2 Table No. 3.14.3 Table No. 3.14.4 Table No. 3.14.5 Table No. 3.14.6 Table No. 3.14.7 Table No. 3.14.8 Table No. 3.14.9 Title of the Table Gross Profit Ratio Net Profit Ratio Return on Investment Return on Shareholders Fund Return on Equity Share Capital PE Ratio Current Ratio EPS DPS
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Table No. 3.14.10 Table No. 3.14.11 Table No. 3.14.12 Table No. 3.14.13

Dividend Yield Ratio Overall Turnover Ratio Fixed Asset Turnover Ratio Proprietary Ratio

LIST OF FIGURES Figure No. Figure No. 3.14.1 Figure No. 3.14.2 Figure No. 3.14.3 Figure No. 3.14.4 Figure No. 3.14.5 Figure No. 3.14.6 Figure No. 3.14.7 Figure No. 3.14.8 Figure No. 3.14.9 Figure No. 3.14.10 Figure No. 3.14.11 Figure No. 3.14.12 Figure No. 3.14.13 Title of the Figure Gross Profit Ratio Net Profit Ratio Return on Investment Return Fund on Shareholders Page No.

Return on Equity Share Capital PE Ratio Current Ratio EPS DPS Dividend Yield Ratio Overall Turnover Ratio Fixed Asset Turnover Ratio Proprietary Ratio

1.1 Basic Theoretical Concepts and Contexts of the Topic The Very Basics When talking about stocks, fundamental analysis is a technique that attempts to determine a securitys value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements. Fundamental analysis serves to answer questions, such as: Is the companys revenue growing?
Is it actually making a profit?

Is it in a strong-enough position to beat out its competitors in the future?

Is it able to repay its debts? Is management trying to "cook the books"?

The biggest part of fundamental analysis involves delving into the financial statements. Also known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Fundamental analysts look at this information to gain insight on a company's future performance. A good part of this tutorial will be spent learning about the balance sheet, income statement, cash flow statement and how they all fit together. But there is more than just number crunching when it comes to analyzing a company. This is where qualitative analysis comes in - the breakdown of all the intangible, difficult-to-measure aspects of a company. Finally, we'll wrap up the tutorial with an intro on valuation and point you in the direction of additional tutorials you might be interested in. The Concept of Intrinsic Value Before we get any further, we have to address the subject of intrinsic value. One of the primary assumptions of fundamental analysis is that the price on the stock market does not fully reflect a stocks real value. After all, why would you be doing price analysis if the stock market were always correct? In financial jargon, this true value is known as the intrinsic value. For example, lets say that a companys stock was trading at $20. After doing extensive homework on the company, you determine that it really is worth $25. In other words, you determine the intrinsic value of the firm to be $25. This is clearly relevant because an investor wants to buy stocks that are trading at prices significantly below their estimated intrinsic value. 1.2 Literature review Only buy something that youd be perfectly happy to hold if the market shut down for 10 years - Warren Buffet Investment Guru Prevailing wisdom is that markets are always right, I assume they are always wrong - George Soros, Chairman, Soros Fund Management According to Michal Parness, Founder & CEO Investors dont Make Money in the Stock Market. One reason the institutions make so much money is that they are trading. They make money every time you buy or sell. They make money whether you win or lose. That means that when youre investing, youre basically just sitting there. Youre not going anywhere. Youre not making money as an investor. Trading the Trend: The Only Way to Make Money in the Market If you dont know this already, Trend Trading means trading trends based on human emotions. Not lagging indicators. Not complex statistical analysis and not
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Ph.D. level mathematical equations. With trend trading, you look for market movement. That could mean stocks that are going to move up or down during the course of a day (intraday). Youll play the gaps up and down, often several days a week. The Trend trading means being aware and taking advantage of trends like the run-ups that happen around earning sessions. These are trends that have worked time and time again in the market. They consistently yield results Fundamental and Technical Analysis: Substitutes or Compliments? Jenni L. Bettman
a. Australian National University Stephen Sault Australian National University

Faculty of Economics & Commerce March 28, 2006 While the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, while each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises. Keywords: Equity valuation models, Fundamental information, Technical information JEL Classifications: G12, G14, M41 Although the fundamental and technical analysis literatures invest considerable effort in assessing their respective ability to explain share prices, they invariably do so without reference to each other. In this context, we propose an equity valuation model integrating both fundamental and technical analysis and, in doing so, recognize their potential as complements rather than as substitutes. Testing confirms the complementary nature of fundamental and technical analysis by showing that, although each performs well in isolation, models integrating both have superior explanatory power. While our findings relate to the valuation of shares, they also have implications for other valuation exercises. Accepted Paper Series Accounting & Finance, Vol. 49, No. 1, pp. 21-36, March 2009 ISSN 1822-6515 ISSN 1822-6515 EKONOMIKA IR VADYBA: 2009. 14 ECONOMICS & MANAGEMENT: 2009.
b. Relevance of Fundamental Analysis on the Baltic Equity Market

Julia Bistrova, Natalja Lace Riga Technical University, Latvia, The main target of the present research was to discover the importance of fundamental analysis on the Baltic equity markets. The hypothesis that fundamental analysis is not able to generate substantial additional value to the performance of the portfolio comprised of Baltic enterprises stocks was proved. The relevance and need of fundamental analysis was checked by analyzing the performances of portfolios, which were created on the basis of key fundamental ratios: ROE, equity ratio, ROIC, net debt to assets as well as PE and PB. Naturally, the companies with better than average
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ratios were selected to form stock portfolios. The findings of the conducted study demonstrate that neither of the mentioned ratios helped in the creating portfolio, performance of which would beat markets performance. The only exception was price to earnings ratio, which proved that cheap companies seem to be attractive to the investors. It was decided to look closer at the major performers and to find out whether there are any common patterns among the winners and the losers of the Baltic equity markets. Basically, equity investors ignored financial situation of the companies (profitability, stability of balance sheets) and focused mainly on assessing their growth opportunities and attractiveness of business model. So, investors were mainly forward-looking when making company selection. As a result, major sufferers performance-wise were the companies with limited growth potential or total business model erosion. The authors of the research have also checked whether the trading volumes of the stock have any impact on the performance. The study results show that in the phase of the major capital inflows (2001-2006), indeed, most liquid companies tended to reward investors with higher performances. However, the shareholders of these companies suffered the most in financial years 2007 and 2008, when there was a major selling across stock market all over the world. c. By Sandy Jadeja 9- Oct -2004 Should you use Technical or Fundamental analysis to make your decisions? Volumes have been written about the different ways to forecast or predict market movement. Traditionally, there are two distinct schools of thought that an individual may choose from, and that being Fundamental analysis or Technical analysis. By choosing fundamental analysis, your decisions are based upon underlying economic factors, cash flows, and price earnings. This information will aim to tell you why a stock will move. Technical analysis aims to show you how and when a stock will move. This method discounts all news and information regarding the value of the stock. In other words, you only pay attention to a chart. The saying a picture is worth a thousand words truly summarizes this concept nicely. You can of course choose to use a combination of both if you prefer. This would imply that when the stock you are looking at becomes undervalued fundamentally, you would wait for a technical setup to get you in to the market. Deciding on which method is appropriate and gives bigger returns is truly a matter of opinion. Respectively, both methods have the same goal; to determine market direction. I know of a number of individuals who only use one or the other and is equally successful with phenomenal returns. It becomes interesting when one speaks to traders from each school. The fundamental traders believe that charts are a waste of time and provide no real sense as to why one would make trading decisions based on indicators and repetitive patterns. This group are essentially bargain hunters. They want to buy stocks which they feel are under priced and will return to a normal value at a later stage. Fundamental traders often hold stocks for longer periods of time compared to technical traders. On the other hand, the technical traders believe that numbers do not lie and that
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information based on value, supply and demand are already factored into the price. They also argue that people can be predictable and that these behaviors occur in the form of price patterns. These patterns repeat with a degree of predictability and therefore can be used to forecast future price movements. Technical traders generally hold positions for shorter periods of time compared to fundamental traders. Clearly both avenues are important, and one must make careful decisions before jumping into trading without having an objective. I have always said that finding a method, style or strategy depends on ones personality. If you are thinking of long term investing then the fundamental approach may suit your needs whereas if you are looking for short term market moves, then technical analysis can provide a myriad of systems to accommodate your personal style. Some of which we shall take a look at further into the course. 1.3 Need for the study Whenever youre thinking of investing in a company it is vital that you understand what it does, its market and the industry in which it operates. You should never blindly invest in a company. One of the most important areas for any investor to look at when researching a company is the financial statements. It is essential to understand the purpose of each part of these statements and how to interpret them. Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't really investing if you aren't performing fundamental analysis. Because the subject is so broad, however, it's tough to know where to start. There are an endless number of investment strategies that are very different from each other, yet almost all use the fundamentals. The goal of this tutorial is to provide a foundation for understanding fundamental analysis. It's geared primarily at new investors who don't know a balance sheet from an income statement.While you may not be a "stock-picker extraordinaire" by the end of this tutorial, you will have a much more solid grasp of the language and concepts behind security analysis and be able to use this to further your knowledge in other areas without feeling totally lost. Financial statement namely the statement of the profit & loss account and the balance sheet are indication of two signify-cant factors profitability and financial soundness analysis of statements means such a treatment of the information contained to afford a diagnosis of the profitability and financial statements analysis as the process of methodical classification comparison with other co-rising question and then seeking answer for them. Finance is the very typical aspect in course of management. The main objective behind the study is to get precisely. It also helps us to study the present finance scenario. The objective is such that companys profitability, liquidity and capacity by such analysis we can interpret the position of the company. So it is very important to study.
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1.4 Importance of Cash Profit Theory: Meaning Cash flow means inflows that is, sources of cash which are at the disposable at the firm and outflows of the fire that is the use of the firm. The difference between inflows and outflows is either net inflow or net outflow. A cash outflow statement deals with the cash fund flow, which excludes working capital movements. The Accounting standard (A53) classifies cash flows as under: 1) Cash from operating activities 2) Cash from investing activities 3) Cash from financing activities The operating activities include receipts from sale of goods or Rendering of services receipts from royalty, fees, commission etc. Outflow is the resulting from payment to creditors for goods and services, payment for expenses such as lighting, power, rent, wages salaries etc. Only cash from operating activities is included in this report.

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Importance of Cash Profit: The cash profit is an important measure of profitability as well as liquidity. When the cash profit differs from the profit is shown in the profit and loss account or profit and loss statement. Adjusting depreciation arrives at the cash profit; amortize action of capital expenses etc. The cash profit is much less or negative compared to the profit declared in the profit and loss account. It indicates liquidity and signals for appropriate cash management. The net cash from operations can be calculated through adjustment of non-cash items like depreciation, changes in inventory and receivable and payables, and or other items for which cash offers the investing and financing activities. 1.5 Meaning & Importance of Ratio: The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the allimportant early warning indications that allow you to solve your business problems before your business is destroyed by them. Ratio is a figure showing, logical relationship between any two items taken from financial statement as prepared and presented annually are of little use for guidance of prospective investors, creditors and even management. If relationships between various related items in these financial statements are established, they can provide useful dues to garage accurately the financial health and ability of business to make profit. The relation between in two related items of financial statements is known ratio. Utility of Ratio Analysis: It is very important to find the ratio of liquidity, profitability etc. Because the ratio analysis provides useful data to the management, important uses of it are given as below:

Profitability: Useful information about the trend of profitability is from profitability ratio. The gross profit

ratio, net profit ratio and ratio of return on investment give a good idea of the profitability of the business. On the basic of this ratio, investors get an idea about overall efficiency of managers and as well as other creditors draw conclusion about repaying capacity of the borrower.
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 Liquidity:

In fact the use of ratio was made initially to ascertain the Liquidity of business. The current ratio, acid test ratio will tell whether the firm will be able to meet its current liabilities and when they nature. Banks and other leaders will be able to conclude from these ratios whether the firm will be able to pay regularly the interest and loan instalments.

Efficiency:

The turnover ratios are excellent guide to measure the efficiency of managers. All such ratio related to sales present a good picture of the success on the business.

Inter Firm Comparison:

The absolute ratios of a firm are not of much use, unless they are compared with similar ratios of other firms belonging to the same industry. This is a inter firm compared to other firms comparison, which shows the strength and weakness of the firm as compared to other firms and will indicate corrective measure

Indicate Trend:

The ratio of the last 3 to 5 years will indicate the trend in the respective fields. A particular ratio of a company, for one year may compare favourably with industry average, but its trend shows a deteriorating position, it is not desirable only ratio analysis will provide this information.

Useful for Budgetary Control:

Regular budgetary reports are prepared in a business where the system of budgetary control is in use. If various ratios are presented these reports, it will give a fairly good idea about various aspects of financial position

Useful for Decision Making:

Ratio guide the management in making some of the important decision, suppose, the liquidity ratios shows an unsatisfactory position, the management may decide to get additional liquid funds. Even for capital expenditure decision, the ratio of investment. The efficiency of each department a thus be deter minded. Thus, the ratio are the most useful I financial statement. 1.6 Statement of the Problem Fundamental stock analysis of Tata motors and Mahindra & Mahindra.

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1.7 Objectives of the Project

To study of the core underlying elements that influence the economy of a particular entity To Study that attempts to predict price action and market trends by analyzing economic indicators, government

policy and societal factors (to name just a few elements) within a business cycle framework
Politico-Economic Analysis

No industry or company can exist in isolation. It may have splendid managers and a tremendous product. However, its sales and its costs are affected by factors, some of which are beyond its control - the world economy, price inflation, taxes and a host of others. It is important, therefore, to have an appreciation of the politico-economic factors that affect an industry and a company.
Industry Analysis

The importance of industry analysis is now dawning on the Indian investor as never before
Company Analysis At the final stage of fundamental analysis, the investor analyzes the company. This analysis has two thrusts:

How has the company performed vis--vis other similar companies and How has the company performed in comparison to earlier years.

1.8 Data Collection

Primary Data: The entire study was conducted in Edelweiss Broking Ltd, Pune, which consisted of information on understanding the level of awareness regarding the concepts and techniques of fundamental analysis. Data was also collected through observation during the training period of two months from 17th May to 16th July 2010. Secondary Data:

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The information was drawn from published journals by Reserve Bank of India, in house magazines of the bank, capital market magazine. Information was also gathered from news papers and related magazines. Besides data was also collected from the internet. RESEARCH DESIGN: Descriptive research is used in this study because it will ensure the minimization of bias and maximization of reliability of data collected. The researcher had to use fact and information already available through financial statements of earlier years and analyze these to make critical evaluation of the available material. Hence by making the type of the research conducted to be both Descriptive and Analytical in nature. From the study, the type of data to be collected and the procedure to be used for this purpose were decided.

1.9 Research Hypothesis Population size: Population size means total number of companies in auto sector. Population size =15 Sample size =2 Criteria = random sampling. 1.10 Research Hypotheses 1. BALANCE SHEET The Balance Sheet details the financial position of a company on a particular date; of the company's assets (that which the company owns), and liabilities (that which the company owes), grouped logically under specific heads 2. SOURCES OF FUNDS SHAREHOLDERS FUNDS SHARE CAPITAL (i)Private Placement (ii) Public Issue iii) Rights issues 3. RESERVES
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(i)Capital Reserves ii) Revenue Reserves 4. LOAN FUNDS i) Secured loans: ii) Unsecured loans 5. FIXED ASSETS INVESTMENTS 6. STOCK OR INVENTORIES i) Raw materials ii) Work in progress iii) Finished goods 7. CASH AND BANK BALANCES 8. LOANS AND ADVANCES 9. PROFIT AND LOSS ACCOUNT

1.11 Scope of the study

To Compare two companies that are in same fields and same industries.

To find fundamentally strong company. To find stocks that will have the highest % rise in the stock price.
To carry out Fundamental analysis of Tata Motors and Mahindra and Mahindra using ratio analysis.

To find Competitive advantage of one company has over competing firms.

To find Market presence and market share.

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CHAPTER II COMPANY PROFILE

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Company Profile:
Kantilal Chhaganlal is a name synonymous with wealth management .Established in 1954; Kantilal Chhaganlal has stood the test of time which speaks volume about the reliability, stability and expertise of the firm Backed by a highly dedicated and professional team, Kantilal Chhaganlal offers its 60,000 plus clientele a bouquet of customized, end to end, wealth management solutions. With its presence at more than 500 locations across India, the company ensures its clientele, uncompromised performance and a focused approach Why Kantilal Chhaganlal?

Experience:With over 5 decades of experience in wealth management we enjoy the trust of over 60,000 satisfied clients. Client Centric Model:Client satisfaction is an asset. Hence clients interest precedes our interest .Our stringent internal customer service standards ensure that you enjoy the best in class service. Technology:It has been our constant endeavor to harness the best of technologies to ensure that clients get maximized returns. Strong Operation and Research Desk: With over 54 years of experience, the company has one of the best operations and research cells in the industry. Wide network: Presence all across India with over 500 locations ensures that we are never far away from you.

Our Values

Unification of clients interest with the companys business interest. Maintaining high level of integrity, transparency and ethical values. A No Compromise attitude for quality with passion for excellence. Client centric model with a clear focus on providing long term value added services while maintaining the highest standards of professionalism.

Kantilal Chhaganlal Securities Pvt. Ltd.

Member of NSE, NSE F&O, BSE, BSE F&O Depository Participant CDSL

Kaycee Commodity Services Pvt. Ltd.

Member of NCDEX and MCX

Kaycee Advisory Services Pvt. Ltd.

AMFI Mutual Fund Distributor

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Kaycee Insurance Agency & Consultancy Services Pvt. Ltd.

Life Insurance Distribution

Kaycee Finstock Pvt. Ltd.

NBFC

Products & Services We offer our clientle a bouquet of products and services where each service is customized to benefit our clients need. Wealth Catering to individuals and corporates with investible corpus of Rs. 5 crores +. Management

Commodity Kaycee Commodity Services Pvt. Ltd a group company of Kantilal Chhaganlal Securities Pvt. Ltd is a Clearing cum Trading Member of MCX & NCDEX. We rank amongst the top broker houses in Commodity. We provide online as well as offline facility. We have the best in state of art technology for our Business partners and clients. We also provide online back office facility to business partners and all our clients. Kaycee Commodity is also renowned for its research services. We provide reports on daily and weekly basis; we also give commodity specific reports. We send our research to our clients and Business Partner's via Email, Chat and SMS services. We at Kaycee Commodity believe in long and entrusted relationship and we remain true to our beliefs.

Institutional Currently empaneled with:

Broking

Dll's, Fll's Life Insurance Corporation of UTI Mutual Funds Canararobeco Asset Management Co. Ltd. Axis Bank State Bank of India (SBI) Vijaya Bank Allahabad Bank Central Bank of India Bank of India

Private Client Group

Broking
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Equities Derivatives Commodities Internet Trading - Shareguru & Instatrade Depository Participant PMS & Structured Products Mutual Funds Alternate Investment Life Insurance Margin Funding

Premier Branches Franchisees Catering to - Retail clients Catering to: Individuals and corporates with investible corpus of Rs.5 Corers + Experience high speed Internet trading through Kantilal Chhaganlal Securities Pvt ltd.

NSE, BSE CASH, Futures & Options Trading, Commodity Trading, Currency Trading through One account

KC Internet Trading Advantage: High speed trading Customized AMC Scheme to reduce cost of your trade Paperless transactions-Buy/Sell shares, IPO's, mutual funds and commodities. Live order status Advantage of mobility - Access all your account from anywhere; home; office, cyber cafe, laptop Integrated back office: Access all your information at anytime from anywhere Integrated banking, demat and trading account with digital contract notes After hours order placement facility World class research reports (fundamental & technical) Phone trade Intra-day calls & flash news

24X7 web enabled back office Multiple exchanges on single screen

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shareguru Web Version - for Investors: Product Feature:

Browser based platform for investors, user friendly software Trading becomes as simple as internet surfing Live streaming quotes. Time Tested Research- Delivery, Intraday , Commodity , FNO Centralized Phone Trade through Toll free number .

User defined market watches Product Benefits

View market information Creating investors own portfolio Enter orders Edit or cancel orders Receive online trade confirmations View order and trade status View portfolio and cash balance View transaction history Receive orders and trade confirmations via e-mails Provide hyperlinks to other services such as market historical information, exchange websites,news, charting, back office.

Intratrade For Active Traders: Product Features:

World class, user friendly application based platform The speed of broker's terminal on your desk top Streaming quotes for continuous rates refresh Single screen experience - All exchanges can be viewed on single screen Online fund transfer facility Live charting facility.

Centralized Phone Trade through Toll free number. Product Benefits:

Multi-exchange internet based trading application

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Compact easy to deploy self-installing kit Streaming quotes for continuous rates refresh Real-time market data for multiple exchanges with Integrated Watch for Multiple Exchange and Exchange Segments Order entry screens for quick order entry on multiple exchanges Provision to create multiple portfolios Facilitates Order and Trade book functions with customizable views at all levels Integrated Net Positions View with Multiple Filters

Market

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CHAPTER: I INDIAN AUTOMOBILE SECTOR REVIEW

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AUTOSECTOR PROFILE: De-licensing in 1991 put the Indian automobile industry on a new growth trajectory, which attracted foreign auto giants to set up their production facilities in the country to take advantage of various benefits it offers. Large middle class population, growing earning power and strong technological capability have been boosting automobile demand for past few years. Despite economic slowdown, the Indian automobile sector is expected to see high growth in coming years, especially in passenger cars segment, said our new research report, Indian Automobile Sector Analysis. The passenger vehicle market, which constitutes around 80% of automobile sales, has immense growth potential as passenger car stock stood at around 11 per 1,000 people in 2008. Anticipating the future market potential, the production of passenger vehicle is forecasted to grow at a CAGR of around 11% from 2009-10 to 2012-13. The recent launch of Tata Nano has brought about a new revolution in the countrys small car segment. Seeing the good initial response from consumers, many other players in the industry are chalking out their plans to launch cars in this segment in the next few years. Our research foresees a CAGR growth of around 12% in domestic volume sales of passenger vehicles during the forecast period. Other segments, such as two-wheelers, multi-purpose vehicle and light commercial vehicle, are also expected to witness fast growth in coming years. The report covers various aspects of the Indian automobile market and gives detailed analysis of its various segments such as passenger vehicle, commercial vehicle, utility vehicles, multi-purpose, two wheelers and three wheelers. Each section succinctly explains the current and future market trends, and developments in the Indian automobile market. There are immense opportunities for various industry players including automobile manufacturers and players of automobile components. Besides, we have also comprehensively analyzed the auto component industry and its future outlook. The study has evaluated growth avenues available for the automobile market, which include automotive design market, nonconventional vehicle market, domestic tyre industry, India as global manufacturing hub, green car market etc.

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CHAPTER III: FUNDAMENTAL ANALYSIS OF TATA MOTORS LIMITED AND MAHINDRA &MAHINDRA

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3.1 COMPANY PROFILE OF TATA MOTORS:

Tata Motors was established in India in 1945 and has been enjoying great revenues in recent times. The car maker had just one aim, to expand its base and reach every nook and corner of India. Currently, as long as the Indian automobile sector is concerned, it is the winner in the commercial vehicle sales and ranks third in passenger vehicle sales. From its first truck to the small Nano car, Tata has seen a lot in India. It has created significant milestones in its long and accelerated journey. The accelerated journey was for the prime goal of excellence and leadership. After tasting success in the commercial sector, Tata entered the passenger car segment. It came out with the Sierra in 1991. This car is not in production as of now. But, it certainly was considered as one of the most durable cars in India. After the Sierra, came the Safari. Meanwhile, Tata Motors also designed several new cars on different platforms. The Tata Sumo car was born in 1994 and is a favorite among taxi drivers even today. After the Sumo, Tata brought a refined version of the same car, the Tata Sumo deluxe, in 1996. After that, it brought the Tata Safari on to the Indian roads. The Safari was Tata's first SUV and the first one to be completely produced in India. Tata was still not satisfied with its success and wanted something more. It enhanced the Safari and strapped it with a new DICOR engine coupled with modified car interiors and exteriors. By that time, Tata Motors found itself completely in the midst of the Indian passenger car segment. In response to its own desires, the car maker launched the Tata Indica in 1998. In no time this car started boosting the sales figures for Tata Motors. Tasting success once again, the company brought in different versions and variants of the Indica car from time to time on to the Indian roads. An Indica with a diesel motor was launched in the year 2000 followed by a multi-point fuel injection petrol engine Indica launch in the same year. But, these cars had some problems with the mileage and power output. So, in response, Tata came out with the new Indica V2 in 2001. A CNG variant of the car was also brought in and that made the car a huge hit. Re-work, creativity and innovation by Tata engineers gave rise to the Tata Indica Vista or Tata Indica V3 cars in 2008. Tata earned enough fame in the compact car sector and wanted to move into production of sedans. The Tata Indigo was showcased at the Auto Expo 2002 and the sedan became a huge hit owing to its innovative features and enhanced engine technology. The Tata Indigo Marina variant then came in followed by the luxury variant Indigo SX in 2005. The premium Indigo with the new long wheelbase was introduced in 2006. More Tata Indigo variants were launched and finally, the Indigo sedan and a compact Indigo, popularly known as Tata Indigo CS found their way on the Indian roads. Finally, we now have the Nano joining in the family. This is considered to be not just India's but the world's cheapest car. The Tata Nano was Ratan Tata's dream car and we see the dream come true. Tata Motors has seen both ups and downs, but what really matters is that the car maker has moved on. It has and will continue to add great cars to its portfolio. The foundation of the company's growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customer-desired offerings through leading edge R&D. With over 3,000 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,
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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 Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10. 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. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. The company's 24,000 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 5.9 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) 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 is establishing a new plant at Sanand (Gujarat). The company's dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in 2008. In 2004, it acquired the Daewoo Commercial Vehicles Company, South Korea's second largest truck maker. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market, while also exporting these products to several international markets. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. In 2005, Tata Motors acquired a 21% stake in Hispano Carrocera, a reputed Spanish bus and coach manufacturer, and subsequently the remaining stake in 2009. Hispano's presence is being expanded in other markets. In 2006, Tata Motors formed a joint venture with the Brazil-based Marcopolo, a global leader in bodybuilding for buses and coaches to manufacture fully-built buses and coaches for India and select international markets. In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company's pickup vehicles in Thailand. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with the Xenon having been launched in Thailand in 2008. Tata Motors is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. 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. The standard version has been priced at Rs.100,000 (excluding VAT and transportation cost).
27

Designed with a family in mind, it has a roomy passenger compartment with generous leg space and head room. It can comfortably seat four persons. Its mono-volume design will set a new benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants, it has a lower pollution level than two-wheelers being manufactured in India today. The lean design strategy has helped minimise weight, which helps maximise performance per unit of energy consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that the car has low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation solution with a low carbon footprint. In May 2009, Tata Motors introduced ushered in a new era in the Indian automobile industry, in keeping with its pioneering tradition, by unveiling its new range of world standard trucks called Prima. In their power, speed, carrying capacity, operating economy and trims, they will introduce new benchmarks in India and match the best in the world in performance at a lower life-cycle cost. 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. Tata Motors is committed to improving the quality of life of communities by working on four thrust areas employability, education, health and environment. The activities touch the lives of more than a million citizens. The company's support on education and employability is focused on youth and women. They range from schools to technical education institutes to actual facilitation of income generation. In health, our intervention is in both preventive and curative health care. The of environment protection is achieved through tree plantation, conserving water and creating new water bodies and, last but not the least, by introducing appropriate technologies in our vehicles and operations for constantly enhancing environment care.

3.2 COMPANY PROFILE OF MAHINDRA&MAHINDRA:

28

Mahindra Group is one of the largest corporate groups of India. It is a US $4.5 billion conglomerate with employee strength of over 40,000. The group has diverse business interests such as automotive, farm equipments, infrastructure, information technology, hospitality, and financial services. Mahindra Group has global presence and it is ranked amongst Forbes Top 200 list of the World's Most Reputable Companies and in the Top 10 list of Most Reputable Indian companies. The origins of Mahindra Group can be traced back to October 2, 1945 when Mahindra brothers J.C. Mahindra & K.C. Mahindra joined hands with Ghulam Mohammad, and Mahindra & Mohammad was set up as a franchise for assembling jeeps from Willys, USA. After India's independence in 1947, Mahindra & Mohammad changed its name to Mahindra & Mahindra. Ghulam Mohammad migrated to Pakistan post-partition and became the first Finance Minister of Pakistan. Since then, Mahindra Group has gone from strength to strength and today it has evolved into a giant group. Business Interests of Mahindra Group Automotive Sector: Mahindra Group is the market leader in utility vehicles in India since inception. Mahindra also manufactures and markets utility vehicles and light commercial vehicles, including three-wheelers. Some of the famous automobile brands of Mahindra are: Scorpio and Bolero. Recently, Mahindra joined hands with French automobile major Renault to enter passenger car segment. It has launched a car called Mahindra Renault Logan. Farm Equipment Sector: Mahindra is the largest producer of tractors in India and is among the top five tractor brands in the world. It has its own state-of-the-art plants in India, USA, China and Australia, and a capacity to produce 1,50,000 tractors a year. Trade & Financial Services: Mahindra Intertrade Limited and its subsidiaries have specialized domain knowledge in imports and exports of commodities, domestic trading, marketing and distribution services. Mahindra Finance is one of the largest Non Banking Finance Companies in India with an asset base of about Rs. 5000 crores. Mahindra Insurance Brokers offer Life and Non-life Insurance plans to retail and corporate customers. Mahindra Steel Service Centre is the first steel service centre in the organised sector in India. Infrastructure Development: Mahindra Group has interests in real estate, special economic zones, hospitality industry, infrastructure development, project engineering consultancy and design. Mahindra Holidays & Resorts is the leader in the lifetime holiday market in India. Mahindra Gesco is fastest growing Construction Company in India. Mahindra World City is developing and promoting India's first Integrated Business City. Mahindra Acres Consulting Engineers is a multidisciplinary engineering consultancy organization. Information Technology: Mahindra Group entered into IT sector in 1986 when it formed a joint venture with British Telecommunications plc. The company was called Mahindra-British Telecom. The Company has recently changed its name to Tech Mahindra. Tech Mahindra is a leading provider of telecommunication solution and service industry world-wide. It is India's 8th largest software exporter. Speciality Businesses: Mahindra Group companies such as Mahindra AshTech, Mahindra Defence, Spares Business Unit and Mahindra Logistics are into Speciality Businesses. Mahindra AshTech undertakes turnkey contract execution for Ash Slurry System and Travelling Water Screens. Mahindra Defence Systems looks after the requirements of India's defence and security forces. Mahindra Logistics provide complete logistics solutions to complex transportation needs of clients across the world. Major Achievements of Mahindra Group
29

Mahindra & Mahindra made the first indigenous Jeep in the country in 1949. Fourth largest tractor company in the world. Largest manufacturer of tractors in India. Largest manufacturer of MUVs, offering over 20 models

3.4 MEANING OF ANALYSIS Financial statement namely the statement of the profit & loss account and the balance sheet are indication of
30

two signify-cant factors profitability and financial soundness analysis of statements means such a treatment of the information contained to afford a diagnosis of the profitability and financial statements analysis as the process of methodical classification comparison with other co-rising question and then seeking answer for them. Finance is the very typical aspect in course of management. The main objective behind the study is to get precisely. It also helps us to study the present finance scenario. The objective is such that companys profitability, liquidity and capacity by such analysis we can interpret the position of the company. So it is very important to study.

3.5 This study contain following analysis:

Comparative analysis statement Common-size analysis statement Ratio analysis Trend analysis. 3.5.1Comparative financial statement: Comparative financial statement is those statements which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. In these statements, figures for two or more periods are placed side by side to facilitate comparison. But the income statement and balance sheet can be prepared in the form of comparative financial statement. i) Comparative income statement: The income statement discloses net profit or net loss on account of operations. A comparative income statement will show the absolute figures for two or more periods. The absolute change from one period to another and if desired. The change in terms of percentages. Since, the figures for two or more periods are shown side by side; the reader can quickly ascertain whether sales have increased or decreased, whether cost of sales has increased or decreased etc. ii) Comparative balance sheet: Comparative balance sheet as on two or more different dates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. Thus, while in a single balance sheet the emphasis is on present position, it is on change in the comparative balance sheet. Such a balance sheet is very useful in studying the trends in an enterprise. 3.5.2 common-size financial statement: Common-size financial statement are those in which figures reported are converted into percentages to some common base in the income statement the sales figure is assumed to be 100 and all figures are expressed as a percentage of sales. Similarly, in the balance sheet, the total of assets or liabilities is taken as 100 and all the figures are expressed as a percentage of this total. 3.5.3 Ratio analysis: Ratio analysis is a widely used tool of financial analysis. The term ratio in it refers to the relationship expressed in mathematical terms between two individual figures or group of figures connected with each other in
31

some logical manner and are selected from financial statements of the concern. The ratio analysis is based on the fact that a single accounting figure by it self may not communicate any meaningful information but when expressed as a relative to some other figure, it may definitely provide some significant information the relationship between two or more accounting figure/groups is called a financial ratio helps to express the relationship between two accounting figures in such a way that users can draw conclusions about the performance, strengths and weakness of a firm. 3.6 Classification of ratios: Liquidity ratios Leverage ratios Turnover ratios Profitability ratios Other Ratios 3.6.1 Liquidity ratios: These ratios portray the capacity of the business unit to meet its short term obligation from its short-term resources (e.g.) current ratio, quick ratio. 3.6.2 Leverage ratios: Many financial analyses are interested in the relative use of debt and equity in the firm. The term solvency refers to the ability of a concern to meet its long-term obligation. Accordingly, long-term solvency ratios indicate a firms ability to meet the fixed interest and costs and repayment schedules associated with its long-term borrowings. (E.g.) debt equity ratio, proprietary ratio, etc. 3.6.3 Turnover ratios: These ratios evaluate the use of the total resources of the business concern along with the use of the components of total assets. They are intended to measure the effectiveness of the assets management the efficiency with which the assts are used would be reflected in the speed and rapidity with which the assets are converted into sales. The greater the rate of turnover, the more efficient the management would be (E.g.) stock turnover ratio, fixed assets turnover ratios etc.It is also called as Activity Ratios or Asset Management Ratios 3.6.4 Profitability ratios: The profitability ratios of a business concern can be measured by the profitability ratios. These ratios highlight the end result of business activities by which alone the over all efficiency of a business unit can be judged, (E.g.) gross ratios, Net profit ratio. 3.6.5 Other Ratios: The ratios are which are not included in the above categories are called as other ratios. It is also used to reveal the financial position of the company.

3.7 IMPORTANCE OF CASH PROFIT THEORY: MEANING Cash flow means inflows that is, sources of cash which are at the disposable at the firm and outflows of the fire
32

that is the use of the firm. The difference between inflows and outflows is either net inflow or net outflow. A cash outflow statement deals with the cash fund flow, which excludes working capital movements. The Accounting standard (A53) classifies cash flows as under: 1) Cash from operating activities 2) Cash from investing activities 3) Cash from financing activities The operating activities include receipts from sale of goods or Rendering of services receipts from royalty, fees, commission etc. Outflow is the resulting from payment to creditors for goods and services, payment for expenses such as lighting, power, rent, wages salaries etc. Only cash from operating activities is included in this report

33

3.8 IMPORTANCE OF CASH PROFIT: The cash profit is an important measure of profitability as well as liquidity. When the cash profit differs from the profit is shown in the profit and loss account or profit and loss statement. Adjusting depreciation arrives at the cash profit; amortize action of capital expenses etc. The cash profit is much less or negative compared to the profit declared in the profit and loss account. It indicates liquidity and signals for appropriate cash management. The net cash from operations can be calculated through adjustment of non-cash items like depreciation, changes in inventory and receivable and payables, and or other items for which cash offers the investing and financing activities. 3.9 MEANING & IMPORTANCE OF RATIO: The Balance Sheet and the Statement of Income are essential, but they are only the starting point for successful financial management. Apply Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business. Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the allimportant early warning indications that allow you to solve your business problems before your business is destroyed by them. Ratio is a figure showing, logical relationship between any two items taken from financial statement as prepared and presented annually are of little use for guidance of prospective investors, creditors and even management. If relationships between various related items in these financial statements are established, they can provide useful dues to garage accurately the financial health and ability of business to make profit. The relation between in two related items of financial statements is known ratio. A) UTILITY OF RATIO ANALYSIS: It is very important to find the ratio of liquidity, profitability etc. Because the ratio analysis provides useful data to the management, important uses of it are given as below: B) PROFITABLITY : Useful information about the trend of profitability is from profitability ratio. The gross profit ratio, net profit ratio and ratio of return on investment give a good idea of the profitability of the business. On the basic of this ratio, investors get an idea about overall efficiency of managers and bank as well as other creditors draw useful conclusion about repaying capacity of the borrowers.

34

C) LIQUIDITY : In fact the use of ratio was made initially to ascertain the Liquidity of business. The current ratio, acid test ratio will tell whether the firm will be able to meet its current liabilities and when they nature. Banks and other leaders will be able to conclude from these ratios whether the firm will be able to pay regularly the interest and loan installments. D) EFFCIENCY : The turnover ratios are excellent guide to measure the efficiency of managers. All such ratio related to sales present a good picture of the success on the business. E) INTER FIRM COMPARION : The absolute ratios of a firm are not of much use, unless they are compared with similar ratios of other firms belonging to the same industry. This is a inter firm compared to other firms comparison, which shows the strength and weakness of the firm as compared to other firms and will indicate corrective measures. F) INDICATE TREND : The ratio of the last 3 to 5 years will indicate the trend in the respective fields. A particular ratio of a company, for one year may compare favorably with industry average, but its trend shows a deteriorating position, it is not desirable only ratio analysis will provide this information. G) USEFUL FOR BUDGETARY CONTROL : Regular budgetary reports are prepared in a business where the system of budgetary control is in use. If various ratios are presented these reports, it will give a fairly good idea about various aspects of financial position. H) USEFUL FOR DECISION MAKING : Ratio guide the management in making some of the important decision, suppose, the liquidity ratios shows an unsatisfactory position, the management may decide to get additional liquid funds. Even for capital expenditure decision, the ratio of investment. The efficiency of each department a thus be deter minded. Thus, the ratio are the most useful I financial statement

35

3.10 BALANCE SHEET OF TATA MOTORS (in cr) Mar ' 10 Sources of funds Owner's fund Equity share capital Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06

570.6

514.05

385.54

385.41

382.87

Share application money Preference share capital Reserves & surplus 14,394.87 11,855.15 7,428.45 6,458.39 5,127.81 Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block

7,742.60

5,251.65

2,461.99

2,022.04

822.76 2,114.08 8,447.52

8,883.31 7,913.91 3,818.53 1,987.10 31,591.38 25,534.76 14,094.51 10,852.94

18,416.81 13,905.17 10,830.83 25.07 6,259.90 7,620.20 6,954.04 25.51 5,443.52 5,361.80 5,064.96 4,910.27

8,775.80 25.95 4,894.54 3,855.31 2,513.32 2,477.00

7,971.55 26.39 4,401.51 3,543.65 951.19 2,015.15

Less : revaluation reserve Less : accumulated depreciation 7,212.92 Net block 11,203.89 Capital work-inprogress 5,232.15 Investments Net current assets

22,336.90 12,968.13

Current assets, loans & advances 11,699.67 10,836.58 10,781.23 10,318.42 Less : current liabilities & provisions 18,881.23 12,846.21 12,029.80 8,321.20

9,812.06 7,888.65
36

Total net current assets -7,181.56 -2,009.63 -1,248.57 1,997.22 Miscellaneous expenses not written 2.02 6.05 10.09 Total 31,591.38 25,534.76 14,094.51 10,852.94 Notes: Book value of unquoted investments 21,991.93 12,358.84 Market value of quoted investments 345.53 558.32 Contingent liabilities 3,447.50 5,433.07 Number of equity sharesoutstanding (Lacs)

1,923.41 14.12 8,447.52

4,145.82 2,530.55 5,590.83

2,117.86 1,323.08 5,196.07

1,648.57 1,550.00 2,185.63

5705.58

5140.08

3855.04

3853.74

3828.34

3.11 PROFIT AND LOSS ACCOUNT (In cr) Mar ' 10 Mar ' 09 Mar ' 08 Income Operating income Expenses Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses

Mar ' 07

Mar ' 06

35,564.00 25,660.67 28,767.91 26,664.25

20,088.63

24,759.49 19,039.41 20,931.81 19,529.88 439.32 1,836.13 5,091.32 1,171.59 1,551.39 1,224.15 1,867.05 1,230.14 1,544.57 1,179.48 1,982.79 1,200.36 1,367.83 1,068.56 1,488.16

14,376.11 929.82 1,143.13 759.54 1,042.52

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Expenses capitalised -740.54 -916.02 -1,131.40 -577.05 -308.85 Cost of sales 31,385.72 23,937.57 25,737.39 24,077.74 17,942.27 Operating profit 4,178.28 1,723.10 3,030.52 2,586.51 2,146.36 Other recurring income 51.74 841.54 359.42 887.23 685.18 Adjusted PBDIT 4,230.02 2,564.64 3,389.94 3,473.74 2,831.54 Financial expenses 1,103.84 704.92 471.56 455.75 350.24 Depreciation 1,033.87 874.54 652.31 586.29 520.94 Other write offs 144.03 51.17 64.35 85.02 73.78 Adjusted PBT 1,948.28 934.01 2,201.72 2,346.68 1,886.58 Tax charges 589.46 12.5 547.55 660.37 524.93 Adjusted PAT 1,358.82 921.51 1,654.17 1,686.31 1,361.65 Non recurring items 881.26 79.75 374.75 227.15 167.23 Other non cash adjustments 15.29 -0.07 Reported net profit 2,240.08 1,016.55 2,028.92 1,913.39 1,528.88 Earnigs before appropriation 3,926.07 2,399.62 3,042.75 2,690.15 2,094.54 Equity dividend 859.05 311.61 578.43 578.07 497.94 Preference dividend Dividend tax 132.89 34.09 81.25 98.25 69.84 Retained earnings 2,934.13 2,053.92 2,383.07 2,013.83 1,526.76

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3.12 BALANCE SHEET OF M&M Mar ' 09

(in cr) Mar ' 08 Mar ' 06

Mar ' 10

Mar ' 07

Sources of funds Owner's fund Equity share capital 282.95 272.62 239.07 238.03 233.4 Share application money 8.01 Preference share capital Reserves & surplus 7,527.60 4,959.26 4,098.53 3,302.01 2,662.14

Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-inprogress Investments Net current assets Current assets, loans & advances

602.45 981 617.26 2,277.70 3,071.76 1,969.80 10,698.71 9,284.64 6,924.66

106.65 1,529.35 5,176.05

216.68 666.71 3,778.92

4,866.18 4,653.66 3,552.64 11.67 12.09 12.47

3,180.57 12.86

2,859.25 13.33

2,537.77 2,326.29 1,841.68 2,316.74 2,315.28 1,698.49 1,374.31 886.96 649.94 6,398.02 5,786.41 4,215.06

1,639.12 1,528.59 329.72 2,237.46

1,510.27 1,335.65 205.46 1,669.09

6,224.56 5,081.20 3,816.41

3,916.94

2,805.04

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Less : current liabilities & provisions

5,619.04 4,797.76 3,468.77

2,854.20 1,062.74 17.55 5,176.05

2,254.37 550.66 18.05 3,778.92

Total net current assets 605.52 283.44 347.64 Miscellaneous expenses not written 4.12 12.55 13.53 Total 10,698.71 9,284.64 6,924.66

Notes: Book value of unquoted investments 4,806.15 4,305.50 1,429.16 1,515.23 Market value of quoted investments 12,216.75 3,218.81 7,669.90 10,285.25 Contingent liabilities 2,020.79 1,220.39 985.35 1,008.27 Number of equity sharesoutstanding (Lacs)

1,419.01 2,030.85 946.36

5659.08

2726.16

2390.73

2380.33

2334

3.13 PROFIT AND LOSS ACCOUNT

(in cr) Mar ' 07 Mar ' 06

Mar ' 10 Income Operating income Expenses Material consumed Manufacturing expenses 12,437.87

Mar ' 09

Mar ' 08

18,516.33 13,081.08 11,310.37 9,921.34

8,136.59

9,365.00

7,814.71 6,930.76

5,782.01

217.89

174.05

164.68

134

111.9
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Personnel expenses Selling expenses Adminstrative expenses

1,199.85 802.02 901.45

1,024.52 575.34 700.45

853.65 804.51 561.66

666.15 635.1 466.22

551.78 458.32 387.57

Expenses capitalised -59.55 -42.83 -46.49 -47.1 -26.53 Cost of sales 15,499.53 11,796.53 10,152.72 8,785.12 7,265.04 Operating profit 3,016.80 1,284.55 1,157.65 1,136.22 871.54 Other recurring income 317.99 305.98 364.05 404.87 195.82 Adjusted PBDIT 3,334.79 1,590.53 1,521.70 1,541.09 1,067.36 Financial expenses 156.85 134.12 87.59 19.8 26.96 Depreciation 370.78 291.51 238.66 209.59 200.01 Other write offs 0.59 0.33 0.28 Adjusted PBT 2,807.16 1,164.90 1,194.86 1,311.37 840.12 Tax charges 759 199.69 303.4 350.1 242.4 Adjusted PAT 2,048.16 965.21 891.46 961.28 597.72 Non recurring items -32.9 -173.33 211.91 126.3 259.38 Other non cash adjustments 72.49 48.97 -19.19 Reported net profit 2,087.75 840.85 1,103.37 1,068.39 857.1 Earnigs before appropriation 5,453.07 3,807.00 3,228.45 2,544.13 1,853.50 Equity dividend 549.52 278.83 282.61 282.23 243.97 Preference dividend Dividend tax 74.23 33.23 38.48 42.5 34.22 Retained earnings 4,829.32 3,494.94 2,907.36 2,219.40 1,575.31

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3.14 RATIO ANALYSIS: 3.14.1 Gross Profit Ratio: Meaning: It is expresses relationship between Gross Profit earned to net sales. It is a significant indicator of the profitability of business. It expresses in percent. For example, a ratio shows that for a sale of every Rs. 1000 a margin of 250 rupees is available from which operating expenses of business are recovered. The ratio shows whether the mark up obtained on cost of production is sufficient or not. There is no calibration against reasonability of gross profit ratio. However it must be enough to cover its operating expenses. In many industries, there are more or less recognized gross profit ratios and the business should strive to maintain this standard. If this ratio is low, it indicates that the cost of sales is high or that the purchasing is inefficient. Alternatively, it may also mean that due to depression, the selling price is reduced but there are may be no corresponding reduction, the selling price is reduced but there may be no corresponding reduction in cost of sales. In such a case, the management must investigate the causes and try to bring up this ratio.

Implementation: Gross profit is result of the relation between price, sales volume and costs. A change in the gross margin can be brought about by changes in any of these factors. The gross profit ratio can also be used in determining the extent of loss caused by theft, spoilage, damage and so on in the case of those firms which follow the policy of fixed gross profit margin in pricing their product. The gross margin represents the limit beyond which fall in sales price are outside the tolerance limit. Formula: Gross profit Sales X 100

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Company

Particulars Gross Profit (EBDT) (In x10M Rs)

2010 4,783. 86

2009 1,953. 56

2008 3,160. 82

2007 2568. 67

2006 2115. 91

TATA MOTORS

Net Sales (In x10M Rs) Gross Profit Ratio Gross Profit (EBDT) (In x10M Rs)

35593. 1 13.440 4 3126.7 8

25660. 8 7.6130 1 1317.7 1

31884. 7 9.9132 8 1480.2 3

24004 .1 10.70 1 1525. 27

20482 .6 10.33 03 1089. 5

MAHINDRA & MAHINDRA

Net Sales (In x10M Rs

18602. 1

13093. 7

11503. 5

11363 .1

9347. 57

Gross Profit Ratio

16.808 7

10.063 7

12.867 7

13.41 23

11.65 55

Table 3.14 1

Figure 3.14 1

43

INTERPRETATION:

As mentioned above the gross profit ratio indicates the relationship between gross profit and net sales. Here from the table we can judge the financial position of TATA MOTORS and MAHINDRA & MAHINDRA year wise. Here, negative sign indicates that the percent is decreased compare to immediate previous year, while positive sign indicates that the percent is decreased in the gross profit compare to immediate previous year. Gross Profit of MAHINDRA & MAHINDRA are better than TATA MOTORS.

3.14.2 Net Profit Ratio Meaning: Net profit ratio is valuable for the purpose of ascertaining the over-all profitability of business and shows the efficiency of operating the business. Implementation: The net profit ratio is indicative of managements ability to operate the business with sufficient success not only to recover from revenue of the period the cost of merchandise or services, the expenses of operating the business and the cost of the borrowed funds, but also to leave a margin of reasonable compensation to the owners for providing their capital at risk. The ratio of net profit ratio to sales essentially expresses the cost price effectiveness of the operation. A high net profit margin would ensure adequate return to the owners as well as enable a firm to withstand adverse economic conditions when selling price is declaiming, cost of production raising and a low net profit margin has the opposite implication. It indicates the portion of sales revenue is left to the proprietors after all operating expenses are paid. The higher the ratio, the better will be the profitability. In order to have a better idea of profitability, the gross profit ratio and net profit ratio may be simultaneously considered. If the gross profitability increases over the five years but net profit is declining, it indicates that administrative expenses are slowly rising.

Formula
44

Net Profit Sales Particulars Company Net Profit (EBDT) (In x10M Rs) Net Sales (In x10M Rs) Net Profit Ratio Net Profit (EBDT) (In x10M Rs) Net Sales (In x10M Rs Net Profit

100

2010 2,240.08

2009 1,001.26

2008 1,913.46

2007 1528.88

2006 1236.95

35593.05 25660.79 31884.69 24004.11

20482.57

6.2935

3.9019

6.0011

6.3692 6.039

TATA MOTORS

2087.75

836.78

1103.37

1068.39

857.1

MAHINDRA & MAHINDRA

18602.11 13093.68 11503.48 11363.05 11.2331 6.3907 9.5916 9.4023

9347.57 9.1692

Table 3.14 2

45

Figure 3.14 2

Interpretation:

Net profit is the profit that is available to the proprietors of the firm after clearing all outstanding and expenses. Thus, higher the ratio yields higher profit Higher the net profit ratio shows better financial position of the company. M&M have higher net profit ratio hence M&M has better financial position than TATA MOTORS

3.14.3 RETURN ON INVESTMENT Meaning: The profitability ratio can be computed by relating the profits of a firm to its investment. Implementation: Return on investment indicates the profitability of business and is very much in use among financial analysis. The ratio is an indicator of the measure of the success of a business from the owners point of view. The ultimate interest of any business is the rate of return on invested capital. It may be measured by the ratio of income to equality capital. It determines whether a certain goal has been achieved or whether an alternative use of capital is
46

justified. It is an index of profitability of business and is obtained by comparing net profit with capital employed. Capital includes share capital, reserves and long term loans such as debentures. Formula: EBIT Capital employed X 100

Particulars Company Gross Profit (EBDT) (In x10M Rs) Capital Employed (Share capital + Reserves and surplus) (In x10M Rs) Return on Investment Gross Profit (EBDT) (In x10M Rs) Capital Employed (Share capital + Reserves and surplus) (In x10M Rs)

2010 4,783.86 14965.5 31.9659 3126.78 7810.55

2009 1,953.56 12369.2 15.7937 1317.71 5231.88

2008 3,160.82 7813.86 40.4514 1480.23 4337.6

2007 2568.67 6843.8 37.5328 1525.27 3540.04

2006 2115.91 5510.68

TATA MOTORS

38.3964 1089.5 2895.54

MAHINDRA & MAHINDRA

Return on Investment

61.2486

37.3395

72.8702

72.5604

73.074

Table 3.14 3

47

Figure 3.14 3

INTERPRETATION

This ratio shows relationship between E B I T to CAPITAL EMPLOYED. Higher the ratio, it is better for the company ROI of M& M is better than TATA MOTORS.

3.14.4 Return on Shareholders Fund: Meaning: It is carries the relationship of return to the sources of funds yet another step further. In order to judge the efficiency with which the proprietors funds are employed in business, this ratio is ascertained. Proprietors equity or Proprietors funds include share capital and reserves. It is of great practical importance to the perspective of investors, as it enables the profitability of a company to be compared with that of other. It also indicates whether the return on proprietors fund is enough in relation to the risk that they undertake. This ratio shows what amount of dividend is likely to be received on shares. Implementation:
48

 It expresses the profitability of a firm in relation to the funds supplied by the creditors and owners taken to gather, the return on shareholders equity measures exclusively the return on the owners funds. Formula:

Net profit X Share holders fund Company Particulars Net Profit Capital Employed (Share capital + Reserves and surplus) (In x10M Rs) Return on Shareholders fund Net Profit Capital Employed (Share capital + Reserves and surplus) (In x10M Rs) MAHINDRA & MAHINDRA Return on Shareholders fund 2010 2,240.08 14965.47

100

2009 1,001.26 12369.2

2008 1,913.46 7813.86

2007 1528.88 6843.8

2006 1236.95 5510.68

TATA MOTORS

14.9683237

8.09478

24.488

22.3396

22.4464

2087.75

836.78

1103.37

1068.39

857.1

7810.55

5231.88

4337.6

3540.04

2895.54

26.7298718

15.9939

25.4373

30.1802

29.6007

Table 3.14 4

49

Figure 3.14 4

3.14.5 RETURN ON EQUITY SHARE CAPITAL

Meaning: It is obtained by dividing net profit after tax deduction of performance dividing by his amount of ordinary share capital plus free reserve. Implementation: This is probably the single most important ratio to judge whether the firm has earned a satisfactory return for its equity holders or not. Its adequacy can be judge by: (1) comparing it with the past record of the same form, (2) comparisons with the overall industry average. Formula: Net profit after tax - Preference dividend Equity share holders funds X 100

50

Particulars Company Net Profit Preference Dividend TATA MOTORS Share capital Return on Equity Share Net Profit Preference Dividend Share capital MAHINDRA & MAHINDRA Return on Equity Share

2010 2,240.08 0.000 570.6 3.92583246 2087.75

2009 1,001.26 0.000 514.05 1.94779 836.78

2008 1,913.46 0.000 385.54 4.96306 1103.37

2007 1528.88 0.000 385.41 3.96689 1068.39

2006 1236.95 0.000 380.87 3.2477 857.1

282.95 7.3785121

272.62 3.0694

239.07 4.61526

238.03 4.48847

233.4 3.67224

Table 3.14.5

Figure 3.14 5

51

3.14.6 PE Ratio
Meaning: It is closely related to the earning yield leanings price ratio. It is actually the reciprocal of the latter. Thus ratio is computed by dividing the market price of the shares by the EPS. Implementation: The price earning ratio reflects the price currently being paid by the market for each Rupee of currently reported EPS. In other words, the PIE ratio measures investors expectations and the market appraisal of the earnings. Therefore, only normally sustainable earning associated with the assets are taken into account. Formula: Market value per share Earning per share

Particulars Company Market Value EPS Price Earning Ratio Market Value EPS Price Earning Ratio

2010 345.53 39.26 8.80106979

2009 558.32 19.48 28.6612

2008

2007

2006 1550 34.19 45.3349

2,530.55 1323.08 49.65 50.9678 39.93 33.135

TATA MOTORS

12216.75 3218.81 36.18 15.35 337.665837 209.694

Table 3.14.6

7669.9 10285.3 2030.85 73.08 22.44 18.36 104.952 458.344 110.613

MAHINDRA & MAHINDRA

52

Figure 3.14.6

3.14.7 Current Ratio: Meaning: The current ratio is the ratio of total current assets to total current liability. It is calculated by dividing current assets by current liability. It is also known as a working capital ratio, as it is measure of working capital available at a particular time. It is a measure of short term financial strength of the business and shows whether the business will be able to meet its current liabilities, as and when they mature. Implementation: The current ratio of a firm measures its short term solvency. That is a measure of margin of safety to the creditors. The fact that a firm can rarely count on such an even flow requires that the size of the C.A. should be sufficiently larger than C.L. so that the firm would be assured of being able to pay its current maturing debts as and when it becomes due. Formula: Current Assets Current liability

53

Company

Particulars Current Asset

2010 11,699.67 18881.23 0.62 6224.56 5611.04 1.11

Table 3.14.7

2009

2008

2007

2006 9812.06 7888.65 1.24 2805.05 2254.37 1.24

10,836.58 10,781.73 103318.5 12846.28 0.84 5081.2 4797.76 1.06 12029.8 0.89 3816.41 3468.77 1.1 8321.8 1.24 3916.94 2854.20. 1.37

TATA MOTORS

Current Laiability Current ratio Current Asset

MAHINDRA & MAHINDRA

Current Laiability Current ratio

Figure 3.14.7

INTERPRETATION:

The ratio tells us about the capabilities of a company to discharge its short term liabilities. Ideally the ratio should be 2:1 i.e. current asset should be double that of current liability. Current ratio of 1.33:1 is considered by banks as the minimum acceptable level for providing working capital finance.

54

3.14.8 EPS

Meaning: EPS measures the profit available to the equity shareholders on a per share basis, that is, the amount that they can get on every share head. This ratio shows the profitability of the firm from the owners point of view. By comparing EPS of the current year with past years the path of the trend of profitability can be ascertained. It is essential that EPS of the company should be compared with the other companies and also average of the company before giving final opinion. The limitation of EPS is that it does not show how much dividend is actually paid to shareholders and how much profit is retained in business. Implementation: Earning per share is a widely used ratio. EPS s a measure of profitability

Formula: Profit after tax preference dividend X 100 No. of equity shareholders fund

Particulars Company PAT Preference Dividend TATA MOTORS MAHINDRA & MAHINDRA
No. of shareholders EPS

2010 1,358.82 0.00 5705.08 23.8177203 2048.16

2009 921.51 0.00 5140.08 17.9279 965.21

2008

2007

2006

1,654.17 1686.31 1361.65 0.00 3855.04 42.9093 891.46 0.00 0.00 3853.74 3828.34 43.7578 35.5676 961.28 597.72

PAT Preference Dividend 0.00 5659.08 0.00 2726.16 0.00 2394.7 0.00 2380.33 0.00 2334
55

No. of shareholders

EPS

36.1924553

35.4055

37.2264

40.3843 25.6093

Table 3.14.8

Figure 3.14.8

INTERPRETATION:

This ratio indicates the earning per share for shareholders of company. EPS of TATA MOTORS was better than M&M from 2006-02008 but decreased from 2008 onwards.

3.14.9 Dividend Per Share

Meaning: DPS is the dividend paid to shareholders on a per share basis. In the other words, DPS is the Net distributed profit belonging to the shareholders divided by the No. of ordinary shares outstanding. Implementation:
56

 The DPS would be a better indicator than EPS as the former shows what exactly is received by the owners. Like the EPS, the DPS is also should not be taken at its face value as the increase DPS may not be a reliable measure of profitability as the equality base may have increase due to increase relation without any change in the number of outstanding shares.

Formula: Total dividend declared

Company Particulars 2010 2009 No. of 5705.08 5140.08 Equity shares Total 18881.23 12846.28 dividend Dividend per share 15.00 6.00 No. of Equity shares 5659.08 2726.16 Total dividend 5611.04 4797.76 Dividend per share 19.00 10.00
Table 3.14.9

2008 3855.04 12029.8

2007 3853.74 8321.8

2006 3828.34 7888.65

TATA MOTORS

15.00 2394.7

15.00 2380.33

13.00 2334 2254.37 7.50

3468.77 2854.20. 11.50 4.00

MAHINDRA & MAHINDRA

No. of equity shares

57

Figure 3.14.9

58

INTERPRETATION:
Dividend per share of Tata motors was upto15.00 till 2008 and it is more than Mahindra & Mahindra but

after that it became less than Mahindra and Mahindra and it is increases upto 19.00 in 2010. Hence the Mahindra and Mahindra having the better dividend per share than Tata Motors.

3.14.10 Dividend Yield Ratio Meaning: Dividend yield ratio is closely related to the EPS and DPS. While the EPS and DPS are based on the book value per share, the yield is expressed in terms of the market value per share. The earnings yield may be defined as the ratio of earnings per share to the market value per ordinary share. Implementation:

The dividend yield ratio is calculated by dividing the cash dividends per share by the market value per share. Formula: Dividend per share Market value share

Company

Particulars Dividend per share Market Value Dividend Yield Ratio Dividend per share Market Value

2010 15.00 345.53 0.04341

2009 6.00 558.32 0.01

2008 15.00 2,530.55 0.01

2007 15.00 1323.08 0.01

2006 13.00 1550 0.01

TATA MOTORS MAHINDRA & MAHINDRA

19.00 12216.8

10.00 3218.81

11.50 7669.9

4.00 10285.3

7.50 2030.85

Dividend Yield Ratio

0.00156

0.00311

0.00150

0.00039

0.00369

Table 3.14.10

Figure 3.14.10

INTERPRETATION:

3.14.11 Overall turnover ratio: Meaning: The amount invested in business is invested in all capital employed and sales are affected through them to earn profits so in order to find relation between net sales to capital employed. Implementation:

The usefulness of the Du Pont analysis lies in the fact that it presents the overall picture of the
performance of a firm as also enables the management to identify the factors which have a bearing on profitability.

Formula: Net sales Capital employed

Company

Particulars Net Sales (In x10M Rs)

Capital Employed (Share capital + Reserves and surplus) (In x10M Rs) Over all turnover ratio

2010 35593.05

2009

2008

2007

2006 20482.6

25660.8 31884.7 24004.1

TATA MOTORS

14965.47 2.38 18602.11

12369.2 7813.86 2.07 4.08

6843.8 3.51

5510.68 3.72 9347.57

Net Sales (In x10M Rs MAHINDRA & MAHINDRA

Capital Employed (Share capital + Reserves and surplus) (In x10M Rs) Over all turnover ratio

13093.7 11503.5 11363.1

7810.55 2.38

5231.88 2.50
Table 3.14.11

4337.6 2.65

3540.04 3.21

2895.54 3.23

Figure 3.14.11

INTERPRETATION:

` The overall turnover ratio of Tata Motors was better than the Mahindra and Mahindra. The Tata Motors having the more turnover in 2008 up to 4.08and it is decreases in next year till 2.07 And this year it is same 2.38. This year both company having better turn over than previous year, means both company comes with

3.14.12 Fixed Asset Turnover Ratio

Meaning: It is based on the relationship between the sales and assets of the firm. A reference to this was made while working out the overall profitability of a form as reflected in its earning power. Implementation:

To ascertain efficiency and profitability of the business. The higher the turnover ratio, the more
efficiency is the management and utilization of the assets while low turnover ratios are indicative of underutilization of available resources.

Formula: Sal es Fixed

Company Particulars Net Sales (In x10M Rs)
Fixed Asset Fixed asset turnover ratio

2010 35593.05 18416.81 1.93 18602.11 4866.18 3.82

2009

2008

2007

2006

25660.8 31884.7 24004.1 20482.6 1305.17 10830.8 1.88 2.69 8775.8 3.08 7971.55 2.55

TATA MOTORS

Net Sales (In x10M Rs MAHINDRA & MAHINDRA

Fixed Asset Fixed asset turnover ratio

13093.7 11503.5 11363.1 9347.57 4653.66 3552.64 3180.57 2.81 3.24 3.57 2859.55 3.27

Table 3.14.12

a s s e t

Figure 3.14.12

INTERPRETATION:
The Mahindra and Mahindra having better fixed asset turnover ratio than Tata Motors. Tata Motors having low fixed asset turnover ratio it may be because of NANO car production, Means they invest more money to produce NANO hence it results to decrease the fixed asset turn over ratio

3.14.13 Proprietary Ratio Meaning: The ratio shows the proportion of proprietors funds to the total assets employed in known in the proprietary ratio. Implementation: Proprietary ratio helps to known how many proprietary funds to total assets. The higher the ratio, the stronger the financial position of the enterprise, as it signifies that the proprietors have provided larger funds to purchase assets. This ratio can not exceed 100%; it means that the business does not use any outside funds. There are no outside liabilities. Purchases are made for cash

only and firm carries business entirely from own funs only. A very high ratio therefore is not desired as it shows insufficient use of out side fund is made. Generally it is said that proprietors fund should be enough to cover fixed assets. And also reasonable proportion must be maintained between owned funds and borrowed funds, so the benefit of trading on equity is obtained. Which inture increase the rate of equity dividend.

Formula: Proprietary fund Net asset

Company

Particulars Proprietary Fund

2010 14965.47 31,591.38 0.47 7810.55 10,698.71 0.73

Table 3.14.13

2009 12369.2 25,534.76 0.48 5231.88 9,284.64 0.56

2008 7813.86 14,094.51 0.55 4337.6 6,924.66 0.63

2007 6843.8 10,852.94 0.63 3540.04 5,176.05 0.68

2006 5510.68 8,447.52 0.65 2895.54 3,778.92 0.77

TATA MOTORS

Total Asset Proprietary Ratio

Proprietary Fund MAHINDRA MAHINDRA &

Total Asset Proprietary Ratio

Figure 3.14.13

INTERPRETATION:
This ratio indicates the proprietary funds to total assets. Proprietary Ratio of Tata Motors is less than Mahindra and Mahindra hence M&M is having stronger

financial position than Tata Motors.