STOCK MARKET AND OPERATIONS

MGT959
TERM PAPER

TOPIC:MARUTI

Submitted to: submitted by:

GEETIKA MADAN PRASHANT KUMAR
RSE156A05
10905632

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ACKNOWLEDGEMENT

I take this opportunity to present my votes of thanks to all those guidepost

who really acted as lightening pillars to enlighten our way throughout this
project that has led to successful and satisfactory completion of this study.
We are really grateful to our HOD for providing us with an opportunity to
undertake this project in this university and providing us with all the
facilities. We are highly thankful to Mrs GEETIKA MADAN for her active
support, valuable time and advice, whole-hearted guidance, sincere
cooperation and pains-taking involvement during the study and in
completing the assignment of preparing the said project within the time
stipulated.
Lastly, We are thankful to all those, particularly the various
friends , who have been instrumental in creating proper, healthy and
conductive environment and including new and fresh innovative ideas for
us during the project, their help, it would have been extremely difficult
for us to prepare the project in a time bound framework.

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EXECUTIVE SUMMARY

Maruti was incorporated in 1981 as a Government company. They started production in

December 1983 with collaboration from Suzuki of Japan. Initially Suzuki had 26% equity
which has since increased to 40%.

The original model was replaced in the 2nd year itself with a new streamlined model with
more leg room and better fuel efficiency. A van (now called Omni) in two types of roof
and a Jeep type vehicle Gypsy, were also introduced in quick succession.

The various cars proved extremely popular and production has already crossed 100,000
nos. which is 60% of the total production of passenger car. The company has an up to
date manufacturing facility and absorbed the technology successfully. The foreign equity
and presence of a number of Japanese experts has helped in the stabilisation
of production.

In the initial stages Maruti set up a limited R&D department for absorbing the technology
that was being imported. Even at this stage Maruti made certain modifications in the
imported technology on market considerations e.g. Application engineering to develop
special bodies for school van,taxi, delivery van, executive van, ambulance.

Improved suspension and seating for OMNI, which was used more as a car than a
commercial vehicle. Modifications in Gypsy and Maruti 800 to meet export requirements
of various countries.

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 CONTENTS
CHAPTER:1

INTRODUCTION

Automobile industry
Company Profile
S.W.O.T. Analysis
Competitors Information

CHAPTER:2

FUNDAMENTAL ANALYSIS

CLASSIFICATION OF RATIO

ACTIVITY / TURN OVER RATIO

LIQUIDITY RATIO

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 CHAPTER:-1

INTRODUCTION

AUTOMOBILE INDUSTRY

Indian automobile industry has grown leaps and bounds since 1898, a time when a car
had touched the Indian streets for the first time. At present it holds a promising tenth
position in the entire world with being # 2 in two wheelers and # 4 in commercial
vehicles. Withstanding a growth rate of 18% per annum and an annual production of
more than 2 million units, it may not be an exaggeration to say that this industry in the
coming years will soon touch a figure of 10 million units per year.

Reasons of Growth
Economic liberalization, increase in per capita income, various tax relief policies, easy
accessibility of finance, launch of new models and exciting discount offers made by
dealers all together have resulted in to a stupendous growth of India automobile industry.

MARKET SHARE
Automobile industry of India can be broadly classified under passenger vehicles,
commercial vehicles, three wheelers and two wheelers, with two wheelers having a
maximum market share of more than 75%. Automobile companies of India, Korea,
Europe and Japan have a significant hold on the Indian market share. Tata Motors
produces maximum numbers of mid and large size commercial vehicles, holding more
that 60% of the market share. Motorcycles top the charts of two wheelers with Hero
Honda being the key player. Bajaj by far is the number one manufacturer of three
wheelers in India.

Passenger vehicle section is majorly ruled by the car manufacturers capturing over 82%
of the total market share. Maruti since long has been the biggest car manufacturer and
holds more that 50% of the entire market.

Global recession has impacted, the Indian automobile industry also and can be seen
clearly in the sales figures of the last financial year. Even then this industry has high
hopes in 2009-2010, as banks have reduced loan interest rates and the major chuck of
automobile customers belong to the middle income group who are becoming
economically stronger with every passing day.

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  The first automobile in India rolled in 1897 in Bombay.
 India is being recognized as potential emerging auto market.
 Foreign players are adding to their investments in Indian auto industry.
 Within two-wheelers, motorcycles contribute 80% of the segment size.
 2/3rd of auto component production is consumed directly by OEMs.
 India is the largest three-wheeler market in the world.
 India is the largest two-wheeler manufacturer in the world.
 India is the second largest tractor manufacturer in the world.
 India is the fifth largest commercial vehicle manufacturer in the world.
 The number one global motorcycle manufacturer is in India.
 India is the fourth largest car market in Asia - recently crossed the 1 million mark.

COMPANY PROFILE

Maruti Udyog Ltd. (MUL) is the first automobile company in the world to be honoured
with an ISO 9000:2000 certificate. The company has a joint venture with Suzuki Motor
Corporation of Japan. It is said that the company takes only 14 hours to make a car. Few
of the popular models of MUL are Alto, Baleno, Swift, Wagon-R and Zen.

QUICK FACTS

Year of Establishment February 1981

Vision "The Leader in The Indian Automobile

Industry, Creating Customer Delight and
Shareholder's Wealth; A pride of India."

Industry Automotive - Four Wheelers

Listings & its codes BSE - Code: 532500

NSE - Code: MARUTI
Bloomberg: MUL@IN
Reuters: MRTI.BO

Joint Venture With Suzuki Motor Company, now Suzuki

Motor Corporation, of Japan in October
1982.

Registered & Corporate Office 11th Floor, Jeevan Prakash

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 25, Kasturba Gandhi Marg
New Delhi - 110001, India
Tel.: +(91)-(11)-23316831 (10 lines)
Fax: +(91)-(11)-23318754, 23713575
Telex: 031-65029 MUL IN

Works Palam Gurgaon Road

Gurgaon -122015
Haryana, India
Tel.: +(91)-(124)-2340341-5, 2341341-5

Website www.marutiudyog.com

MILESTONES
1981  Maruti Udyog Ltd. was incorporated.

1982  Steped into a JV with SMC of Japan.

1983  Maruti 800, a 796 cc hatchback, India's first affordable car
was produced.
1984  Installed capacity reached 40,000 units. Omni, a 796 cc
MUV was in production.
1985  Launch of Maruti Gypsy (970cc, 4WD off-road vehicle).
1986  Produced 100,000 vehicles (cumulative production).
1987  Exported first lot of 500 cars to Hungary.
1988  Installed capacity increased to 100,000 units.
1992  SMC increases its stake to 50 per cent.
1994  Produced the 1 millionth vehicle since the commencement of
production.
1995  Second plant launched, the installed capacity reached
200,000 units.
1996  Launch of 24-hour emergency on-road vehicle service.
1997  Produced the 2 millionth vehicle since the commencement of
production.
1998  Launch of website as part of CRM initiatives.
1999  Launch of Maruti - Suzuki innovative traffic beat in Delhi
and Chennai as social initiatives.

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2000  IDTR (Institute of Driving Training and Research) launched
jointly with Delhi government to promote safe driving
habits.
2001  Launch of customer information centers in Hyderabad,
Bangalore, and Chennai.
2002  SMC increases its stake to 54.2 per cent.
 Launch of Maruti Finance with 10 finance companies in
Mumbai.

 Start of Maruti True value in Mumbai.

2003  Production of 4 millionth vehicle.

 Listed on BSE and NSE after a public issue oversubscribed

10 times.
2004  Maruti closed the financial year 2003-04 with an annual sale
of 472122 units, the highest ever since the company began
operations 20 years ago.
2005  The fiftieth lakh car rolls out in April, 2005.

1. Maruti 800: Launched - 1983

2. Maruti Omni: Launched - 1984
3. Maruti Gypsy: Launched - 1985
4. Maruti Alto: Launched - 2000
5. Maruti Wagon-R: Launched - 2002
6. Maruti Versa: Launched - 2003
7. Maruti Grand Vitara Launched - 2004
8. Maruti Suzuki Swift: Launched - 2005
9. Maruti Suzuki SX4: Launched - 2007
10.Maruti Swift Dzire: Launched - 2008
11.Maruti Suzuki A-STAR: Launched - 2008
12.Maruti Suzuki Ritz: Launched - 2009
13.Maruti Suzuki Estilo: Launched – 2009

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 Company overview

Maruti Udyog Limited (MUL), established in 1981, had a prime objective to meet the
growing demand of a personal mode of transport, which is caused due to lack of efficient
public transport system. The incorporation of the company was through an Act of
Parliament.

Suzuki Motor Company of Japan was chosen from seven other prospective partners
worldwide. Suzuki was due not only to its undisputed leadership in small cars but also to
commitments to actively bring to MUL contemporary technology and Japanese
management practices (that had catapulted Japan over USA to the status of the top auto
manufacturing country in the world). at Maruti Udyog Ltd.

A license and a Joint Venture agreement were signed between Government of India and
Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in Oct 1982.

The objectives of MUL, then are as cited below:

 Modernization of the Indian Automobile Industry.
 Production of fuel-efficient vehicles to conserve scarce resources.
 Production of large number of motor vehicles which was necessary for economic
growth.

In 2001, MUL became one of the first automobile companies, globally, to be honoured
with an ISO 9000:2000 certificate. The production/ R&D is spread across 297 acres with
3 fully-integrated production facilities. The MUL plant has already rolled out 4.3 million
vehicles. The fact says that, on an average two vehicles roll out of the factory in every
single minute. The company takes approximately 14 hours to make a car. only this, with
range of 11 models in 50 variants, Maruti Suzuki fits every car-buyer's budget and any
dream.

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader
in the car segment, both in terms of volume of vehicles sold and revenue earned. Until
recently, 18.28% of the company was owned by the Indian government, and 54.2% by
Suzuki of Japan. The Indian government held an initial public offering of 25% of the
company in June 2003. As of May 10, 2007, Govt. of India sold its complete share to

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Indian financial institutions. With this, Govt. of India no longer has stake in Maruti
Udyog.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual
production commenced in 1983 with the Maruti 800, based on the Suzuki Alto kei car
which at the time was the only modern car available in India, its' only competitors- the
Hindustan Ambassador and Premier Padmini were both around 25 years out of date at
that point. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold
in India and various several other countries, depending upon export orders. Cars similar
to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki and manufactured
in Pakistan and other South Asian countries.

The company annually exports more than 50,000 cars and has an extremely large
domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was
the India's largest selling compact car ever since it was launched in 1983. More than a
million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the
sales charts and Maruti Swift is the largest selling in A2 segment.

Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is
commonly used to refer to this compact car model. Till recently the term "Maruti", in
popular Indian culture, was associated to the Maruti 800 model.

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has
been the leader of the Indian car market for over two decades.

It’s manufacturing facilities are located at two facilities Gurgaon and Manesar south of
New Delhi. Maruti’s Gurgaon facility has an installed capacity of 350,000 units per
annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly
plant with a capacity of 100,000 units per year and a Diesel Engine plant with an annual
capacity of 100,000 engines and transmissions. Manesar and Gurgaon facilities have a
combined capability to produce over 700,000 units annually.

More than half the cars sold in India are Maruti cars. The company is a subsidiary of
Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned
by the public and financial institutions. It is listed on the Bombay Stock Exchange and
National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In all,
over six million Maruti cars are on Indian roads since the first car was rolled out on
December 14, 1983.

Maruti Suzuki offers 12 models, Maruti 800, Omni, Alto, Versa, Gypsy, A Star, Wagon
R, Zen Estilo, Swift, Swift Dzire, SX4, Grand Vitara. Swift, Swift dzire, A star and SX4
are maufactured in Manesar, Grand Vitara is imported from Japan as a completely built
unit (CBU), remaining all models are manufactured in Maruti Suzuki's Gurgaon Plant.

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Suzuki Motor Corporation, the parent company, is a global leader in mini and compact
cars for three decades. Suzuki’s technical superiority lies in its ability to pack power and
performance into a compact, lightweight engine that is clean and fuel efficient.

Maruti is clearly an “employer of choice” for automotive engineers and young managers
from across the country. Nearly 75,000 people are employed directly by Maruti and its
partners.

The company vouches for customer satisfaction. For its sincere efforts it has been rated
(by customers)first in customer satisfaction among all car makers in India for nine years
in a row in annual survey by J D Power Asia Pacific.

Maruti Suzuki was born as a government company, with Suzuki as a minor partner to
make a people's car for middle class India. Over the years, the product range has
widened, ownership has changed hands and the customer has evolved. What remains
unchanged, then and now, is Maruti’s mission to motorise India.

COMPETITORS INFORMATION :-
MARUTI UDYOG LIMITED – Managing competition successfully

Maruti Udyog Limited (MUL) was established in Feb 1981 through an Act of
Parliament, to meet the growing demand of a personal mode of transport caused by the
lack of an efficient public transport system. It was established with the objectives of -
modernizing the Indian automobile industry, producing fuel efficient vehicles to conserve
scarce resources and producing indigenous utility cars for the growing needs of the
Indian population. A license and a Joint Venture agreement were signed with the Suzuki
Motor Company of Japan in Oct 1983, by which Suzuki acquired 26% of the equity and
agreed to provide the latest technology as well as Japanese management practices. Suzuki
was preferred for the joint venture because of its track record in manufacturing and
selling small cars all over the world. There was an option in the agreement to raise
Suzuki’s equity to 40%, which it exercised in 1987. Five years later, in 1992, Suzuki
further increased its equity to 50% turning Maruti into a non-government organization
managed on the lines of Japanese management practices.

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Maruti created history by going into production in a record 13 months. Maruti is the
highest volume car manufacturer in Asia, outside Japan and Korea, having produced over
5 million vehicles by May 2005. Maruti is one of the most successful automobile joint
ventures, and has made profits every year since inception till 2000-01. In 2000-01,
although Maruti generated operating profits on an income of Rs 92.5 billion, high
depreciation on new model launches resulted in a book loss.

FUTURE CHALLENGES

  Maruti has always been identified as a traditional carmaker producing value-for-money

cars and right now the biggest hurdle Maruti is facing is to shed this image. Maruti wants
to change it for a more aggressive image. Maruti Baleno has failed due to one of the
major reasons being that customers could not identify Maruti with a car as sophisticated
as Maruti Baleno. Maruti is looking forward to bring about a perception change about
the company and its cars. Maruti started the exercise with the new-look Zen, and Suzuki's
decision to pick India as one of the first markets for this radically different-looking car
gave this endeavor a new thrust. Maruti has also changed its logo at the front grill. It has
replaced the traditional Maruti logo on grill ‘stylish ‘M’ with S’. The major thrust in the
facelift endeavour is with the launch of 1.3 litre Swift. It’s a style statement from Maruti
to Indian market.

  The next threat Maruti faces is the growing competition in compact cars. Companies
like Toyota, Ford, Honda and Fiat are planning to come out with small segment cars in
near future.Ford is launching Focus and Fiesta, GM is launching Aveo in 2006, Chevrolet
is launching Spark in 2006, Hyundai is launching its new compact car in 2006, Honda is
launching Jazz in 2006, GM is has reduced prices of its Corsa, Fiat is coming up with

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Panda and new Fiat Palio, Skoda is launching Fabia. All this will pose a major threat to
Maruti leadership in compact cars.

  New emission norms like Bharat Stage 3 which has come into effect from April 2005
has increased car prices by Rs.20000 and Bharat Stage 4 which is coming into force in
2007 will contribute in increasing car prices further. This could be of concern to Maruti
which is low cost provider of passenger cars.

  Rise in petrol prices and growing popularity of other substitute fuels like CNG will be
another threat to Maruti. There is also a threat to Suzuki from R&D investment by Toyota
and Honda in Hybrid cars. Hybrid cars could run on both petrol and gaseous fuels.

  There is a threat to Maruti models ageing. Maruti models like Maruti 800 which is in
market for the last twenty years and others like Zen and Esteem which have also entered
the decline phase are the other threats. Maruti is planning phasing out Zen in 2007 and
there were rumors of phasing out Maruti 800 also. This all makes Suzuki to replace these
brands with new launches . As Swift and Wagon R are replacing the Zen market. Maruti
will have to keep on making modifications in its present models or its models will face
extinction

S.W.O.T. ANALYSIS OF THE COMPANY

Company’s Portfolio:
Maruti Udyog Limited (MUL),INDIA’s finest and Asia’s largest automobile industry
was established in 1981 by an act of parliament.MUL, the first automobile company
of the world to be honored with an ISO 9000:2000 certificate, is a subsidiary of
Suzuki Motor Corp (holds a 54% equity stake). The Government of India remains a
significant equity stakeholder (10%).With its early mover advantage in Indian
market; Maruti retains a dominant Market share despite increasing competition.

Business Portfolio:
The Group's principal activity is to manufacture, purchase and sale of Motor Vehicles
and Spare parts. The other activities of the Group comprises of facilitation of Pre-
Owned Car Sales, Fleet Management and Car Financing. The Group also provides
services like framing of customized car policies, economical leasing of cars,
maintenance management, registration and insurance management, emergency
assistance and accident management. The product range includes ten basic models

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 with more than 50 variants. The Group has operations in over 100 cities with more
than 150 outlets and also exports cars to other countries.

Vision:
Visions of any company are those values on which company works. As the MUL is
started by Governmental initiatives it tends to be more consumer oriented and hence
cost effective, but on the other hand Suzuki’s participation ensures not only need of
the profit, but of the need of maximum profit. The only way for this Nora’s dilemma
of selecting principals for company’s working vision ,was to maximize profit and
reducing cost by maximizing output and sales Hence MUL declared its Vision as-
“The Leader in the Indian Automobile Industry, Creating Customer Delight1 and
Shareholder's Wealth2; eventually become a pride of India”
Customer Delight1 is making sure that performance, after sales service and customer
support are best and beyond expectation. Shareholder’s wealth2 is the prime concern
for running business smoothly.MUL knows this and understands “customer is king”,
he can change the fortune of any company, hence goes company’s brand line:
COUNT ON US!

Mission:
Mission is the statement of an organization’s purpose, what it want to accomplish in
the larger environment and its goals which are specific, realistic and motivating.
Missions are described over visions and visions demand certain objectives. The main
objectives/Missions of MUL are:
- Modernization of the Indian Automobile Industry.
- Developing cars faster and selling them for less.
- Production of fuel-efficient vehicles to conserve scarce resources.
- Production of large number of motor vehicles which was necessary for economic
growth.

- Market Penetration, Market Development Similarly Product Development and

Diversification.
- Partner relationship management, Value chain, Value delivery network .

SWOT ANALYSIS: Consists of analysis of internal environment (Strength and

weakness) and external environments
(Opportunity and Threat).

STRENGTH: Contemporary technology. Japanese Management practices (that had

captured Japan over USA to the status of top Auto manufacturing country in the world)
Early mover advantages. Recruitment is done in very tedious manner
ensuring talent and best professionals, Working culture, after sale services , distribution,
diversification,
Sell directly to consumers
Keep costs below competitors’ costs

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WEAKNESS: Still depends upon SUZUKI COPORATION, Japan For tech. support,
10% components are manufactured outsideIndia. Though MUL has launched luxury cars
as well it’s still considered as poor man’s brand. Diversification is not
supported with all India presence of Manufacturing Units. Bureaucracy, Technological
disadvantages, Decades of isolation, inertia and subservience to the whims of government
bureaucrats have made MUL unaccustomed to international standards or keen
competitors
No strong relationships with computer retailers

OPPURTUNITY: first company to roll out suitably designed cars before 2008 as per
Govt.’s Proposal of new ethanol (renewable)
mixed fuel. Other companies’ lacks economy of scale, so market is still open. Importing
new technology is controlled by Govt. so there is plenty of untapped market and with
increase in Income scale, Demand is rising.

FUNDAMENTAL ANALYSIS:

Fundamental analysis is performed on historical and present data, but with the
goal of making financial forecasts. There are several possible objectives:

 to conduct a company stock valuation and predict its probable price

evolution,
 to make a projection on its business performance,
 to evaluate its management and make internal business decisions

Fundamental analysis maintains that markets may misprice a security in the

short run but that the "correct" price will eventually be reached. Profits can be
made by trading the mispriced security and then waiting for the market to
recognize its "mistake" and reprice the security.

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Fundamental analysis includes:

1. Economic analysis
2. Industry analysis
3. Company analysis

On the basis of these three analyses the intrinsic value of the shares are
determined. This is considered as the true value of the share. If the intrinsic value
is higher than the market price it is recommended to buy the share . If it is equal
to market price hold the share and if it is less than the market price sell the
shares.

Macroeconomic Analysis

GDP
The Gross Domestic Product (GDP) in India expanded at an annual rate of 8.80
percent in the last reported quarter.
From 2004 until 2010, India's average quarterly GDP Growth was 8.37 percent
reaching an historical high of 10.10 percent in September of 2006 and a record
low of 5.50 percent in December of 2004.
The economy has posted an average growth rate of more than 7% in the decade
since 1997, reducing poverty by about 10 percentage points.

Country Interest Rate Growth Rate Inflation Rate

India 5.00% 8.80% 11.25%

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 GDP growth rate of India

Mar Jun Sep Dec

Year
2010 8.60 8.80    
2009 5.80 6.00 8.60 6.50
2008 8.50 7.80 7.50 6.10

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 India’s GDP

Year Value
2009 1296.09
2008 1159.17

Foreign direct investment

Foreign direct investment are the net inflows of investment to acquire a lasting
management interest (10 percent or more of voting stock) in an enterprise
operating in an economy other than that of the investor. It is the sum of equity

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capital, reinvestment of earnings, other long-term capital, and short-term capital
as shown in the balance of payments. This series shows net inflows (new
investment inflows less disinvestment) in the reporting economy from foreign
investors. Data are in current U.S. dollars.
Source International Monetary Fund, International Financial Statistics and
Balance of Payments databases, and World Bank, Global Development Finance.

2005 2006 2007 2008 2009

7,60,64,25,242 20,33,59,47,448 25,12,71,55,852 41,16,86,05,242 34,57,70,00,000

Inflation:
The inflation rate in India was last reported at 11.25 percent in July of 2010.
From 1969 until 2010, the average inflation rate in India was 7.99 percent
reaching an historical high of 34.68 percent in September of 1974 and a record
low of -11.31 percent in May of 1976.

Country Interest Rate Growth Rate Inflation Rate Jobless Rate Current Account Exchange R
India 5.00% 8.80% 11.25% 8.00% -13 45.0150

India’s Inflation rate 

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov De
2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25          
2009 10.45 9.63 8.03 8.70 8.63 9.29 11.89 11.72 11.64 11.49 13.51 14.

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2008 5.51 5.47 7.87 7.81 7.75 7.69 8.33 9.02 9.77 10.45 10.45 9.7

Considering the data for the past five years, 2005-06 to 2009-10, it is seen that
there is not much difference in average inflation rate between the new series and
the old series which is about 5.5 per cent .

Table 1 : Annual WPI Inflation: New vis-à-vis Old Series

(per cent)

Base Average2005-
Items Weight 2010-11*
Year 06 to 2009-10

2004-05 100.0 5.5 10.0

WPI- All Commodities
1993-94 100.0 5.4 10.6

2004-05 20.1 9.2 19.3

1. Primary Articles
1993-94 22.0 7.9 16.8

2004-05 14.9 5.9 13.5

2. Fuel & Power
1993-94 14.2 4.2 13.6

2004-05 65.0 4.1 5.6

3. Manufactured Products
1993-94 63.7 4.8 6.8

Memo items        

a. Food Articles & Food 2004-05 24.3 8.1 14.2

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 Products 1993-94 26.9 7.7 10.2

2004-05 55.0 3.7 5.5

b. Non-Food Manufactured
Products
1993-94 52.2 4.2 7.2
* Relates to the period April-August.

Finally, with the reduction in average inflation and inflation volatility, since the
mid-1990s, tolerance for high inflation has come down.

The moderation of inflation trend has had several beneficial effects in terms of
lower nominal interest rate and high GDP growth rate

Given the remarkable stability in the inflation rate since the mid- 1990s, it is
important to persevere with appropriate policy responses so that the high inflation
seen in the recent months does not get entrenched.

Even if the trigger for inflation is from supply side, its persistence necessitates
monetary policy responses to bring the inflation rate back to its trend and anchor
inflationary expectations.

Rates:

The benchmark interest rate (reverse repo) in India was last reported at 5.00 percent. In India, interes
decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate
benchmark repurchase rate. ,From 2000 until 2010, India's average interest rate was 5.82 percent reachi
historical high of 14.50 percent in August of 2000 and a record low of 3.25 percent in April of 2009.
page includes: India Interest Rate chart, historical data and news.

Country Interest Rate Growth Rate Inflation Rate Jobless Rate Current Account Exchange R
India 5.00% 8.80% 11.25% 8.00% -13 45.0150

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 Sector analysis
It contributes 4% in India’s GDP & 5% in India’s
Industrial Production
Despite economic slowdown that has affected the automobile industry,
production and exports of the sector went up last fiscal, said the Economic
Survey
2008-09
Passenger car sales grew by 0.31% in FY09 ,various tax relief policies, easy
accessibility of finance, launch of new models and exciting discount offers for the
growth in car sales in the last one year

There was not a marked impact of recession

•Sales of automobiles fluctuate across the year
•The Mid size & Premium segment were affected
•The decline in sales were in the range of 15%-20%
•Now the market have recovered with a sales increase of 20 %
The Small car segment or Economy segment showed
consistent sales as those people who prefer these
segments were either purchasing because of need
•The Mid Sized Segment showed a drop as the
customers for these segments are those who actually
have a car for their utility and are looking for a new

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car that will satisfy their status requirement. At the
point of recession people began to rethink, weather it
is wise to spend money on luxury
•Luxury segment showed no drop as customers of this
segment are those who have money and are capable
of spending
Automotive manufacturer looking at exploring new markets
in Southeast Asia and South America, to boost revenues

According to SIAM, the total automobile sales in the domestic market was
reported 1114157 units in January , increasing by 44.9% while for the same
period last year 7,68,698 units were reported sold.

Car sales in January saw a growth of 32% as it was reported 145000 units in the
first month of 2010. The data for car sales surprised the analysts as it beats the
previous best of 133000 sales recorded in November 2009, according to the data
released by SIAM.

While analysts in the industry see the low interest rates for car loans and
economic recovery as important factors for this growth. Analysts also said fear of
a hike in taxes in the Union Budget also aided the growth. Now the expectations
are there by the industry experts that the total domestic industry will end the
current financial year at over 11 million units, which will be a growth of 22.6%
over 2008-09.

Following a temporary setback on account of the global economic recession, the

Indian automobile market has once again picked up a remarkable momentum
witnessing a buoyant sale for the first time in its history in the month of
September 2009.

Recently, the automotive giants of India including General Motors (GM),

Volkswagen, Honda, and Hyundai, have declared significant expansion plans. On
account of its huge market potential, a very low base of car ownership in the
country estimated at about 25 per 1,000 people, and a rapidly surging economy,
the nation is firmly set on its way to become an outsourcing platform for a
number of global auto companies

 One can say that the automobile industry in the country has occupied a solid
space in the platform of Indian economy. Empowered by its present growth,
today the automobile industry in the country can produce a diverse range of
vehicles

23
Company Analysis
Maruti Suzuki India Limited a partial subsidiary of Suzuki Motor Corporation of Japan,
is India's largest passenger car company, accounting for over 45% of the domestic car
market. The company offers a complete range of cars from entry level Maruti-800 and
Alto, to stylish hatchback Ritz, A star, Swift, Wagon-R, Estillo and sedans DZire, SX4
and Sports Utility vehicle Grand Vitara

It was the first company in India to mass-produce and sell more than a million cars. It is
largely credited for having brought in an automobile revolution to India. It is the market
leader in India and on 17 September 2007, Maruti Udyog Limited was renamed Maruti
Suzuki India Limited. The company's headquarters are located in Delhi.

The company annually exports more than 50,000 cars and has an extremely large
domestic market in India selling over 730,000 cars annually. Maruti 800, till 2004, was
the India's largest selling compact car ever since it was launched in 1983. More than a
million units of this car have been sold worldwide so far. Currently, Maruti Suzuki Alto
tops the sales charts and Maruti Suzuki Swift is the largest selling in A2 segment.

Maruti Suzuki has been the leader of the Indian car market for over two decades.

More than half the cars sold in India are Maruti Suzuki cars. The company is a subsidiary
of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti Suzuki. The
rest is owned by public and financial institutions. It is listed on the Bombay Stock
Exchange and National Stock Exchange in India.

During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were exported. In all,
over six million Maruti Suzuki cars are on Indian roads since the first car was rolled out
on 14 December 1983.

Nearly 75,000 people are employed directly by Maruti Suzuki and its partners. It has
been rated first in customer satisfaction among all car makers in India from 1999 to 2009
by J D Power Asia Pacific

24
25
Ratios
Mar Mar Mar Mar Mar
'06 '07 '08 '09 '10
Profitability Ratios        
Operating
Profit 15.29 14.88 14.12 9.18 12.74
Margin(%)
Gross Profit
16.95 16.66 10.97 5.77 9.93
Margin(%)
Net Profit
9.53 10.29 9.34 5.72 8.34
Margin(%)
Return On
Capital 33.46 30.65 26.18 17.37 27.89
Employed(%)
Return On Net
21.81 22.79 20.56 13.04 21.1
Worth(%)
Return on Long
Term Funds(% 33.47 30.74 27.35 17.48 28.8
)
Liquidity And Solvency
       
Ratios
Current Ratio 1.77 1.4 0.91 1.51 0.91

Quick Ratio 1.31 1.13 0.66 1.26 0.68

Debt Equity
0.01 0.09 0.11 0.07 0.07
Ratio
Long Term
Debt Equity 0.01 0.09 0.06 0.07 0.04
Ratio
Management Efficiency
       
Ratios
Inventory
14.15 21.27 22.93 30.46 30.47
Turnover Ratio
Debtors
19.45 21.12 25.76 26.33 33.92
Turnover Ratio
Investments
18.78 28.76 22.93 30.46 30.47
Turnover Ratio
Fixed Assets
6.59 6.32 2.48 2.38 2.82
Turnover Ratio
Total Assets
2.21 1.98 1.94 2.06 2.32
Turnover Ratio
Asset Turnover
2.46 2.41 2.48 2.38 2.82
Ratio

26
 Mar Mar Mar Mar Mar
 
'06 '07 '08 '09 '10
Earnings
41.16 54.07 59.91 42.18 86.45
Per Share
Book Value 188.73 237.23 291.28 323.45 409.65

P/L account details

  Mar '06 Mar '07 Mar '08 Mar '09 Mar '10
           
Operating Profit 1,897.70 2,256.10 2,628.70 1,976.60 3,824.60
Reported Net
Profit 1,189.10 1,562.00 1,730.80 1,218.70 2,497.60

 SALES ANALYSIS

27
 The company vouches for customer satisfaction. For its sincere efforts it has been
rated (by customers) first in customer satisfaction among all car makers in India for ten
years in a row in annual survey. Maruti Suzuki India Limited, a subsidiary of Suzuki
Motor Corporation of Japan, has been the leader of the Indian car market for over two
decades.
During 2007-08, Maruti Suzuki sold 764,842 cars, of which 53,024 were
exported. In all, over six million Maruti cars are on Indian roads since the first car was
rolled out on 14 December 1983.
And finally in 2009-10, the nation's number one car manufacturer joined a select club of
global automobile makers, when it became the first automobile company in India to
produce one million (10 lakh) cars in a year.

 MARKET SHARE

28
29
MARUTI SUZUKI FINANCIALS FOR 2008-09
Total Income up 14.28 per cent; Premium compacts and sedan segment drive top line
growth

Fiscal 2008-09
The company's Total Income (Net of Excise) (Income from Operations plus Other
Income) for the financial year 2008-09 climbed to Rs 21,453.8 Crore. This is the highest
Total Income (Net of Excise) ever in the company's history, and marks a growth of 14.28
per cent over 2007-08. The growth in Total Income (Net of Excise) included higher
realizations, largely contributed by the company's popular hatch-back Swift and premium
sedan Swift Dzire (Diesel and Petrol variants).

Net Profit during the year stood at Rs 1,218.7 Crore, down 29.6 per cent over 2007-08.
The company's EBDITA for the year stood at Rs 2,433.4 Crore, a fall of about 22 per
cent over the previous year.

During the year, commodity prices went up sharply and remained high for most part of
the year. Forex fluctuations were also adverse and impacted the bottom-line significantly.

In recent months, commodity prices have eased.

With regard to foreign currency exposure, the company's exports in 2009-10 are expected
to be higher and cover its imports.

Highlights of 2008-09

FINANCIAL HIGHLIGHT:
FINANCIAL HIGHLIGHTS
Particulars 2009 2008 2007 2006 2005 2004 2003
Net Sales (In
20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
x10M Rs)
Profit Before
Tax (In x10M 1675.8 2503 2279.8 1750 1304.9 769.8 282.1
Rs)
Reported Net 1218.7 1730.8 1562 1189.1 853.6 542.1 146.4

30
Profit (In x10M
Rs)
Earnings Per
Share-Unit Curr 41.57 59.03 53.29 40.65 29.25 18.56 4.88
( In Rs)

In the fiscal 2008-09 Maruti Suzuki sold a total of 792,167 vehicles. The annual sales in
2008-09 is the highest ever by the company in its 25 year history. The previous highest
annual sales were 764,842 units in 2007-08.

During the fiscal, Maruti Suzuki Swift crossed the 3 lakh-sales mark cumulative domestic
sales since launch and became the quickest vehicle model to do so. During the fiscal,
Maruti Suzuki's Alto continued to be the preferred vehicle for the great Indian middle
class crossing the 1 million-mark in cumulative sales in domestic market.

The company's sales included exports of 70,023 units in 2008-09, up by 32.1 per cent
over sales of 53,024 recorded in 2007-08. The 2008-09 export numbers, the highest ever
by the company, was led by A-star, the fuel efficient compact car launched in Europe
during the year as Suzuki Alto. The export tally includes around 19,000 units of A-star
exported to Europe including United Kingdom, France, Germany, Italy, Netherlands,
Denmark and Switzerland.

Fiscal 2008-09 marked Maruti Suzuki's Silver Jubilee year in India. Over these 25 years
the company has sold over 7 million (70 lakh) cars in the domestic market. Additionally,
over half a million cars made by Maruti Suzuki have been exported world-over.

During the year, the company continued its focus on long term initiatives, despite the
challenging market situation. These include:

• Focus on R&D: Manpower strength to 730 engineers from 460 in end March
2008. Company plans 1,000 engineers in R&D by 2010.

• New technology engine: Brand new facility for K-series engine launched on
schedule.

• Launching new models: A-star launched. Introduced Maruti 800 Duo - an

alternate fuel option that runs on LPG and petrol.

• Annual capacity to manufacture expanded from 800,000 to one million units

(Gurgaon plus Manesar plants).

31
 • Reached out to new segments of customers - government employees and rural
customers - through innovative programs.

• Export of A star (as Suzuki Alto) to Europe commenced as per schedule.

• Dedicated export port facilities for cars at Mundra completed, used for A-star
shipment.

• Network expansion:

o Sales : From 600 sales outlets (in 393 cities) last year to 681 outlets (in
454 cities)
o Service : From 2,628 service outlets (1220 cities) last year to 2,767 (in
1314 cities);
o True Value : From 265 outlets (in 166 cities) last year to 315 outlets (181
cities)

• Increased Pre-owned car sales from 1.01 lakh units in 2007-08 to 1.23 lakh units
in 2008-09

• National Road Safety Mission launched - a nation-wide Corporate Social

Responsibility (CSR) initiative to train 500,000 people in safe driving in three years.
The network of Maruti Driving Schools further expanded and crossed 50 schools.

MEANING OF ANALYSIS AND OBJECTIVE OF STUDY :

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 company’s profitability, liquidity and capacity by such analysis we
can interpret the position of the company. So it is very important to study.

Profit Trend for 7 years:

32
 PROFIT COMPARISION (IN x10M Rs)
Particulars 2009 2008 2007 2006 2005 2004 2003
Operating Profit
2433.3 3130.8 2588.8 2055.8 1797.7 1308.1 656.9
(EBDIT)
Gross Profit
2382.3 3071.2 2551.2 2035.4 1761.7 1264.7 604.2
(EBDT)
Profit Before
1675.8 2503 2279.8 1750 1304.9 769.8 282.1
Tax (EBT)
Adjusted Net
1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
Profit (EAT)

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.

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-

33
cash items like depreciation, changes in inventory and receivable and payables, and or
other items for which cash offers the investing and financing activities.

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 all-important 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:

 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
  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.

 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.

Classification of ratio

Profitability ratio

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.

35
 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:

FOR GROSS PROFIT RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Gross Profit (EBDT)
2382.3 3071.2 2551.2 1761.7 1264.7 604.2
(In x10M Rs)
Net Sales (In x10M
20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Rs)
16.1271 13.891 8.41492
Gross Profit Ratio 11.603937 17.165597 17.359471 16.939222
719 0856 458

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 Maruti Suzuki
year wise.

Here 6 consecutive years from 2004 to 2009 are taken into consideration. The changes in
the gross profit ratio in percent are as follows.

36
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.

For consecutive four years the gross profit ratio is positive. It indicates better financial
position of the company.

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 management’s 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:
Net Profit X 100
Sales

37
 FOR NET PROFIT RATIO
Particulars 2009 2008 2007 2006 2005 2004 2003
Net Profit (In x10M
1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
Rs)
Net Sales (In x10M
20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Rs)
7.87363 6.8298 1.80666
Net Profit Ratio 5.2246701 9.3323682 10.446779 9.9623831
372 8445 007

Interpretation:

 Here 6 consecutive years from 2004 to 2009 are taken into consideration. The
changes in the net profit ratio in percent are as follows.
 Higher the net profit ratio shows better financial position of the company.
 Due to various reasons this ratio goes down. If the administration department is
not sufficient then net profit ratio goes down or the control mechanism is not
efficient at all check points then also it affects net profit of the company.
 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.

Expenses Ratio:

Meaning:

 This ratio shows relationship between expanses to sales.

 Above table shows that for the year 2004 – 05 it was 88.64 % the increase in 2005
– 06 up to 89.23% that indicates there is increase in operating expenses for the
year 2006 – 07 it is 92.03% and it is higher than previous year which shows
increase in operating expenses.
 For the year 2008-09 there is 2.43 increases in the net profit ratio which gives
signal of better financial position of the company.

38
  This operating expense may be due to growth in the organization or it may reflect
inefficacy of administrative control on expenses.
 Here negative sign shows decrease in operating expenses.

Implementation:

 Some accountants calculate expenses ratio in respected of raw – material

consumed, direct wages and factory expenses.
 It is closely related to the profit margin, gross as well as net.

Formula:
Expenses X 100
Sales

FOR EXPENSES RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Total Expenditure
18738.7 15934.2 12462.8 10625.3 9671 8177.1 6704.8
(In x10M Rs)
Net Sales (In x10M
20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Rs)
88.5314 89.814 93.3803
Net Profit Ratio 91.274275 89.059670 84.802297 88.427000
634 8148 15

INTERPRETATION:

 This ratio shows relationship between expanses to sales.

 Above table shows that for the year 2004 – 05 it was 88.64 % the increase in 2005
– 06 up to 89.23% that indicates there is increase in operating expenses for the
year 2006 – 07 it is 92.03% and it is higher than previous year which shows
increase in operating expenses.
 This operating expense may be due to growth in the organization or it may reflect
inefficacy of administrative control on expenses.
 Here negative sign shows decrease in operating expenses.
[6.1.4] OPERATING RATIO:

Meaning:

 Operating Ratio is computed by dividing expenses by sales.

39
  The term ‘operating ratio’ includes (1) COGS (2) administrative expenses (3)
selling expenses and (4) financial expenses but excludes taxes, dividends and
extraordinary losses due to theft of goods, good destroyed by fire and so on.

Implementation:

Some accountants calculate expenses ratio in respected of raw – material consumed,

direct wages and factory expenses.
It is closely related to the profit margin, gross as well as net.

Formula:

C O G S + Operating expenses X 100

Net sales

OPERATION RATIO
Particulars 2009 2008 2007 2006 2005 2004 2003
Operating
2114.8 1510.4 1244.21 900.15 801.54 786.54 840.88
Expense
COGS 3498.6 3744.5 3197.01 2506.35 2160.04 1673.64 1168.58
Net Sales 20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Operating Ratio 27.3423 29.3708 30.22 28.3499 27.1113 27.0219 27.9865

INTERPRETATION:

 This ratio shows relationship between COGS + operating expanses to sales.

 Above table shows that for the year 2004 – 05 it was 87.33 % the increase in 2005
– 06 up to 86.90 % that indicates there is increase in operating expenses for the
year 2006 – 07 it is 83.89 % and it is lower than previous year which shows
increase in operating expenses.
 In the year 2008-09 there is 28% increase in the operating expenses. This is may
be due to inefficient operation management and also there may be some other
expenses for sales or promotion may incur during this year.

40
 Return on investment / Capital employed:

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 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 X 100
Capital employed

FOR RETURN ON INVESTMENT / CAPITAL EMPLOYED

Particulars 2009 2008 2007 2006 2005 2004 2003
Gross Profit (EBIT) (In
2382.3 3071.2 2551.2 2035.4 1761.7 1264.7 604.2
x10M Rs)
Capital Employed ( Share
capital + Reserves and 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
surplus) (In x10M Rs)
36.49499 37.222 37.3289 40.232 35.216 19.502
Return on Investment 25.4930497
73 6032 807 4838 6407 9051

INTERPRETATION:

 This ratio shows relationship between E B I T to CAPITAL EMPLOYED.

41
  Higher the ratio, it is better for the company.
 In the year 2008- 09 there is decrease of 43.15 percent in the gross profit of the
company. This show slow- down in company’s sale. It is due to recession during
that period where an overall sale was affected.

Return on shareholder’s 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. Proprietor’s 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 proprietor’s 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:

 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 100
Share holders fund

FOR RETURN ON SHAREHOLDER'S FUND

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Profit (In x10M Rs) 1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
Capital Employed ( Share
capital + Reserves and 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
surplus) (In x10M Rs)
11.4782 19.84112 22.4002 21.9541 19.642 17.315 4.18721
Return on Investment
395 46 393 136 3678 1036 756

42
INTERPRETATION:

 The ratio indicates relationship between Net profits to share holders fund
therefore higher the returns to shareholders.
 For the year 2004 05 it is 21.90 % that increase in the year 2005 – 06 up to 23.70.
 This ratio shows downward trend in the ratio in return on shareholders fund for
this company.
 During the year 2008-09 there is 72.97% decrease in the ROI. This ratio shows
upward trend for that financial year for the company.

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 X 100
Equity capital

FOR RETURN ON EQUITY SHARE CAPITAL

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Profit (In x10M
1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
Rs)
Preference Dividend
0 0 0 0 0 0 0
(In Rs)
Share Capital (In
144.5 144.5 144.5 144.5 144.5 144.5 144.5
x10M Rs)

43
 Return on Equity
55.73 8.13 22.03 28.14 27.73 79.12 11.46
Share Capital (In Rs)

INTERPRETATION:

 The ratio indicates relationship between Net profits to share holders fund
therefore higher the returns to shareholders.
 For the year 2004 – 05 it is 19.49 % that increase in the year 2005 – 06 up to
21.81 %.
 This ratio shows downward trend in the ratio in return on shareholders fund for
this company.
 For the financial year 2008-09 there is 85% increase in the ratio in return on
shareholders fund. Here, year 2008-09 shows marked improvement that is
why it is taken into consideration.

Return on Equity share holders fund:

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 X 100

Equity share holders’ funds

44
 FOR RETURN ON EQUITY SHARE HOLDERS FUND
Particulars 2009 2008 2007 2006 2005 2004 2003
Net Profit (In x10M Rs) 1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
Capital Employed ( Share
capital + Reserves and 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
surplus) (In x10M Rs)
Preference Dividend (In Rs) 0 0 0 0 0 0 0
Return on Investment (In 11.4782 19.8411 22.4002 21.9541 19.6423 17.315 4.18721
Rs) 395 246 393 136 678 1036 756

INTERPRETATION:

 For the year 2004 – 05 it is 19.64 % that increase in the year 2005 – 06 up to
21.95%.
 These ratios shows downward trend in the ratio in return on shareholders fund for
this company.
 Here in the year 2008-09 there is decrease of 69% compared to previous year in
the ROI which shows upward trend in the company.

Earning per share:

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 owner’s 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

45
 Formula:

Profit after tax – preference dividend X 100

No. of equity shareholders fund

FOR RETURN ON EARNING PER SHARE

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Profit (In x10M Rs) 1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72
2889100 2889100 2889100 2889100 2889100 288910 2889100
No. of Equity Shares
60 60 60 60 60 060 60
Preference Dividend (In Rs) 0 0 0 0 0 0 0
Return on Investment ( In 37.1267 57.7934 53.1407 41.4340 29.7705 21.522 44.8997
Rs) 792 185 594 02 106 9612 865

INTERPRETATION:

This ratio indicates the earning per share for shareholders of company.
In the year 2004 – 05 ratio is 29.77 % and 2005 – 06 it is 41.43 % and its increase on
2006-07 is 53.14 %.therefore it is good for company as well as shareholders.

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:

 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.

46
 Formula:
Total dividend declared
No. of equity shares

FOR DIVIDEND PER SHARE

Particulars 2009 2008 2007 2006 2005 2004 2003
2889100 2889100 2889100 2889100 2889100 288910 2889100
No. of Equity Shares
60 60 60 60 60 060 60
Total Dividend (In x10M
101.1 144.5 130 101.1 57.8 43.3 42.7
Rs)
3.49935 5.00155 4.49967 3.49935 2.00062 1.4987 1.47796
Dividend per Share ( In Rs)
894 654 024 894 262 3632 861

INTERPRETATION:

 This ratio indicates the total dividend declared to no. of shares. For the year 2004
– 05 it is 2 % and 2005 – 06 is3.50 % and increase on 4.50 % in the year 2006 –
07.
 For the year 2007-08 is 96% increased compared to previous year while for the
year 2008-09 it is decreased to 26.84%. Thus for the current year it is decreased.
It indicates slow-down in the financial position of the company.

Price earning 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

47
 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

FOR PRICE EARNING RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Market Value of Share (In
1559.65 520.1 990.05 927.35 636.5 461.25 376.3
Rs)
Earning Per Share (In Rs) 41.57 59.03 53.29 40.65 29.25 18.56 4.88
37.5186 8.81077 18.5785 22.8130 21.7606 24.851 77.1106
Price Earning Ration
433 418 326 381 838 8319 557

INTERPRETATION:

 This ratio indicates the earning per share for shareholders of company.
 In the year 2004 – 05 ratio is 17.58% and 2005 – 06 it is 21.95% and its increase
on 29.55%.
 Therefore it is good for company as well as shareholders.

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:

48
  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

FOR DIVIDEND YIELD RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003

Market Value of Share (In Rs) 1559.65 520.1 990.05 927.35 636.5 461.25 376.3
3.4993589 5.001555 4.49967 3.499358 2.00062 1.4987 1.4779
Dividend Per Share (In Rs)
4 65 024 94 262 3632 6861
0.0022436 0.009616 0.00454 0.003773 0.00314 0.0032 0.0039
Dividend Yield Ratio
8 53 489 5 316 4929 2763

INTERPRETATION:
 This ratio indicates the earning per share for shareholders of company.
 In the year 2004 – 05 ratio is 17.58% and 2005 – 06 it is 21.95%.
 For the year 2007-08 the ratio is decreased by 109.9% and for 2008-09 it is
increased by 76.51%. So for current situation is good for company as well as
shareholders.

Interest coverage ratio:

Meaning:

 It is also known as ‘time interest – earned ratio’.

 This ratio measures the debt servicing capacity of a firm insofar as fixed interest
on long term loan is concerned. It is determined by dividing the operating profit
or earning before interest and taxes (EBIT) by the fixed interest changes on loans.

Implementation:

49
  This ratio uses the concept of net profits before taxes because tax is calculated
after paying interest on long term loan.
 This ratio as the name suggests, show how many times the interest changes are
covered by EBIT out of which they will be paid.

Formula:

EBITD
Interest

FOR INTEREST COVERING RATIO

PARTICULARS 2009 2008 2007 2006 2005 2004 2003
OPERATING PROFIT 2433.
3130.8 2588.8 2055.8 1797.7 1308.1 656.9
(EBDIT) (IN X10M RS) 3
INTEREST (IN X10M RS) 51 59.6 37.6 20.4 36 43.4 52.7
47.71
INTEREST COVERING 52.53020 68.85106 100.774 49.9361 30.1405 12.464
1764
RATIO 13 38 51 111 53 8956
7

INTERPRETATION:

 This ratio indicates the EBDIT to interest. In the year 2004 – 05 ratio is 49.93 and
2005 – 06 it is 100.8 and its decrease on 68.85.therefore it is good for company as
well as shareholders.
 For the year 2008-09 the interest covering ratio is 47.71 while for the year 2007-
08 it is 52.53.It is decreasing for the last 2 financial years due to the fluctuation in
for-ex.

Activity / Turn over Ratio:

Overall turnover ratio:

Meaning:

50
  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

FOR OVERALL TURNOVER RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Sales (In x10M Rs) 20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Capital Employed
( Share capital +
9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
Reserves and surplus)
(In x10M Rs)
OVERALL 2.19693 2.126054 2.1442244 2.203700 2.49470 2.5351 2.31765
TURNOVER RATIO 0946 614 56 987 174 97149 6553

INTERPRETATION:

 This ratio indicates net sales to capital employed. In the year 2004 – 05 ratio is
2.49 and 2005 – 06 it is 2.20 and its decrease on 2.14 in the year 2006 – 07.
Therefore it is bad for company.
 In the year 2008-09 the ratio is 2.19 while in the year 2007-08 the ratio is
decreased to 2.12 which shows slow down in the company.

fixed assets turn over ratio:

Meaning:

51
  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:
Sales
Fixed assets

FOR FIXED ASSETS TURNOVER RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Sales (In x10M Rs) 20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Total Fixed Asset (In 7079.34 5716.166 4740.7419 4073.186 3943.61 3746.6 3554.50
x10M Rs) 4828 134 35 441 011 6667 495
Fixed Asset Turnover 2.4299
2.9 3.13 3.1 2.95 2.77 2.02
Ratio 99998

INTERPRETATION:

 Fixed turn over ratio indicates the turnover of the company in one year.
 In the year 2004 – 05 ratio is 2.77 and 2005 – 06 it is 2.95 and it increase on 3.1
in the year 2006 - 07. Therefore, it is good for company.
 In the year 2008-09 there is decrease of 7% in the fixed turnover ratio compare to
last year while during year 2007-08 there is very minor change in the ratio. Year
2007-08 and 2006-07 shows almost similar financial position of the company
while year 2008-09 shows slight slow down in the financial position of the
company

52
 Debtor turn over ratio:

Meaning:

 It is allied and closely related to this is the average collection period. It is the test
of the liquidity of the debtors of a firm.

Implementation:

 This figure should be measured, as in the case of average inventory, on the basis
of the monthly average. It suggests that number of times the amount of credit sale
is collected during the year.

Formula:
Credit sales
Avg. Debtors

FOR DEBTOR TURN OVER RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Net Sales (In x10M
20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1
Rs)
Sundry Debtors (In 697.117 596.9836 595.23288 507.2140 527.974 560.61 603.877
x10M Rs) 1477 503 78 144 867 57635 2077
Debtor Turnover
29.45 29.97 24.69 23.69 20.69 16.24 11.89
Ratio

INTERPRETATION:

 Debtor turnover ratio indicates credit sales to avg. debtors.

 In the year 2004 – 05 ratio is 20.69 and 2005 – 06 it is 23.69 and its increase on
24.69 in the year 2006 – 07. Therefore, it is good position for company.
 In the year 2008-09 there is 1% decrease in the Debtor’s turnover ratio compare
to previous year and 2007-08 there is 17.91% increase in the debtor’s turn over
ratio.
 How efficiently the amount is collected from the customers from the credit sales.

53
  As compare to previous year the no. of day’s collection period increase which
indicate inefficiency of collection department.
 Lower the collection period and higher debtor turnover ratio is advisable.

Creditor ratio:

Meaning:

 It is the no. of days within which we make payment to our creditors for credit
purchases it obtained from creditor ratio.

Implementation:

 The generally the longer credit period achieved means the operation of the
payment being financial interest feels by supper funds.

Formula:
Creditor + B / P X 365
Credit Purchases

FOR CREDITOR RATIO

Particulars 2008 2007 2006 2005
Creditor (In x10M Rs) 854.9 909.6 555.1 463.7
Bills Payable (In x10M
0 0 0 0
Rs)
Credit Purchase (In
13938.8 10836.4 9392.8 8621.3
x10M Rs)
Creditor Ratio 22.3863245 30.63785021 21.57093731 19.6316681

INTERPRETATION:

Creditor ratio indicates creditor to credit purchase.

In the year 2004 – 05 ratio is 19.63 and 2005 – 06 it is 21.57 and its increase on 30.63 in
the year 2006 – 07.

54
In the year 2007-08 there is decrease on 22.38 times i.e. decrease of 36.36% in the
creditor ratio compare to previous year.
Thus it indicates slight slow down in the financial condition of the company.

creditor turns over ratio:

Meaning:

 It is the no. of days within which we make payment to our creditors for credit
purchases it obtained from creditor ratio.

Implementation:

 The generally the longer credit period achieved means the operation of the
payment being financial interest feels by supper funds.

Formula:
No. of days in a year
Creditor’s ratio

FOR CREDITOR TURN OVER RATIO

Particulars 2008 2007 2006 2005
NO. Of Days
365 365 365 365
in Year
Creditor's
22.3863245 30.63785021 21.57093731 19.6316681
Ratio
Creditors
Turnover 16.30459703 11.91336851 16.92091515 18.5924089
Ratio

INTERPRETATION:

55
  Creditor ratio indicates creditor to credit purchase. In the year 2004 – 05 ratio is
18.59 and 2005 – 06 it is 16.92 and its increase on 11.91 in the year 2006 – 07.
Therefore, it is good position for company.
 During the year 2007-08 ratio is 16.30. It increases in compare to previous
financial year thus it indicates good position of the company.

Stock Turnover Ratio:

Meaning:

 It is the no. of times the average stock is turned over during the year is known as
stock turnover ratio. It measures the relationship between COGS and inventory
level.
 Higher the turnover ratio, the more profitable business would be. Such firms will
be able to trade on a smaller margin of a gross profit.
 Lower stock turn over ratio indicates accumulation of slow moving, obsolete and
low quality goods, which is a danger signal for management.

Implementation:

 This approach has the advantage of being free from bias as it smoothens out the
fluctuations in the inventory level at different period.
 It is measures how quickly inventory is sold. It is a test of efficient inventory
management.
 To judge whether the ratio of a firm is satisfactory or not.

Formula:
Cost of good sold
Average stock

FOR STOCK TURN OVER RATIO

Particulars 2009 2008 2007 2006 2005 2004 2

56
 Sales Turnover (In
23182.2 21025.2 17205.9 14753.1 13335.7 11047.4 89
x10M Rs)
Gross Profit (EBDT)
2382.3 3071.2 2551.2 2035.4 1761.7 1264.7 6
(In x10M Rs)
Cost Of Good Sold
20799.9 17954 14654.7 12717.7 11574 9782.7 83
(COGS) (In x10M Rs)
Inventories (In x10M
902.3 1038 701.4 881.2 666.6 439.8
Rs)
23.052089 17.29672 20.893498 14.4322514 17.362736 22.243519 17.2
Stock Turn over Ratio
11 447 72 8 3 78

INTERPRETATION:

 Stock turnover ratio indicates cost of goods sold to average stock.

 In the year 2004 – 05 ratio is 17.36 times and 2005 – 06 it is 14.43 times and it’s
increase on 20.80 times in the year 2006 – 07.
 For the year 2008-09 and 2007-08 the ratio are 23.05 times and 17.3 times
respectively. It is more in 2008-09 compare to 2007-08. It indicates better position
of the company.
 Therefore, it is good for company. How efficiently stock rate in the year Higher
the ratio, better position of the company as well as efficiency.

Liquidity Ratio:

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.

57
 Formula:

Current Assets
Current liability

FOR CURRENT RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Total Current
Assets (In x10M 5491.1 3097.9 4405 3740.9 2972 2018.9 2782.8
Rs)
Total Current
Liabilities (In 3397.6 2825.7 3072.4 1977.1 1608 1531.8 1478.6
x10M Rs)
Current Ratio 1.6162 1.096330 1.433732 1.892114 1.848258 1.31799 1.882050

INTERPRETATION:

 Current ratio indicates current assets to current liability. In the year 2004 – 05
ratio is 1.84: 1 and 2005 – 06 it is 1.89: 1 and its decrease on 1.43: 1 in the year
2006 – 07.
 Therefore, it is good for company.
 For the year 2008-09 the ratio is 1.61:1 and for the year 2007-08 it is 1.61:1. So
for the year 2008-09 it is good as ideal is 2:1 and 1.61:1 closer to ideal one.
 Mainly 2: 1 is good. It indicates, repaying condition of the company to the current
liabilities. The standard current ratio must be 2:1.

Liquid Ratio:

Meaning:

 It is obtained by dividing the liquid assets by liquid liabilities.

 It liquid ratio is designed to show the amount of cash available to meet immediate
payments.
 If the liquid assets are equal to or more than liquid liabilities, the condition may
be considered as satisfactory.

Implementation:

58
  The importance of adequate liquidity in the sense of the ability of a firm to meet
short term obligations when they become due for payment can hardly be
overstressed.
 In fact liquidity is a prerequisite for the very survival of a firm. It measures ability
of a firm to meet its short term obligations and reflect the short term finance
strength of a firm.

Formula:

Liquid assets
Liquid liability

FOR LIQUIDITY RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Total Current
Assets (In 5491.1 3097.9 4405 3740.9 2972 2018.9 2782.8
x10M Rs)
Inventories
902.3 1038 701.4 881.2 666.6 439.8 487
(In x10M Rs)
Prepaid
Expenses (In 0 0 0 0 0 0 0
x10M Rs)
Quick Asset
4588.8 2059.9 3703.6 2859.7 2305.4 1579.1 2295.8
(In x10M Rs)
Total Current
Liabilities (In 3397.6 2825.7 3072.4 1977.1 1608 1531.8 1478.6
x10M Rs)
Bank Over
Draff (In 0 0 0 0 0 0 0
x10M Rs)
Liquidity
1.35060042 0.72898751 1.205442 1.44641141 1.43370647 1.0308787 1.55268497
Ratio

INTERPRETATION:

Liquid ratio indicates liquid assets to liquid liability. In the year 2004 – 05 ratio is 1.43: 1
and 2005 – 06 it is 1.44: 1 and its decrease on 1.21: 1 in the year 2006 – 07. Therefore, it
is good for company. How effectively the liability paid off.

59
 For the year 2008-09 the ratio is 1.35:1 which shows slight better condition compare to
FY 2004-05.
The standard liquidation must be 1:1.

Quick / acid test ratio:

Meaning:

 The measure of absolute liquidity may be obtain by comparing only cash and
bank balance as well as readily marketable securities with liquid liabilities.
 This is exacting standard of liquidity and it is satisfactory if the ratio is 0.5:1.
 Quick assets here do not include both stock and debtors, because payment from
debtors would not generally be received immediately when liquid liabilities are to
be paid.

Implementation:

 This ratio is the most rigorous and conservative test of a firm’s liquidity position.
Further, it is suggested that it would be useful for the management.

Formula:
Quick assets
Liquid liability

FOR QUICK ACID TEST RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Quick Assets
5491.1 3097.9 4405 3740.9 2972 2018.9 2782.8
(In x10M Rs)
Current
Liability (In 3397.6 2825.7 3072.4 1977.1 1608 1531.8 1478.6
x10M Rs)
Quick Acid
1.61617024 1.09633011 1.43373259 1.89211471 1.84825871 1.3179919 1.88205059
Test Ratio

INTERPRETATION:

60
  Quick acid test ratio is indicates quick assets and liquid liability. In the year 2004
– 05 ratio is 1.84: 1 and 2005 – 06 it is 1.89: 1 and its decrease on 1.4: 1 in the
year 2006 – 07. Therefore, it is good for company.
9.
Leverage Ratio:

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 proprietor’s 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
FOR PROPEIETARY RATIO
Net asset
Particulars 2009 2008 2007 2006 2005 2004 2003
Total Proprietary
9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
Funds (In x10M Rs)
Total Assets (In
10043.8 9315.6 7484.7 5524.3 4686.4 3903.1 3554
x10M Rs)

61
 93.041478 90.3366 91.57214 93.43632 92.0089 87.1693
Proprietary Ratio 98.702098
32 3962 05 639 1599 8661

INTERPRETATION:

This ratio indicates the proprietary funds to total assets. For the year 2006 – 07 it is 91.57
% and 2007– 08 is 90.33 % and increase in 2008 – 09 it is 93.04 %. This is a good for
company.

Debt equity ratio:

Meaning:

 The relationship between borrowed funds and owner’s capital is a popular

measure of the long term financial solvency of a firm. This relationship is shown
by the debt – equity ratio.

Implementation:

 This ratio reflects the relative claims of creditors and shareholders against the
assets of the firm. Alternatively this ratio indicates the relative proportions of
debts and equity in financing the assets of a firm.
 The D/E ratio is an important tool of financial analysis to appraise the financial
structure of a firm. It has important implication from view point of the creditors,
owners and the firm itself.
 A higher ratio means that outside creditors have a larger claim than the owners of
business. The pressure from creditors would increase and their interference will
also increase. The company with high debt position will have to accept strict
conditions from the lenders, while borrowing money.
 A lower ratio is not profitable from the view point of equity share holders, as
benefit of trading on equity is not availed of and the rate of equity dividend will
be comparatively lower.

FOR DEBT EQUITY RATIO

Particulars 2009 2008 2007 2006 2005 2004 2003
Long term 841.041 841.54 411.234 218.104 350.304 395.032 588.62

62
 Liabilities (In
x10M Rs)
Total 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098
Shareholders
Funds (In x10M
Rs)
Debt-Equity Ratio 9% 10% 6% 4% 8% 11% 19%

INTERPRETATION:

 This ratio indicates the debt to equity ratio. For the year 2004 – 05 it is 8 %and
2005– 06 is 4 % and increase in 2006 – 07 it is 6%.
 This is a bad for company as compare to 2005-06 year is more debt ratio which
indicate the more realize on debt fund rather owned fund. The good impact is
interest burden will be more indirectly.
 For the year 2008-09 and 2007-08 the debt equity ratio is 9% and 10%
respectively. As the higher debt equity ratio it shows the weaker financial
condition of the company. But, still it again varies for company to company.

Conclusion

Maruti was listed in 2003, and has been a consistent and strong performer on the stock
exchange, giving handsome returns to investors.

They are practically debt free and have a healthy cash balance. They have financed all
growth from internal resources.

Their continuous efforts at cost cutting and improving productivity, even in good times,
have helped them in making reasonable profits despite the impact of higher commodity
prices and weaker rupee.

Maruti Suzuki India LTD. company has a trend of growth from 2003 to 2007.During the
financial year 2008-09 the there is downfall in the growth of the company. The main
reason behind this downfall is because of the global recession and the price of
commodities of Maruti was quite high in the commodity market. The downfall of net
profit during the financial year 2008-09 is 29.6% over the financial year 2007-2008.The
total sales numbers in 2009-10 mark a growth of 29% over last financial year. The export

63
sales of 147,575 units in the year2009-10 are the highest ever annual export by the
company.

Maruti has crossed sale of 1million cars and by achieving this now it has become
landmark for Maruti where other companies will take time to reach and of course they
have raise their bar for themselves also.

From above facts and figures we reach to the conclusion that the future is exciting and
full of promise.

Balance Sheet(2009-2000) of Maruti Suzuki

*All numbers are in INR and in x10M

Appendix 1 200903 200803 200703 200603 200503 200403 200303 200203 200103 200003
SOURCES OF FUNDS :
Balance Sheet of Maruti Suzuki
Share Capital 144.5 144.5 144.5 144.5 144.5 144.5 144.5 132.3 132.3 132.3
Reserves Total 9200.4 8270.9 6709.4 5308.1 4234.3 3446.7 2953.5 2575 2510.2 2779.8
Equity Share Warrants 0 0 0 0 0 0 0 0 0 0
Equity Application Money 0 0 0 0 0 0 0 0 0 0
Total Shareholders Funds 9344.9 8415.4 6853.9 5452.6 4378.8 3591.2 3098 2707.3 2642.5 2912.1
Secured Loans 0.1 0.1 63.5 71.7 307.6 311.9 300 395.1 561.5 86.4
Unsecured Loans 698.8 900.1 567.3 0 0 0 156 260.9 550.6 459.7
Total Debt 698.9 900.2 630.8 71.7 307.6 311.9 456 656 1112.1 546.1

Total Liabilities 10043.8 9315.6 7484.7 5524.3 4686.4 3903.1 3554 3363.3 3754.6 3458.2

APPLICATION OF FUNDS :
Gross Block 8720.6 7285.3 6146.8 4954.6 5053.1 4566.7 4513.8 4384.7 3866.7 3499.9
Less : Accumulated Depreciation 4649.8 3988.8 3487.1 3259.4 3179.4 2735.9 2258.1 1954.6 1619.6 1324.2
Less:Impairment of Assets 0 0 0 0 0 0 0 0 0 0
Net Block 4070.8 3296.5 2659.7 1695.2 1873.7 1830.8 2255.7 2430.1 2247.1 2175.7
Lease Adjustment 0 0 0 0 0 0 0 0 0 0
Capital Work in Progress 861.3 736.3 250.7 92 42.1 74.9 9.3 72.4 368.4 234.2
Investments 3173.3 5180.7 3409.2 2051.2 1516.6 1677.3 103.2 96.8 95.5 397.4
Current Assets, Loans & Advances
Inventories 902.3 1038 701.4 881.2 666.6 439.8 487 681.1 865.5 990.2
Sundry Debtors 918.9 655.5 747.4 646.1 599.5 689.4 671.1 839.3 675.5 466.3
Cash and Bank 1939 330.5 1422.8 1401.6 1029.4 240.2 989.4 71.9 87.6 31.7
Loans and Advances 1730.9 1073.9 1533.4 812 676.5 649.5 635.3 517.7 622.4 526.4
Total Current Assets 5491.1 3097.9 4405 3740.9 2972 2018.9 2782.8 2110 2251 2014.6
Less : Current Liabilities and Provisions
Current Liabilities 3016.9 2456.2 2011 1505.8 1218.8 1211.4 1135.9 1201.7 1026.7 1090.2
Provisions 380.7 369.5 1061.4 471.3 389.2 320.4 342.7 263.5 239.4 325.8
Total Current Liabilities 3397.6 2825.7 3072.4 1977.1 1608 1531.8 1478.6 1465.2 1266.1 1416
Net Current Assets 2093.5 272.2 1332.6 1763.8 1364 487.1 1304.2 644.8 984.9 598.6
Miscellaneous Expenses not written off 0 0 0 0 0 16.3 88.7 119.2 58.7 52.3
Deferred Tax Assets 78.9 99.6 110.1 121.1 125.4 125.5 231.7 0 0 0
Deferred Tax Liability 234 269.7 277.6 199 235.4 308.8 438.8 0 0 0
Net Deferred Tax -155.1 -170.1 -167.5 -77.9 -110 -183.3 -207.1 0 0 0
64
Total Assets 10043.8 9315.6 7484.7 5524.3 4686.4 3903.1 3554 3363.3 3754.6 3458.2

Contingent Liabilities 1353 2186.1 1684.4 881.4 1051.4 1297.3 1754.1 2018.2 1314.2 793.2
 Appendix 2
Income Statement

Income Statement (2009-2003) of Maruti Suzuki

*All numbers are in INR and in x10M
200903 (12) 200803 (12) 200703 (12) 200603 (12) 200503 (12) 200403 (12) 200303 (12) 200203 (12) 200103 (12) 200003 (12)
INCOME :
Sales Turnover 23182.2 21025.2 17205.9 14753.1 13335.7 11047.4 8981.5 9087.8 8928.7 9315.1
Excise Duty 2652.1 3133.6 2509.6 2737.2 2411.9 1943 1801.4 2013.2 2211.8 2325.6
Net Sales 20530.1 17891.6 14696.3 12015.9 10923.8 9104.4 7180.1 7074.6 6716.9 6989.5
Other Income 998.5 837.1 598.4 429.2 403.2 377.6 276.5 318 324.6 357.5
Stock Adjustments -356.6 336.3 -243.1 236 141.7 3.2 -94.9 141.9 -20.3 51.3

Total Income 21172 19065 15051.6 12681.1 11468.7 9485.2 7361.7 7534.5 7021.2 7398.3

EXPENDITURE :
Raw Materials 15763.1 13791.5 10739 9335.6 8563.2 6973.3 5563.4 5839.6 5889.8 5616.1
Power & Fuel Cost 193.6 147.3 97.4 57.2 58.1 95.8 78.1 49.4 51.4 37.5
Employee Cost 463.5 346.8 266.29 211.45 191.46 293.76 217.82 227.25 199.22 185.71
Other Manufacturing Expenses 254.7 197.8 153.5 141.3 92.7 71.1 57.3 60.2 82.1 94.9
Selling and Administration Expenses 1486.96 1110.4 941.67 668.56 580.01 536.44 621.29 635.02 551.8 588.15
Miscellaneous Expenses 576.84 340.4 264.94 211.19 185.53 206.7 166.89 184.83 117.88 167.54
Less: Pre-operative Expenses Capitalised 0 0 0 0 0 0 0 0 0 0

Total Expenditure 18738.7 15934.2 12462.8 10625.3 9671 8177.1 6704.8 6996.3 6892.2 6689.9

Operating Profit 2433.3 3130.8 2588.8 2055.8 1797.7 1308.1 656.9 538.2 129 708.4
Interest 51 59.6 37.6 20.4 36 43.4 52.7 77 75.9 60.2
Gross Profit 2382.3 3071.2 2551.2 2035.4 1761.7 1264.7 604.2 461.2 53.1 648.2
Depreciation 706.5 568.2 271.4 285.4 456.8 494.9 322.1 342.9 322.3 263.1
Profit Before Tax 1675.8 2503 2279.8 1750 1304.9 769.8 282.1 118.3 -269.2 385.1
Tax 459.2 759.8 621.4 587.3 524.6 251.5 35.1 13.8 0.2 55
Fringe Benefit tax 9.7 9.8 6.7 5.7 0 0 0 0 0 0
Deferred Tax -11.8 2.6 89.7 -32.1 -73.3 -23.8 100.6 0 0 0
Reported Net Profit 1218.7 1730.8 1562 1189.1 853.6 542.1 146.4 104.5 -269.4 330.1
Extraordinary Items 146.07 61.09 26.71 -7.97 -6.5 -79.72 16.68 -0.71 18.29 5.83
Adjusted Net Profit 1072.63 1669.71 1535.29 1197.07 860.1 621.82 129.72 105.21 -287.69 324.27

Adjst. below Net Profit 0 0 -8.8 0 0 0 0 0 0 0

P & L Balance brought forward 7025.7 5637.3 4393.9 3442.1 2757.4 2335.9 2269.9 2233.2 2502.8 2245
Statutory Appropriations 0 0 0 0 0 0 0 0 0 0
Appropriations 240.2 342.4 309.8 237.3 168.9 120.6 80.4 67.8 0.2 72.3
P & L Balance carried down 8004.2 7025.7 5637.3 4393.9 3442.1 2757.4 2335.9 2269.9 2233.2 2502.8

Dividend 101.1 144.5 130 101.1 57.8 43.3 42.7 39.7 0 33.1
Preference Dividend 0 0 0 0 0 0 0 0 0 0
Equity Dividend % 70 100 90 70 40 30 30 30 0 25
Earnings Per Share(Adj)-Unit Curr 41.57 59.03 53.29 40.65 29.25 18.56
Earnings Per Share-Unit Curr 41.57 59.03 53.29 40.65 29.25 18.56 4.88 78.99 0 243.99
Earnings Per Share(Adj)-Unit Curr 41.57 59.03 53.29 40.65 29.25 18.56
Book Value-Unit Curr 323.35 291.19 237.16 188.67 151.52 124.26 107.2 2046.33 1997.35 2201.13

65
Appendix 3
Cash Flow Statement

Cash Flow Statement (2009-2001) - Maruti Suzuki

*All numbers are in INR and in x10M
200903 200803 200703 200603 200503 200403 200303 200203 200103
Cash Flow Summary
Cash and Cash Equivalents at Beginning of the year 330.5 1422.8 1401.6 1029.4 240.2 989.4 71.9 87.6 31.7
Net Cash from Operating Activities 1193.3 1822.8 2028 1222.6 1074.7 1035.9 770.5 653.9 -244.8
Cash Flow From Operating Activities
Net Profit before Tax & Extraordinary Items 1675.8 2503 2279.8 1750 1304.9 769.8 282.1 118.3 -269.2
Adjustment For
Depreciation 706.5 568.2 271.4 285.4 456.8 494.9 322.1 342.9 322.3
Interest (Net) -192.6 -81.2 -73.3 -86.5 -29.4 -30.4 -48.9 -18.6 4.6
Dividend Received -144 -166.8 -152.8 -72 -79.2 -72.3 -3 -3.9 -3.7
P/L on Sales of Assets 12.5 2.4 0.4 22 11.9 2.2 5.4 0.8 0.7
P/L on Sales of Invest -213.7 -89.8 -38.9 -10 -1.1 -3.4 -35 0 -19
Prov. & W/O (Net) -37.9 -85.5 -43.7 -4.4 -36.7 -8.1 43.6 -42.3 19.2
P/L in Forex -61 44.3 0 0 0 0 0 -0.2 0
Fin. Lease & Rental Chrgs 0 0 0 0 0 0 0 0 0
Others 0 0 -8.9 0 0 0 0 0.3 -26.1
Total Adjustments (PBT & Extraordinary Items) 69.8 191.6 -45.8 134.5 322.3 382.9 284.2 279 298
Op. Profit before Working Capital Changes 1745.6 2694.6 2234 1884.5 1627.2 1152.7 566.3 397.3 28.8
Adjustment For
Trade & 0th receivables -265 92 -103.5 -55.3 89.9 -20.4 167.3 -184.1 -333.8
Inventories 135.7 -336.6 168 -214.6 -226.7 47.3 194.1 175 124.7
Trade Payables 645.5 356.6 517 318.5 105.2 113 -20.3 172.7 -74
Loans & Advances -616.1 -119.1 -152.3 -130.1 -21.5 -23.2 -124.6 105.6 0
Investments 0 0 0 0 0 0 0 0 0
Net Stock on Hire 0 0 0 0 0 0 0 0 0
Leased Assets Net of Sale 0 0 0 0 0 0 0 0 0
Trade Bill(s) Purchased 0 0 0 0 0 0 0 0 0
Change in Borrowing 0 0 0 0 0 0 0 0 0
Change in Deposits 0 0 0 0 0 0 0 0 0
Others 0 0 0 0 0 0 0 0 0
Total (OP before Working Capital Changes) -99.9 -7.1 429.2 -81.5 -53.1 116.7 216.5 269.2 -283.1
Cash Generated from/(used in) Operations 1645.7 2687.5 2663.2 1803 1574.1 1269.4 782.8 666.5 -254.3
Interest Paid(Net) 0 0 0 0 0 0 0 0 0
Direct Taxes Paid -452.4 -864.7 -635.2 -580.4 -499.4 -233.5 -12.3 -12.3 9.5
Advance Tax Paid 0 0 0 0 0 0 0 0 0
Others 0 0 0 0 0 0 0 -0.3 0
Total-others -452.4 -864.7 -635.2 -580.4 -499.4 -233.5 -12.3 -12.6 9.5
Cash Flow before Extraordinary Items 1193.3 1822.8 2028 1222.6 1074.7 1035.9 770.5 653.9 -244.8
Extraordinary Items
Excess Depreciation W/b 0 0 0 0 0 0 0 0 0

66
Premium on Lease of land 0 0 0 0 0 0 0 0 0
Payment Towards VRS 0 0 0 0 0 0 0 0 0
Prior Year 's Taxation 0 0 0 0 0 0 0 0 0
Gain on Forex Exch. Tran 0 0 0 0 0 0 0 0 0
Others 0 0 0 0 0 0 0 0 0
Net Cash Used in Investing Activities 951.4 -3047.4 -2436.8 -530.7 -193.7 -1551.1 37 -128.1 -193.5
Cash Flow from Investing Activities
Investment in Assets :
Purchased of Fixed Assets -1620.7 -1685.8 -1395.5 -210.3 -482.5 -140.1 -101.7 -222.9 -603.6
Sale of Fixed Assets 7.1 6.9 12.3 31.5 3.7 2.3 8.6 9.4 16.8
capital WIP 0 0 0 0 0 0 0 0 0
Capital Subsidy Recd 0 0 0 0 0 0 0 0 0
Financial/Capital Investment :
Purchase of Investments -17019.1 -18696.6 -12244.4 -9346.9 -5224.3 -5416.3 -2290.5 -1.3 -11
Sale of Investments 19237.2 17012.3 10925.3 8822.2 5375.7 3845.5 2319.1 0 331.9
Investment Income 0 0 0 0 0 0 0 0 0
Interest Received 202.9 149 112.7 100.8 54.5 85.2 98.5 82.8 68.7
Dividend Received 144 166.8 152.8 72 79.2 72.3 3 3.9 3.7
Invest.In Subsidiaires 0 0 0 0 0 0 0 0 0
Loans to Subsidiaires 0 0 0 0 0 0 0 0 0
Investment in Group Cos 0 0 0 0 0 0 0 0 0
Issue of Sh. on Acqu. of Cos 0 0 0 0 0 0 0 0 0
Canc. of Invest. in Cos Acq. 0 0 0 0 0 0 0 0 0
Acquisition of Companies 0 0 0 0 0 0 0 0 0
Inter Corporate Deposits 0 0 0 0 0 0 0 0 0
Others 0 0 0 0 0 0 0 0 0
Net Cash Used in Financing Activities -536.2 132.3 430 -319.7 -91.8 -234 110 -541.5 494.2
Cash Flow From Financing Activities
Proceeds:
Proceeds from Issue of shares (incl share premium) 0 0 0 0 0 0 399 0 0
Proceed from Issue of Debentures 0 0 0 0 0 0 0 0 0
Proceed from 0ther Long Term Borrowings 0 0 567.5 0 0 0 0 0 435.6
Proceed from Bank Borrowings 0 0 0 0 0 0 0 0 0
Proceed from Short Tem Borrowings 454.8 399.9 23.3 1.7 7.6 11.9 13.3 41.5 126.1
Proceed from Deposits 0 0 0 0 0 0 0 0 0
Share Application Money 0 0 0 0 0 0 0 0 0
Cash/Capital Investment Subsidy 0 0 0 0 0 0 0 0 0
Loans from a Corporate Body 0 0 0 0 0 0 0 0 0
Payments:
Share Application Money Refund 0 0 0 0 0 0 0 0 0
On Redemption of Debenture 0 0 0 0 0 0 0 0 0
Of the Long Tem Borrowings 0 0 0 0 0 -142.7 0 0 0
Of the short term Borrowings -788.7 -63.4 -31.7 -237.6 -11.9 -13.3 -209.6 -504.1 0
Of financial Liabilities 0 0 0 0 0 0 0 0 0
Dividend Paid -144.4 -129.9 -101.1 -57.8 -43.2 -42.7 -39.7 0 0
Shelter Assistance Reserve 0 0 0 0 0 0 0 0 0
Interest Paid -57.9 -74.3 -28 -26 -44.3 -47.2 -53 -78.9 -67.5
Others 0 0 0 0 0 0 0 0 0
Net Cash Used in Financing Activities -536.2 132.3 430 -319.7 -91.8 -234 110 -541.5 494.2
Net Inc/(Dec) in Cash and Cash Equivalent 1608.5 -1092.3 21.2 372.2 789.2 -749.2 917.5 -15.7 55.9
Cash and Cash Equivalents at End of the year 1939 330.5 1422.8 1401.6 1029.4 240.2 989.4 71.9 87.6

67
Appendix 4

Ratio
Key Ratios for Maruti Suzuki
200903 200803 200703 200603 200503 200403 200303 200203 200103 200003
Key Ratios
Debt-Equity Ratio 9% 10% 6% 4% 8% 11% 19% 33% 30% 12%
Long Term Debt-Equity Ratio 6% 7% 6% 4% 8% 11% 18% 24% 15% 2%
Current Ratio 1.22 1.13 1.52 1.73 1.42 1.37 1.47 1.35 1.22 1.25
Turnover Ratios
Fixed Assets 2.9 3.13 3.1 2.95 2.77 2.43 2.02 2.2 2.42 3.18
Inventory 23.9 24.18 21.74 19.06 24.11 23.84 15.38 11.75 9.62 11.88
Debtors 29.45 29.97 24.69 23.69 20.69 16.24 11.89 12 15.64 25.08
Interest Cover Ratio 29.91 43 61.63 86.78 37.25 21.47 5.79 2.54 -2.55 7.4
Profitability Ratio
PBIDTM (%) 9.63 14.89 15.05 13.93 13.48 12.91 6.98 5.92 1.44 7.6
PBITM (%) 6.58 12.19 13.47 12 10.05 8.43 3.4 2.15 -2.16 4.78
PBDTM (%) 9.41 14.61 14.83 13.8 13.21 12.52 6.4 5.07 0.59 6.96
CPM (%) 7.67 10.93 10.66 9.99 9.83 10.11 5.03 4.92 0.59 6.37
APATM (%) 4.63 8.23 9.08 8.06 6.4 5.63 1.44 1.15 -3.02 3.54
Return on Capital Ratio
ROCE (%) 15.76 30.51 35.63 34.68 31.28 25.34 9.1 5.63 -5.44 14.6
RONW (%) 12.08 22.67 25.38 24.19 21.42 18.59 4.47 3.91 -9.7 11.93

68