Profit and Loss Statement Analysis

The Profit and Loss statement of Mahindra and Mahindra Ltd. follows IND AS 1 standard and
consists of the following sections:

 Profit or Loss
 Total Other Comprehensive Income
 Comprehensive income i.e. total of Profit or Loss and Total Other Comprehensive
Income.

Figure 1 Consolidated Statement of Profit and Loss

The statement does not have separate sections for operating and non-operating expenses which
should have been the case for a clearer understanding.
Industry Analysis

The consolidated profit and loss statement of Mahindra and Mahindra Ltd. has been compared
with two other Automotive companies Maruti Suzuki India Ltd. (MSIL) and Tata Motors Ltd.
The overall presentation across the three statements is extremely similar with small differences
arising in the notes to the profit and loss statement. Most of these differences were due to the
difference in the company functions and businesses. In the below analysis the statements of the
three companies were compared for each observation and the discrepancies (if any) have been
highlighted.

The share of owners of the company and non-controlling interests for Profit, Other
Comprehensive Income and Total Other Comprehensive Income is separately presented in the
end of statement which gives a clear understanding to the reader regarding the majority and
minority shareholders of the conglomerate.

Figure 2 Profit share of owners and non-controlling assets

Profit and Loss Statement of Mahindra and Mahindra Ltd. also includes the heading of
Exceptional Items before Profit Before Tax. Exceptional Items include income from disposal
of associates and joint ventures, profit from change in ownership interest/relationship with
subsidiaries. This feature of P&L statement is common across the major players of the industry.

Figure 3 Exceptional Items in P&L

Figure 4 Notes to Exceptional Items in P&L

Under the heading Revenue from Operations, lease and rental income though relatively small
(INR 3,000,000) as compared to other line items, is displayed explicitly. Whereas, income
under the heading other in other income (INR 7,640,000,000) is not segregated into
components.

Figure 5 Notes to Revenue from Operations in P&L

Industry Relevant Disclosures:

 The group has disclosed the government grant and incentives received from setting up
manufacturing facilities in developing regions in Other Operating Income section
(Notes to Operating Income). This disclosure is common across the financial statements
of major firms in the automotive industry.
 Another common line item in the operating income section of the Profit and Loss
Statement of Automotive/Manufacturing companies is the line item Scrap Sales. For
Mahindra and Mahindra Ltd. the magnitude of Scrap Sales is INR 2,110,000,000.

Other non-operating income under notes to other income which constitutes 18.5% of the total
other income has seen a growth of 90% over last year. But, no breakup of components is stated
in the income statement. It creates a lack of understanding related to the sources of income.

The group has 85% of its interest income coming from hold to maturity financial instruments
which are displayed by the line item Financial assets carried at amortized cost. Whereas 15%
is available for sale instruments displayed by Financial assets carried at FVTOCI.

Figure 6 Notes to Other Income

Other expenses in the expenses heading of the statement includes an unexplained tab of
Miscellaneous Expenses which constitutes 23% of the total Other expenses section. Whereas,
other players like MSIL in their Other expenses section of Profit and Loss statement clearly
quotes regarding miscellaneous expenses - “Does not include any item of expenditure with a
value of more than 1% of the revenue from operation”. This gives an idea to the shareholders
that the numbers though significant are relatively smaller compared to revenue from operations
and hence are immaterial

Figure 7 Notes to Other Expenses

Figure 7 Notes to Other Expenses (MSIL)

The Tax expense in the Profit and Loss statement is clearly bifurcated into current tax and
deferred tax expenses. Moreover, the group also explains the components of deferred tax assets
and liabilities in notes to tax expense which is in coherence with other industry majors like
Maruti Suzuki India Ltd.

Figure 9 Notes to Other Income

Narayanaswamy, R. (2017) Financial accounting a managerial perspective. 6th edition. India.
PH India

Ministry of Corporate Affairs (2017) Indian Accounting Standards (Ind AS) 1. Second Edition.
Accounting Standards (online) Available at: http://mca.gov.in/Ministry/pdf/INDAS1.pdf
(Accessed: 10 July 2019)

Mahindra and Mahindra Ltd. (2018) Integrated Annual Report 2017-18. Available at:
https://www.mahindra.com/resources/investor-reports/FY18/Announcements/Mahindra-and-
Mahindra-Annual-Report-2017-2018.pdf (Accessed: 13 July 2019)

Maruti Suzuki India Ltd. (2018) Annual Report | Sustainability Report 2017-18. Available at:
https://marutistoragenew.blob.core.windows.net/msilintiwebpdf/MSIL_AR_2017-18_HR.pdf
(Accessed: 16 July 2019)

Tata Motors (2018) 73rd Annual Report (Integrated) 2017-18. Available at:
https://www.tatamotors.com/wp-content/uploads/2018/07/12115930/Annual-Report-2017-
2018.pdf (Accessed: 16 July 2019)

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https://www.investopedia.com/terms/i/inventory-write-off.asp (Accessed: 17 July 2019)

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https://www.accountingtools.com/articles/what-is-inventory-valuation.html (Accessed: 17 July 2019)

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https://www.investopedia.com/terms/r/revenuerecognition.asp (Accessed: 20 July 2019)

Corporate Finance Institute, Weighted Average Cost Method [Online]. Available at:
https://corporatefinanceinstitute.com/resources/knowledge/accounting/weighted-average-cost-
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https://corporatefinanceinstitute.com/resources/knowledge/accounting/weighted-average-cost-
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Adam Copeland

Wendy Dunn

George Hall