CHAPTER V DATA ANALYSIS & INTERPRETATIONS

ANALYSIS OF AUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. To understand this industry for the purpose of investment we need to analyze it by the following approach: Fundamental Analysis (E.I.C Approach) a. Economy analysis b. Industry analysis c. Company analysis

Fundamental Analysis
Fundamental analysis is the study of economic, industry and company conditions in an effort to determine the value of a company s stock. Fundamental analysis typically focuses on key statistics in company s financial statements to determine if the stock price is correctly valued. Most fundamental information focuses on economic, industry and company statistics. The typical approach to analyzing a company involves three basic steps:

1. Determine the condition of the general economy. 2. Determine the condition of the industry. 3. Determine the condition of the company.

1. ECONOMY ANALYSIS

Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy. GDP and Automobile Industry In absolute terms, India is 16th in the world in terms of nominal factory output. The service sector is growing rapidly in the past few years. This is the pie- chart showing contributions of different sectors in Indian economy.

Today, automobile sector in India is one of the key sectors of the economy in terms of the employment. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher. As the world economy slipped into recession hitting the demand hard and the banking sector takes conservative approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 per cent for 2008-09 and it has increased to 8.6% in 2010 by overcoming the setbacks of recession. Recession Auto industry in India had been hit hard by ongoing global financial recession. But it is in a good shape now. Much of this optimism resulted from renewed interest being shown in India auto industry by reputed overseas car makers. Nissan Motors which is a well known Japanese car making company regarded India automobile market as a global car manufacturing hub for future and invested huge amount in our market. There are some other automobile companies of world who have shown interest in India auto market. Major names among these are General Motors, Skoda Auto and Mercedes-Benz. These companies have major plans lined up for India auto industry. These are few signs of the revolutionized auto industry after recession.

Inflation The rise in inflation will have adverse impact on the industry that will not only see interest rates getting further hardened but also a drop in demand due to the squeeze in purchasing power. The effect of inflation has affected every sector which is related to car manufacturing and production. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. Foreign Direct Investment The automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India. Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles and component is permitted. Exports Despite recession, the Indian automobile market continues to perform better than most of the other industries in the economy in coming future; more and more MNCs coming in India to setup their ventures which clearly shows the scope of expansion. During April-January 2010, overall automobile exports registered a growth rate of 13.24 percent.

2. INDUSTRY ANALYSIS (AUTOMOBILE)

The automobile industry in India is the ninth largest in the world with an annual production of over 2.3 million units in 2008. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The Automobile Industry is one of the fastest growing sectors in India. The increase in the demand for cars, and other vehicles, powered by the increase in the income is the primary growth driver of the automobile industry in India. In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian automobile sector is far from being saturated, leaving ample opportunity for volume growth. Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks, buses, tempos, tractors); passenger cars; Two-wheelers; Commercial Vehicles; and Three-wheelers. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry. Industry life cycle The industrial life cycle is a term used for classifying industry life over time. Industry life cycle classification generally groups industries into one of four stages: pioneer, growth, maturity and decline. In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are developing, and there is high risk of

failure. However, successful companies can grow at extraordinary rates. The Indian automobile sector has passed this stage quite successfully. The industry is growing rapidly, often at an accelerating rate of sales and earnings growth . Indian Automotive Industry is booming with a growth rate of around 15 % annually. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy, so the automobile sector can be very well be said to be in the growth phase. Swot analysis: A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT analysis of the Indian automobile sector gives the following points: 1. Strengths Large domestic market Sustainable labor cost advantage Competitive auto component vendor base Government incentives for manufacturing plants Strong engineering skills in design etc 2. Weaknesses Low labor productivity

 High interest costs and high overheads make the production uncompetitive Various forms of taxes push up the cost of production Low investment in Research and Development Infrastructure bottleneck 3. Opportunities Increasing challenges in consumer demands, technology development, and globalization. Heavy thrust on mining and construction activity Increase in the income level Cut in excise duties 4. Threats Ignorance of Research & development Rising interest rates Cut throat competition

3. COMPANY ANALYSIS

The company analysis shows the long-term strenght of the company that what is the financial position of the company in the market, where it stands among its competitors and who are the key drivers of the company, what are the future plans of the company, what are the policies of government towards the company and how the stake of the company divested among different groups of people.

Here, I have taken three companies namely TATA Motors, Maruti Suzuki and Mahindra and Mahindra for the purpose of fundamental analysis. Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. Maruti Suzuki is a subsidiary of Suzuki Motor Corporation Japan. More than half the numbers of cars sold in India wear Maruti Suzuki badge. They offer a full range of cars from entry level Maruti 800 & Alto to stylish hatchback Ritz, A star, Swift, Wagon R, Estillo and sedans Dzire, SX4 and Sports Utility Vehicle Grand Vitara. Since inception, it has produced and sold over 7.5 million vehicles in India and exported over 500,000 units to Europe and other countries. Its turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit after Tax at Rs. 12,187 Million.

The Mahindra Groups Automotive Sector is in the business of manufacturing and marketing utility vehicles and light commercial vehicles, including three- wheelers. It is the market leader in utility vehicles in India since inception, and currently accounts for about half of Indias market for utility vehicles. The Automotive Sector continues to be a leader in the utility vehicle segment with a diverse portfolio that includes mass transport as well as new generation vehicles like Scorpio, Bolero and the recently launched Xylo.

TATA MOTORS - Balance sheet Balance Sheet of Tata Motors

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Sources of funds Total Share Capital 361.79 382.87 385.41 385.54 514.05 Equity Share Capital 361.79 382.87 385.41 385.54 514.05 Share Application Money 0.00 0.00 0.00 0.00 0.00 Reserves 3,749.60 5,127.81 6,458.39 7,428.45 11,855.15 Revaluation Reserves 0.00 26.39 25.95 25.51 25.07 Networth 4,111.39 5,537.07 6,869.75 7,839.50 12,394.27 Secured Loans 489.81 822.76 2,022.04 2,461.99 5,251.65 Unsecured Loans 2,005.61 2,114.08 1,987.10 3,818.53 7,913.91 Total Debt 2,495.42 2,936.84 4,009.14 6,280.52 13,165.56 Total Liabilities 6,606.81 8,473.91 10,878.89 14,120.02 25,559.83 Application of funds Gross Block 6,611.95 7,971.55 8,775.80 10,830.83 13,905.17 Less: Accum. Depreciation 3,454.28 4,401.51 4,894.54 5,443.52 6,259.90 Net Block 3,157.67 3,570.04 3,881.26 5,387.31 7,645.27 Capital Work in Progress 538.84 951.19 2,513.32 5,064.96 6,954.04 Investments 2,912.06 2,015.15 2,477.00 4,910.27 12,968.13 Inventories 1,601.36 2,012.24 2,500.95 2,421.83 2,229.81 Sundry Debtors 811.32 715.78 782.18 1,130.73 1,555.20 Cash and Bank Balance 345.26 327.66 535.78 750.14 638.17 Total Current Assets 2,757.94 3,055.68 3,818.91 4,302.70 4,423.18 Loans and Advances 2,831.16 5,964.61 6,208.53 4,831.36 5,909.75 Fixed Deposits 1,659.78 791.77 290.98 1,647.17 503.65 Total CA, Loans & Advances 7,248.88 9,812.06 10,318.42 10,781.23 10,836.58 Deffered Credit 0.00 0.00 0.00 0.00 0.00 Current Liabilities 6,142.74 6,673.61 6,956.88 10,040.37 10,968.95 Provisions 1,126.06 1,215.04 1,364.32 1,989.43 1,877.26 Total CL & Provisions 7,268.80 7,888.65 8,321.20 12,029.80 12,846.21 Net Current Assets -19.92 1,923.41 1,997.22 -1,248.57 -2,009.63 Total Assets 6,606.81 8,473.91 10,878.89 14,120.02 25,559.83 Contingent Liabilities 1,450.32 2,185.63 5,196.07 5,590.83 5,433.07 Book Value (Rs) 113.65 143.94 177.59 202.70 240.64

TATA MOTORS Profit & Loss account Profit & L oss account of Tata Motors
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Income Sales Turnover 20,262.61 23,490.55 31,089.69 33,123.54 28,538.20 Excise Duty 3,063.44 3,401.92 4,425.44 4,355.63 2,877.53 Net Sales 17,199.17 20,088.63 26,664.25 28,767.91 25,660.67 Other Income 403.98 852.41 1,114.38 734.17 921.29 Stock Adjustments 144.00 256.91 349.68 -40.48 -238.04 Total Income 17,747.15 21,197.95 28,128.31 29,461.60 26,343.92 Expenditure Raw Materials 12,245.28 14,633.02 19,879.56 20,891.33 18,801.37 Power & Fuel Cost 237.81 258.51 327.41 325.19 304.94 Employee Cost 1,039.34 1,143.13 1,367.83 1,544.57 1,551.39 Other Manufacturing Expenses 592.64 671.31 872.95 904.95 866.65 Selling and Admin Expenses 890.21 1,061.07 1,505.23 2,197.49 1,652.31 Miscellaneous Expenses 620.27 740.99 1,051.49 964.78 1,438.89 Preoperative Exp Capitalised -282.43 -308.85 -577.05 -1,131.40 -916.02 Total Expenses 15,343.12 18,199.18 24,427.42 25,696.91 23,699.53 Operating Profit 2,000.05 2,146.36 2,586.51 3,030.52 1,723.10 PBDIT 2,404.03 2,998.77 3,700.89 3,764.69 2,644.39 Interest 234.30 350.24 455.75 471.56 704.92 PBDT 2,169.73 2,648.53 3,245.14 3,293.13 1,939.47 Depreciation 450.16 520.94 586.29 652.31 874.54 Other Written Off 67.12 73.78 85.02 64.35 51.17 Profit Before Tax 1,652.45 2,053.81 2,573.83 2,576.47 1,013.76 Extra-ordinary items -1.54 0.00 -0.07 0.00 15.29 PBT (Post Extra-ord Items) 1,650.91 2,053.81 2,573.76 2,576.47 1,029.05 Tax 415.50 524.93 660.37 547.55 12.50 Reported Net Profit 1,236.95 1,528.88 1,913.46 2,028.92 1,001.26 Total Value Addition 3,097.84 3,566.16 4,547.86 4,805.58 4,898.16 Preference Dividend 0.00 0.00 0.00 0.00 0.00 Equity Dividend 452.19 497.94 578.07 578.43 311.61 Corporate Dividend Tax 63.42 69.84 98.25 81.25 34.09 Per share data (annualised) Shares in issue (lakhs) 3,617.52 3,828.34 3,853.74 3,855.04 5,140.08 Earning Per Share (Rs) 34.19 39.94 49.65 52.63 19.48 Equity Dividend (%) 125.00 130.00 150.00 150.00 60.00 Book Value (Rs) 113.65 143.94 177.59 202.70 240.64

MARUTI SUZUKI Balance Sheet

Balance Sheet of Maruti Suzuki India

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Sources Of Funds Total Share Capital 144.50 144.50 144.50 144.50 144.50 Equity Share Capital 144.50 144.50 144.50 144.50 144.50 Share Application Money 0.00 0.00 0.00 0.00 0.00 Reserves 4,234.30 5,308.10 6,709.40 8,270.90 9,200.40 Revaluation Reserves 0.00 0.00 0.00 0.00 0.00 Networth 4,378.80 5,452.60 6,853.90 8,415.40 9,344.90 Secured Loans 307.60 71.70 63.50 0.10 0.10 Unsecured Loans 0.00 0.00 567.30 900.10 698.80 Total Debt 307.60 71.70 630.80 900.20 698.90 Total Liabilities 4,686.40 5,524.30 7,484.70 9,315.60 10,043.80 Application Of Funds Gross Block 5,053.10 4,954.60 6,146.80 7,285.30 8,720.60 Less: Accum. Depreciation 3,179.40 3,259.40 3,487.10 3,988.80 4,649.80 Net Block 1,873.70 1,695.20 2,659.70 3,296.50 4,070.80 Capital Work in Progress 42.10 92.00 238.90 736.30 861.30 Investments 1,516.60 2,051.20 3,409.20 5,180.70 3,173.30 Inventories 666.60 881.20 713.20 1,038.00 902.30 Sundry Debtors 599.50 654.80 747.40 655.50 918.90 Cash and Bank Balance 79.40 51.60 114.80 324.00 239.00 Total Current Assets 1,345.50 1,587.60 1,575.40 2,017.50 2,060.20 Loans and Advances 801.90 933.10 1,072.60 1,173.00 1,809.80 Fixed Deposits 950.00 1,350.00 1,308.00 0.00 1,700.00 Total CA, Loans & Advances 3,097.40 3,870.70 3,956.00 3,190.50 5,570.00 Deffered Credit 0.00 0.00 0.00 0.00 0.00 Current Liabilities 1,454.20 1,704.80 2,288.60 2,718.90 3,250.90 Provisions 389.20 480.00 490.50 369.50 380.70 Total CL & Provisions 1,843.40 2,184.80 2,779.10 3,088.40 3,631.60 Net Current Assets 1,254.00 1,685.90 1,176.90 102.10 1,938.40 Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00 Total Assets 4,686.40 5,524.30 7,484.70 9,315.60 10,043.80 Contingent Liabilities 893.60 1,289.70 2,094.60 2,734.20 1,901.70 Book Value (Rs) 151.56 188.73 237.23 291.28 323.45

MARUTI SUZUKI Profit & Loss account Profit & L oss account of Maruti Suzuki
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Income Sales Turnover 13,458.20 14,898.80 17,358.40 21,200.40 23,381.50 Excise Duty 2,411.90 2,700.90 2,552.00 3,133.60 2,652.10 Net Sales 11,046.30 12,197.90 14,806.40 18,066.80 20,729.40 Other Income 187.50 184.40 338.10 494.00 491.70 Stock Adjustments 141.70 199.70 -200.70 336.30 -356.60 Total Income 11,375.50 12,582.00 14,943.80 18,897.10 20,864.50 Expenditure Raw Materials 8,650.20 9,423.40 10,863.00 13,958.30 15,983.20 Power & Fuel Cost 58.10 57.20 97.40 147.30 193.60 Employee Cost 196.00 228.70 288.40 356.20 471.10 Other Manufacturing Expenses 215.70 302.40 392.40 523.30 716.10 Selling and Admin Expenses 374.27 349.51 483.26 521.48 751.06 Miscellaneous Expenses 121.73 145.39 239.44 287.62 303.44 Preoperative Exp Capitalized -22.40 -6.70 -14.30 -19.80 -22.30 Total Expenses 9,593.60 10,499.90 12,349.60 15,774.40 18,396.20 Operating Profit 1,594.40 1,897.70 2,256.10 2,628.70 1,976.60 PBDIT 1,781.90 2,082.10 2,594.20 3,122.70 2,468.30 Interest 36.00 20.40 37.60 59.60 51.00 PBDT 1,745.90 2,061.70 2,556.60 3,063.10 2,417.30 Depreciation 456.80 285.40 271.40 568.20 706.50 Other Written Off 16.30 0.00 0.00 0.00 0.00 Profit Before Tax 1,272.80 1,776.30 2,285.20 2,494.90 1,710.80 Extra-ordinary items 51.40 5.40 33.40 76.60 37.90 PBT (Post Extra-ord Items) 1,324.20 1,781.70 2,318.60 2,571.50 1,748.70 Tax 446.50 560.90 705.30 763.30 457.10 Reported Net Profit 853.60 1,189.10 1,562.00 1,730.80 1,218.70 Total Value Addition 943.40 1,076.50 1,486.60 1,816.10 2,413.00 Preference Dividend 0.00 0.00 0.00 0.00 0.00 Equity Dividend 57.80 101.10 130.00 144.50 101.10 Corporate Dividend Tax 8.20 14.20 21.90 24.80 17.20 Per share data (annualized) Shares in issue (lakhs) 2,889.10 2,889.10 2,889.10 2,889.10 2,889.10 Earning Per Share (Rs) 29.55 41.16 54.07 59.91 42.18 Equity Dividend (%) 40.00 70.00 90.00 100.00 70.00 Book Value (Rs) 151.56 188.73 237.23 291.28 323.45

MAHINDRA & MAHINDRA Balance Sheet Balance Sheet of Mahindra and Mahindra
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Sources Of Funds Total Share Capital 116.01 233.40 238.03 239.07 272.62 Equity Share Capital 116.01 233.40 238.03 239.07 272.62 Share Application Money 0.00 0.00 0.00 0.00 0.00 Preference Share Capital 0.00 0.00 0.00 0.00 0.00 Reserves 1,881.93 2,662.14 3,302.01 4,098.53 4,959.26 Revaluation Reserves 14.32 13.33 12.86 12.47 12.09 Networth 2,012.26 2,908.87 3,552.90 4,350.07 5,243.97 Secured Loans 336.82 216.68 106.65 617.26 981.00 Unsecured Loans 715.80 666.71 1,529.35 1,969.80 3,071.76 Total Debt 1,052.62 883.39 1,636.00 2,587.06 4,052.76 Total Liabilities 3,064.88 3,792.26 5,188.90 6,937.13 9,296.73 Application Of Funds Gross Block 2,676.51 2,859.25 3,180.57 3,552.64 4,893.89 Less: Accum. Depreciation 1,335.56 1,510.27 1,639.12 1,841.68 2,326.29 Net Block 1,340.95 1,348.98 1,541.45 1,710.96 2,567.60 Capital Work in Progress 133.93 205.46 329.72 649.94 646.73 Investments 1,189.79 1,669.09 2,237.46 4,215.06 5,786.41 Inventories 759.83 878.74 878.48 1,084.11 1,060.67 Sundry Debtors 511.53 637.97 700.89 1,004.88 1,043.65 Cash and Bank Balance 198.07 258.39 415.89 310.58 635.61 Total Current Assets 1,469.43 1,775.10 1,995.26 2,399.57 2,739.93 Loans and Advances 461.07 558.02 1,011.50 866.19 1,402.45 Fixed Deposits 425.91 471.92 910.18 550.65 938.82 Total CA, Loans & Advances 2,356.41 2,805.04 3,916.94 3,816.41 5,081.20 Deffered Credit 0.00 0.00 0.00 0.00 0.00 Current Liabilities 1,480.87 1,711.23 2,138.77 2,525.31 3,520.20 Provisions 499.71 543.14 715.43 943.46 1,277.56 Total CL & Provisions 1,980.58 2,254.37 2,854.20 3,468.77 4,797.76 Net Current Assets 375.83 550.67 1,062.74 347.64 283.44 Miscellaneous Expenses 24.38 18.05 17.55 13.53 12.55 Total Assets 3,064.88 3,792.25 5,188.92 6,937.13 9,296.73 Contingent Liabilities 758.14 946.36 1,008.27 985.35 1,220.39 Book Value (Rs) 178.95 124.06 148.72 181.43 191.91

MAHINDRA & MAHINDRA Profit & Loss account Profit & Loss account of Mahindra and Mahindra
Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Income Sales Turnover 7,649.51 9,273.09 11,231.99 12,894.94 14,713.03 Excise Duty 1,054.82 1,136.50 1,310.65 1,584.57 1,587.05 Net Sales 6,594.69 8,136.59 9,921.34 11,310.37 13,125.98 Other Income 209.74 455.20 531.17 575.96 369.85 Stock Adjustments 174.05 103.20 6.41 149.11 -156.29 Total Income 6,978.48 8,694.99 10,458.92 12,035.44 13,339.54 Expenditure Raw Materials 4,829.29 5,885.21 6,937.16 7,963.82 9,208.71 Power & Fuel Cost 52.64 57.46 65.19 91.33 98.69 Employee Cost 464.25 551.78 666.15 853.65 1,024.61 Other Manufacturing Expenses 48.01 54.44 68.80 73.35 75.36 Selling and Admin Expenses 545.57 667.99 891.29 1,108.33 954.83 Miscellaneous Expenses 141.95 177.89 210.03 257.84 558.07 Preoperative Exp Capitalized -31.84 -26.53 -47.10 -46.49 -42.83 Total Expenses 6,049.87 7,368.24 8,791.52 10,301.83 11,877.44 Operating Profit 718.87 871.55 1,136.23 1,157.65 1,092.25 PBDIT 928.61 1,326.75 1,667.40 1,733.61 1,462.10 Interest 30.24 26.96 19.80 87.59 134.12 PBDT 898.37 1,299.79 1,647.60 1,646.02 1,327.98 Depreciation 184.05 200.01 209.59 238.66 291.51 Other Written Off 0.15 0.28 0.33 0.59 0.00 Profit Before Tax 714.17 1,099.50 1,437.68 1,406.77 1,036.47 Extra-ordinary items 0.00 0.00 -19.19 0.00 4.07 PBT (Post Extra-ord Items) 714.17 1,099.50 1,418.49 1,406.77 1,040.54 Tax 201.50 242.40 350.10 303.40 199.69 Reported Net Profit 512.67 857.10 1,068.39 1,103.37 836.78 Total Value Addition 1,220.58 1,483.04 1,854.37 2,338.01 2,668.73 Preference Dividend 0.00 0.00 0.00 0.00 0.00 Equity Dividend 150.81 243.97 282.23 282.61 278.83 Corporate Dividend Tax 21.15 34.22 42.50 38.48 33.23 Per share data (annualized) Shares in issue (lakhs) 1,116.48 2,334.00 2,380.33 2,390.73 2,726.16 Earning Per Share (Rs) 45.92 36.72 44.88 46.15 30.69 Equity Dividend (%) 130.00 100.00 115.00 115.00 100.00 Book Value (Rs) 178.95 124.06 148.72 181.43 191.91

RATIO ANALYSIS OF TATA MOTORS, MARUTI SUZUKI AND MAHINDRA & MAHINDRA
EARNINGS PER SHARE
EARNINGS PER SHARE YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 34.19 39.94 49.65 52.63 19.48 MARUTI 29.55 41.16 54.07 59.91 42.18 MAHINDRA 45.92 36.72 44.88 46.15 30.69
EARNINGS PER SHARE 70 60 50 TATA 40 MARUTI 30 MAHINDRA 20 10 0 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations EPS measures the profit available to the equity shareholders per share, that is, the amount that they can get on every share held. Till 2008 TATA and Maruti had a rising EPS but in 2009 both of them fall and the effect is more on Tata motors because of the slump in domestic and international markets and sharp fall in sales and net profits which resulted in low EPS. Mahindra is not much affected as its sales have increased from the previous year. But as trend shows Mahindra motors has potential so a shareholder can expect better in future.

SAL ES
SALES YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 20,262.61 23,490.55 31,089.69 33,123.54 28,538.20 MARUTI 13,458.20 14,898.80 17,358.40 21,200.40 23,381.50 MAHINDRA 7,649.51 9,273.09 11,231.99 12,894.94 14,713.03
SALES 35,000.00 30,000.00 25,000.00 TATA 20,000.00 MARUTI 15,000.00 MAHINDRA 10,000.00 5,000.00 0.00 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations Maruti and Mahindra show a positive trend in sales over the past five years. Though slowdown in the economy brought hurdles but these companies have potential to grow in future as lots of products are still to add in their portfolio. Moreover increased demand in foreign market also seems to be a positive signal for better future. TATA has witnessed a decline in sales of each segment. Maruti and Mahindra are going swiftly.

DIVIDEND PER SHARE

DIVIDEND PER SHARE YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 12.5 13 15 15 6 MARUTI 2 3.5 4.5 5 3.5 MAHINDRA 13 10 11.5 11.5 10
DIVIDEND PER SHARE 20 15 TATA 10 MARUTI MAHINDRA 5 0 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations Tata motors and Maruti Suzuki both the companies showed a positive trend in paying dividends till 2008, but the scenario changed in 2009 as both the companys dividend per share fell. According to graph Tatas dividend has fallen drastically while Maruti stick to below 5 per share. Mahindra has made a slight reduction from rs.11.5 per share in 2008 to rs.10 per share this year. Therefore Mahindra would be the best option for an investor.

RETURN ON INVESTMENT (ROI)

Return on Investment YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 30.09 27.74 27.96 25.98 8.09 MARUTI 19.49 21.81 22.79 20.56 13.04 MAHINDRA 25.66 29.6 30.18 25.51 16.03
RETURN ON INVESTMENT 35 30 25 TATA 20 MARUTI 15 MAHINDRA 10 5 0 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations ROI is one of the most important ratios used for measuring the overall efficiency of a firm and determines whether the investments in the firms are attractive or not. According the graph, ROI of TATA has declined to a large extent in 2009, making it a quite risky investment. Marutis ROI has also declined but Mahindras ROI is showing a higher rate compared to TATA and Maruti in 2009. As the investors would like to invest only where the return is higher, Mahindra would be attractive for investment.

DIVIDEND PAYOUT RAT IO

DIVIDEND PAYOUT RATIO YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 41.68 37.13 35.34 32.51 34.52 MARUTI 7.73 9.69 9.72 9.78 9.7 MAHINDRA 33.54 32.45 30.39 29.1 37.29
DIVIDEND PAYOUT RATIO 50 40 TATA 30 MARUTI 20 MAHINDRA 10 0 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations Dividend payout ratio is the percentage of earnings paid to shareholders in dividends. It provides an idea to an investor of how well earnings support the dividend payments. Maruti has maintained a stable payout ratio. Both TATA and Mahindra have increased their payout ratio in which Mahindra shows a higher payout ratio.

PRICE-EARNINGS RATIO (P/E RATIO)

PRICE-EARNINGS RATIO YEARS Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 TATA 19.09 22.5 14.9 3.02 40.6 MARUTI 21.5 22.5 18.3 8.6 36.9 MAHINDRA 11.1 24.6 19.1 5.9 35.2
PRICE EARNINGS RATIO 50 40 TATA 30 MARUTI 20 MAHINDRA 10 0 Mar'05 Mar'06 Mar'07 Mar'08 Mar'09 YEARS

Interpretations This ratio is widely used by investors to decide whether or not to buy shares in a particular company. As per the graph, in 2008, the P/E ratio of the three companies was the lowest compared to the previous years. TATA has the highest P/E ratio in 2009 which indicates that it is overvalued, so the investors can benefit by selling the shares. An investor can go for Mahindra as its P/E ratio is the lowest in 2009 which indicates that it is undervalued and there is a scope for growth in the future.

CHAPTER VI FINDINGS, SUGGESTIONS & CONCLUSION

FINDINGS From the data analysis and interpretations of the ratios of three companies viz. Tata Motors, Maruti Suzuki and Mahindra and Mahindra, the following findings have been given: The three companies were performing well till 2008 with a positive trend in

the earnings per share. But there was a downward trend in 2009. Especially, TATA has witnessed a steep fall in the year 2009. The sales trend has been upward and positive in case of all the three

companies. The sales growth looks positive but in the year 2009, TATAs sales have declined whereas Maruti and Mahindra have maintained the same upward positive trend. In case of dividend per share, there were fluctuations during the period 2005

2009. Due to recession, the dividends per share have declined in all the three companies. Tatas dividend has fallen drastically while Maruti stick to below 5 per share. Mahindra has made a slight reduction from rs.11.5 per share in 2008 to rs.10 per share this year. The return on investment has been fluctuating since 2005 and the year 2009 witnessed low returns in case of all the companies amongst which TATA has the least rate of return. Compared to the three companies, Mahindra has the highest ROI in 2009.

Maruti had a stable dividend payout ratio since 2005. TATA and Mahindra

have increased their payout ratio in which Mahindra shows a higher payout ratio. The three companies have witnessed a low price earnings ratio in 2008 compared to the previous years. But the ratio increased in 2009 in three companies. TATA has the highest P/E ratio in 2009 which indicates that it is overvalued and Mahindras P/E ratio is the lowest in 2009 which indicates that it is undervalued and there is a scope for growth in the future. By analyzing the current trend of Indian Economy and Automobile Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in and this is being proved as more and more foreign companies are setting up there ventures in India. Increase in income level, increase in consumer demand, technology development, globalization, foreign investments are few of the opportunities which the industry has to explore for developing the economy.

SUGGESTIONS By analyzing the automobile industry with the help of fundamental analysis, it has been revealed that this industry has a lot of potential to grow. So recommending investing in Automobile industry with no doubt is going to be a good and smart option because this industry is booming like never before not only in India but all over the world. The three giants of Indian Automobile industry viz. TATA Motors, Maruti Suzuki and Mahindra and Mahindra have outperformed in the industry. From the company analysis, we can know that Mahindra would be a better

option for an investor compared to TATA and Maruti. In view of the slump in the domestic and international market, TATA has recorded a slowdown in sales and income level. Its Earnings per share has also declined drastically. It has reduced its dividend per share from rs.15 in the previous year to rs.6 in 2009. The return on investment is also very low. In view of all these, TATA is not a better option for an investor. The global turmoil in financial markets has affected Maruti also. The

company is maintaining a stable position. Its sales have grown over past five years. Inspite of the general economic slowdown, the sales of Maruti Suzuki increased from Rs 21200 Crore to Rs 23381 Crore. As it is maintaining a stable position, it can be recommended that for now Maruti share price shows

that its a time to hold the position or buy more shares as there is scope of further rise in share prices. Despite the challenging business environment, Mahindra has maintained its

upward sales level. Its Return on Investment is much higher compared to TATA and Maruti. The dividend per share is rs.10 which is higher amongst the three companies. The company has potential to grow. It would be the best option for the investor. Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is a chance of getting correction, as it already went on high side in a very short period of time and is experiencing a downfall from 2008. Holding the shares for long time could be a wrong step and at this point of

time those who invested earlier can book their profits. As Mahindras shares are undervalued, the investor can buy these shares. This is because a relatively lower P/E would save investors from paying a very high price that does not justify the value of an investment. Few Suggestions for Right Stock Selection There are three factors which an investor must consider for selecting the right stocks. Business : An investor must look into what kind of business the company is

doing, visibility of the business, its past track record, capital needs of the company for expansion etc.

Balance Sheet : The investor must focus on its key financial ratios such as

earnings per share, price-earning ratio; debt-equity ratio, dividends per share etc and he must also check whether the company is generating cash flows. Bargaining : This is the most important factor which shows the true worth of

the company. An investor needs to choose valuation parameters which suit its business. Investment rules Invest for long term in equity markets

Align your thought process with the business cycle of the company. Set the purpose for investment. Long term goals should be the objective of equity investment. Disciplined investment during market volatility helps attains profits. Planning, Knowledge and Discipline are very crucial for investment.

CONCLUSION The Automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2009. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The collapse in market place witnessed unprecedented turbulence in the wake of global financial meltdown. A runaway inflation touching a high point of 12% early in the year, the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates and weak consumer demand, have collectively had a devastating effect on the automotive sector. Maruti Suzuki India LTD. company has a trend of growth from till 2008.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. The downfall of net profit during the financial year 2008-09 is 29.6% over the financial year 2007-2008. TATA Motors, which was trying to consolidate its leadership position in the market, also had to face the impact of global meltdown. Amid the crippling economic crisis, Tata purchased Britains Jaguar Land Rover (JLR) from Ford Motor Company. Acquiring JLR saddled Tata with some tough losses. Dividends and earnings remain low.

Inspite of it being a tough year for all the companies across the globe and in India, Mahindra has given a satisfactory performance. At present its shares are undervalued giving it a potential for growth. Global recession had a dampener effect on the growth of automobile industry but it was a short term phenomenon. The industry is bouncing back. One factor favoring this point is that India has become a hot destination for companies of diverse nature to invest in. Cut throat competition among top companies, lots of new car and vehicle model launches at regular intervals keeps the Indian auto sector moving. A continuous effort at cost cutting and improving productivity will help the companies in making reasonable profits despite the impact of higher commodity prices and weaker rupee. The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in terms of returns on their investments.