AUTOMOBILE INDUSTRY REPORT

Transcription

1 AUTOMOBILE INDUSTRY REPORT December 11 th, 2013 Highlights SECTORAL REPORTS The India auto industry closed with a sales dip of 6.7%, the first drop in 12 years. The outlook for isn't much brighter, with expects a growth of 3-5%. During April-November 2013, overall automobile exports grew by 5.52 percent. Passenger Vehicles, Three Wheelers and Two Wheelers registered growth at 9.64 percent percent and 3.41 percent respectively, while Commercial Vehicles declined by percent during April-November 2013 compared to the same period last year. B. Anil Kumar Equity Analyst Equity Research Desk The cumulative foreign direct investment (FDI) inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows. Hero MotoCorp will plan to enter into 50 countries with 20 manufacturing facilities across the globe and 100 million cumulative two-wheelers sold by Nissan Motor India has entered into an agreement with Ennore Port Ltd (EPL), to export at least 60,000 cars a year through the port for the next 10 years. HMIL has invested US$ 2 billion in two state-of-the-art passenger car manufacturing facilities in India. Moreso, India contributes 25 per cent of the firm s global sales. The Government of India plans to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel. Global suppliers are setting up R&D centers in India to increase local content in vehicles and at the same time leverage it as a global hub for design and technology. Japanese auto-maker Isuzu Motors is setting up its first car plant in South India at an investment of Rs 3,000 crore and is expected to become operational by The automotive sector s contribution to the gross domestic product (GDP) is expected to double reaching a turnover worth US$ 145 billion in 2016, according to the Automotive Mission Plan (AMP) P a g e

2 CONTENTS 1. Industry Overview Performance of Automobile Industry in India Automobile Industry in India Production in the Indian Automobile Industry Trends in the Indian Automobile Industry Growth drivers for Automobile Sector Automobile Industry Companies in India 12 MARUTI SUZUKI INDIA LTD TATA MOTORS LTD MAHINDRA & MAHINDRA LTD HERO MOTOCORP LTD BAJAJ AUTO LTD EICHER MOTORS LTD TVS MOTOR COMPANY LTD ATUL AUTO LTD 8. Advantages in India Key Developments & Investments Increasing investments by global car manufacturers Government initiatives Industry Challenges Industry Key Opportunities Conclusion 59 2 P a g e

3 1. Industry Overview With the increasing growth in demand on back of rising income, expanding middle class and young population base, in addition to a large pool of skilled manpower and growing technology, will propel India to be among the world's top five auto-producers by India is also one of the key markets for hybrid and electric mediumheavy-duty trucks and buses. Indian automobile industry contributes significantly to the overall GDP of the nation and also provides significant business and employment opportunities. It is an engine of growth for the Indian economy. It is one of the key industries whose well being is very important in our vision of improving the living standard of our population. According to the Society for Indian Automobile Manufacturers (SIAM), the automobile industry has already invested Rs. 70,000 crores in the past four years in building new factories, adding fresh capacity and bringing out new products. It is driven by a sustained increase in vehicle population and an increasing preference towards higher-end vehicles with rising consumer aspirations (Volvo registered 155% increased growth of its luxury segment in 2012). In Export business, during April-November 2013, overall automobile exports grew by 5.52 percent. Passenger Vehicles, Three Wheelers and Two Wheelers registered growth at 9.64 percent percent and 3.41 percent respectively, while Commercial Vehicles declined by percent during April-November 2013 compared to the same period last year. 2. Performance of Automobile Industry in India 2013 Two-wheelers Improved income prospects to drive two-wheeler sales in After a robust , growth in total domestic two-wheeler sales slowed to 14.1 per cent in In , growth in domestic two-wheeler sales slowed further to 2.9 per cent, as slow in incomes, especially in rural areas, high fuel prices impacted consumer sentiment. Exports declined by 1 per cent y-o-y over a 27 per cent growth in , mainly due to the drop in export incentives post the withdrawal of the DEPB scheme, unfavorable policy actions in key Asian markets and higher competition in African markets. In , growth is expected to recover modestly to 6-8 per cent on expectations of normal monsoons aiding healthy rural incomes, recovery urban incomes and lower fuel prices. However the growth will remain in single digits. Over the long term, the under penetrated rural market will hold the key to the industry s growth. 3 P a g e

4 Exports growth to remain robust with new launches by players Two-wheeler exports grew by 27 per cent in , as volumes remained buoyant despite the discontinuation of the DEPB scheme during the year. In , however, two-wheeler exports fell by 1 per cent owing to the following reasons: The withdrawal of the DEPB scheme and subsequent reductions in incentives under the Duty Drawback scheme forced to players to hike prices across markets. Since most of these are price-sensitive segments (economy motorcycles account for over 50 per cent of total exports), the price hikes directly impacted demand. Unfavorable policy actions in some major markets like Sri Lanka, wherein 100 per cent import duties were imposed on two-wheelers. Higher competition in African markets where Honda Motorcycles (Japan) and a number of Chinese manufactures entered the market with aggressively priced products. In , growth is expected to recover to per cent because of fewer policy-related disruptions and new launches. Commercial vehicles CV Sales Volumes decline in , to revive in on higher GDP expectations Key macroeconomic indicators such as IIP, rail freight loading, mining, road awarding and execution, and growth in port traffic remained weak during , thereby impacting CV sales. CV sales declined by 2 per cent (y-o-y) in , after growing by 28.5 per cent and 18 per cent respectively in and Sales of medium and heavy commercial vehicles (MHCV s), which are directly linked to the level of economic activity, declined by 25.9 per cent in following deceleration in GDP growth to 5.0 per cent. Lower Industrial and agricultural output, weak transporter sentiments weighed down by increase in fuel prices, high interest rates, inflation and higher vehicle prices continued to impact MHCV sales. Other factors that had a bearing on sales growth were availability of finance, and subdued freight rtes. In contrast, LCV sales proved to be relatively resilient to the slowdown in GDP growth, and grew at 15.9 per cent. 4 P a g e

5 Segment wise Short-term calls Segments Growth (%) Growth (%) MHCV's goods 8.8 (25.9) LCV goods Buses 6.5 (4.1) MHCV vehicles Weaker sentiments lower GDP growth dragged down MHCV sales in After recording c CAGR of 35.7 per cent in and , growth in MHCV sale had moderated to 8.8 per cent in following the slowdown in GDP growth. After dipping to 3.9 per cent in , industrial GDP continued to slowdown in precipitating a 25.9 per cent fall in MHCV sales in during the year , the slowdown in GDP impacted freight availability and rates, where as the continuing rise in fuel costs and high interest rates increased the cost of vehicle ownership, thus affecting transporter sentiments. We expect MHCV sales to see a modest recovery in based on expectations of higher GDP growth. Recovery in MHCV sales will, however, lag revival in GDP growth. Fleet utilization levels of transporters and spot freight will have to improve before a recovery is visible in MHCV sales. LCV sales relatively less impacted by economic slowdown Light commercial vehicles (LCV s) grew by 15.9 per cent in enabled by a 21 per cent increase in the sales of small commercial vehicles (SCVs). Growth in the SCV segment was led by sharp growth in the pick-up segment and a corresponding moderation in growth in the sub-one tone category in The sub-one tonne segment declined following a shift in demand from the mini truck (0.75 tonne payload category) to the small pick-up category (about 1.25 tonne payload capacity) because of aggressive marketing and financing initiatives undertaken by the OEMs for pick-ups. Sales of higher tonnage LCVs fell by 22.7 per cent in with slowdown in freight demand, and the shift in preference for SCV and ICVs. Goods three-wheeler offtake is estimated to have declined by 9 per cent in However, in , three-wheeler sales expected to show a modest recovery led by a consumption-led revival GDP. 5 P a g e

6 Small trucks continue to spur LCV sales Small commercial vehicles (SCVs), comprising mini trucks and pick-ups, will remain the fastest growing category in the light commercial vehicles (LCVs) segment. Led by player initiatives, pick-ups will continue to outrun sub-one tonne sales in the near term. Sales of LCVs is expected to grow by per cent in While mini-trucks have almost entirely replaced the use of large three-wheelers, sales of micro-trucks will drive sales growth. Passenger vehicles Bus sales growth fell in Bus sales declined by 4 percent in , owing to slowdown in demand from State Transport Undertakings (STUs) and cautious approach undertaken by private operators towards new investments. Demand form private operators, particularly contract operators plying buses for school and corporate segments, has been affected by the slowdown in the service sector (especially the IT/ITeS sector) and in ability of these operators to pass on the continues increase in fuel cost. A revival in sales is, however, likely in , with expected improvement in demand from contrast operators, following a recovery in the services sector, as well as from STUs. PV sales grew at sub-5 per cent levels for second consecutive year Domestic sales of cars and utility vehicles (UVs) grew by merely 2 per cent in despite a low base in Domestic car sales, which had increased by 3 per cent in , declined by 7 percent in Growth was impacted due to weak macroeconomic growth, uncertainly over income growth, increasing petrol prices, high interest rates and lower disposable income caused by high inflation. Additionally, a lockout at market leader Maruti Suzuki India s Ltd (MSIL) Manesar production facility, and the consequent disruption in production, impacted growth marginally. On the other hand, domestic utility vehicles (UVs) including vans, grew by 32 per cent during because of new model launches during the year and also due to increased preference for diesel vehicles. Domestic car and UV sales to recover slowly in We expect passenger vehicle sales to grow by 5-7 per cent in over a 2 per cent growth in Macroeconomic recovery and decline in petrol prices would aid a revival in small car sales. We expect utility vehicle sales to continue to grow, led by new model launches. However, growth will be capped at 9-11 per 6 P a g e

7 cent on account of diesel price hikes. Long term growth prospects will remain healthy until , as passenger vehicle penetration is currently at low levels. Exports stage a recovery in Exports of cars & utility vehicles (UVs) grew by 9 per cent in after a marginal decline of 0.4 per cent in weak global demand, especially in Europe, one of the largest export markets, had impacted demand in In , sluggish demand in Europe and increase in import and excise duty rates in Sri Lanka, which accounts for nearly 5 per cent of the total exports like MSIL, restricted growth to single digits. 3. Automobile Industry in India The Indian automotive industry is currently going through one of its most challenging phases so far. Vehicle sales are set to register a negative growth in 2013 first time in more than a decade compared with the previous year. Official data shows that vehicle sales in India declined at a high single digit rate year on year in the first nine months of 2013 compared to This downward spiral has prompted automakers and suppliers to cut production to avoid excess inventory build-up. Besides, there's little respite on the cost front. Though there has recently been some softening in raw materials prices, other costs such as wages, cost of power and finance expenses, continue to erode suppliers' operating margins. Car sales in India are expected to fall in the current financial year, marking a second straight year of decline, as high interest rates and a slowing economy force consumers to delay purchases. The weakness in the automotive market has taken its toll on the investment drive of many suppliers. While international suppliers have continued their investments in India, citing the country's long-term growth prospects, local suppliers have almost put their expansion plans on hold until there is a sustained recovery in vehicles sales. The Indian automotive industry at the moment is facing multiple challenges such as slowing economic growth, high inflation and high interest rates compared with many of its peers. IHS however is sanguine about the country's growth trend in the medium to long term and forecasts recovery in vehicle sales in 2014, and high single-digit growth in vehicle sales for the rest of this decade. IHS expects vehicle sales in India to grow at an average rate of 12.2% annually between 2014 and 2020; sales are expected to reach 7.1 million units by 2020 compared with 3.6 million in Key Statistics The Indian automobile industry produced a total 1.69 million vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in August 2013 as against 1.56 million in August 2012, registering a growth of 8.18 percent over the same month last year. 7 P a g e

8 The cumulative foreign direct investment (FDI) inflow into the Indian automobile industry during April 2000 to July 2013 was recorded at US$ 8,932 million, amounting to 4.5 per cent of the total FDI inflows (in terms of US$), according to Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce. The overall automobile exports grew by 2.03 per cent during April-August Furthermore, the production of passenger vehicles in India was recorded at 3.23 million in and is expected to grow at a compound annual growth rate (CAGR) of 13 per cent during , according to Automotive Component Manufacturers' Association of India (ACMA). Automobile Domestic Sales Trends Category Passenger Vehicles 1,549,882 1,552,703 1,951,333 2,501,542 2,618,072 2,686,429 Commercial Vehicles 490, , , , , ,150 Three Wheelers 364, , , , , ,291 Two Wheelers 7,249,278 7,437,619 9,370,951 11,768,910 13,435,769 13,797,748 Grand Total 9,654,435 9,724,243 12,295,397 15,481,381 17,376,624 17,815,618 8 P a g e

9 4. Production in the Indian Automobile Industry The India auto industry closed with a sales dip of 6.7%, the first drop in 12 years. The outlook for isn't much brighter, with expects a growth of 3-5%. The Indian automobile industry produced a total 1.69 million vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in August 2013 as against 1.56 million in August 2012, registering a growth of 8.18 percent over the same month last year. Passenger Vehicles Production ( 000 units) Commercial Vehicles ( 000 units) Tractors ( 000 units) 9 P a g e

10 Two & Three Wheelers ( 000 units) Construction Vehicles ( 000 units) Note: (* Estimates) 5. Trends in the Indian Automobile Industry New product launches Large number of products available to consumers across various segments; this has gathered pace with the entry of a number of foreign players Reduced overall product lifecycle have forced players to employ quick product launches Improving product -development capabilities Increasing R&D investments from both the government and the private sector Private sector innovation has been a key determinant of growth in the sector; two good examples are Tata Nano and Tata Pixel - while the former has been a success in India, the latter is intended for foreign markets Alternative fuels In FY11, the CNG market was worth more than USD330 million and CNG cars and taxis are expected to register a CAGR of 28 per cent over FY11-FY14 The CNG distribution network in India is expected to increase to 250 cities by 2018 from 30 cities in P a g e

11 Upcoming trends India is emerging as a strong automotive R&D hub with foreign players like Hyundai, Suzuki, and General Motors setting up base in India. This move is further enhanced by Government s support towards setting up centres for development and innovation. Tata Nano s successful entry in the Indian market has steamed up the opportunities of growth available in alternative segments like electric cars, vehicles run on natural gas, etc. 6. Growth drivers for Automobile Sector Factors that will drive growth in the sector Rising incomes among Indian population will lead to increased affordability, increasing domestic demand for vehicles, especially in the small car segment. Fuel economy and demand for greater fuel efficiency is a major factor that affects consumer purchase decision that will bring leading companies across two-wheeler and four-wheeler segment to focus on delivering performance-oriented products. Product innovation and market segmentation will channelize growth. Vehicles based on alternative fuels will be an area of interest for both consumers and auto makers. Focus on establishing India as auto-manufacturing hub is reigning in policy support in form of Government s technology modernization fund. Industry will seek to augment sales by tapping into rural markets, youth, women and luxury segments. 11 P a g e

12 7. Automobile Industry Companies in India MARUTI SUZUKI INDIA LTD Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan. Maruti Suzuki has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.5 million (1,500,000) vehicles annually. The company plans to expand its manufacturing capacity to 1.75 million by Maruti Suzuki is India s largest passenger vehicle company with a market share close to 40% which offers 14 models with over 200 variants across the Industry segments like: Passenger cars, Utility vehicles and Vans. Financial Highlights Results updates- Q2 FY14, Months SEP-13 SEP-12 % Change Net Sales PAT EPS EBITDA The company s net profit jumps to Rs million against Rs million in the corresponding quarter ending of previous year, an increase of %. Revenue for the quarter rose 26.04% to Rs million from Rs million, when compared with the prior year period. Reported earnings per share of the company stood at Rs a share during the quarter, registering % increase over previous year period. Profit before interest, depreciation and tax is Rs millions as against Rs millions in the corresponding period of the previous year. Higher localization and cost reduction initiatives by the Company also contributed significantly to bottom-line growth during Q2. The overall impact of foreign exchange was positive during the quarter. Future plan of action Maruti Suzuki India Limited (MSIL) will continue to introduce new range of products and variants in automobiles to meet growing customers expectations. The company will take initiative step to introduce alternate fuel options like LPG and CNG in the company s vehicles. In the long term, the company will focus on enhancing the capability in the field of EV-HEV (Electric Vehicle Hybrid Electric Vehicle) and other environment friendly initiatives. 12 P a g e

13 Financial Highlight STANDALONE (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31, E 13 P a g e FY12A FY13A FY14E FY15E EQUITY AND LIABILITIES: Shareholders Funds: Share Capital Reserves and Surplus a. Net worth Non-Current Liabilities: Long-term borrowings Deferred Tax Liabilities [Net] Other Long Term Liabilities Long Term Provisions b. Long term liabilities Current Liabilities: Short-term borrowings Trade Payables Other Current Liabilities Short Term Provisions c. Current Liabilities Total (a+b+c) ASSETS: Non-Current Assets: Fixed Assets: i. Tangible Assets ii. Intangible Assets iii. Capital work-in-progress Other non-current assets Non Current Investments Long Term Loans and Advances d. Non-Current Assets Current Assets: Current Investments Inventories Trade Receivables Cash and Bank Balances Short Term Loans and Advances Other Current Assets e. Current Assets Total (d+e)

14 Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 MARCH, 2013 to 31 DEC, 2013E Value(Rs.in.mn) 31-Mar Jun Sep Dec-13E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS P a g e

15 Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) EBITDA Margin (%) 9.38% 11.57% 13.81% 15.31% PBT Margin (%) 6.03% 6.86% 8.36% 9.18% PAT Margin (%) 4.59% 5.49% 6.40% 7.12% P/E Ratio (x) ROE (%) 10.77% 12.88% 13.73% 13.83% ROCE (%) 27.53% 34.57% 37.34% 37.57% EV/EBITDA (x) Book Value (Rs.) P/BV Outlook and Conclusion At the current market price of Rs , the stock P/E ratio is at x FY14E and x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs and Rs respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 11% and 28% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 7.57 x for FY14E and 6.50 x for FY15E. Price to Book Value of the stock is expected to be at 2.24 x and 1.93 x respectively for FY14E and FY15E. 15 P a g e

16 TATA MOTORS LTD Tata Motors Limited is India's largest automobile company, with consolidated revenues of INR 1,88,818 crores (USD 34.7 billion) in Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand, Spain, South Africa and Indonesia. It is the leader in commercial vehicles in each segment, and among the top in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. It is also the world's fifth largest truck manufacturer and fourth largest bus manufacturer. The Tata Motors Group's over 60,000 employees are guided by the mission "to be passionate in anticipating and providing the best vehicles and experiences that excite their customers globally." Financial Highlights India's largest automobile company, Tata Motors reported consolidated revenues (net of excise) of Rs million for the quarter ended September 30, 2013, a growth of 31.06% over Rs million for the corresponding quarter of the previous year, despite weak operating environment in the India business which was more than offset by increase in wholesale volumes and richer product and market mix at Jaguar Land Rover (JLR). The Consolidated Profit before tax for the quarter was Rs million, a growth of 53.87% over Rs million for the corresponding quarter of the previous year. The Consolidated Profit after tax (post minority interest and profit/loss in respect of associate companies) for the quarter was Rs million, a growth of 70.71% over Rs million for the corresponding quarter of the previous year. During the quarter, Jaguar Land Rover has reported revenues of GBP 4,612 million, represented a growth of 40.3% over GBP 3,288 million in the corresponding quarter last year. During Q2 FY14, Operating margins stood at 17.8%. Operating profit (EBITDA) of GBP 823 million in the quarter, represented a growth of 69.3% over GBP 486 million in the corresponding quarter last year. Continued strong revenue growth and operating performance were supported by increase in wholesale volume, richer product mix, launch of new Range Rover Sport, new Range Rover and Jaguar F-TYPE. PAT for the quarter grew by 66.2% to GBP 507 million against GBP 305 million in the corresponding quarter last year. During the quarter, Tata Daewoo Commercial Vehicles Co. Ltd. registered net revenues of KRW 202 billion and Net profit of KRW 4.4 billion as compared to KRW 205 billion and KRW 0.5 billion, respectively, in Q2 FY13. The standalone revenues (net of excise) for the quarter ended September 30, 2013 stood at Rs million, as compared to Rs million in Q2 FY13. For the quarter Q2 FY14, the operating margin stood at 2.0%. 16 P a g e

17 Continued slowdown in economic activity, low level of transport freight and infrastructure activity, frequent diesel price increases and tight financing environment, have impacted the industry during the quarter. Tata Motors has entered into an Australian market with a sale of Tata Xenon through distributor Fusion Automotive and it is an important milestone in the continued expansion of Tata Motors global footprint. The Company plans to launch the new Tata Aria, the Tata Prima KL3TXF 6X4 Truck Tractor and Tata Ultra 812 Truck in South Africa in JLR performance to remain strong led by product actions and continued growth in emerging markets, particularly China. Results updates- Q2 FY14, Months Sep-13 Sep-12 % Change Net Sales PAT EPS EBITDA Latest Updates Standalone sales (including exports) of commercial and passenger vehicles for the quarter ended September 30, 2013, stood at 1,50,930 units, a decline of 32.5% as compared to the corresponding quarter last year. During the quarter September 30, 2013, Jaguar Land Rover wholesale and retail volumes grew by 31.6% and 21.1% over the corresponding period last year to stood at 101,931 units and 102,644 units, respectively. Tata Motors Group global sales in September 2013, including Jaguar Land Rover, were 87,316 nos. Cumulative sales for the fiscal were 503,887 nos. Tata Motors total sales (including exports) of Tata commercial and passenger vehicles in October 2013 were 1,638 vehicles. The company s domestic sales of Tata commercial and passenger vehicles for October 2013 were 46,926 nos. Cumulative sales (including exports) for the company for the fiscal were 356,380 nos. Tata Motors has released the new Tata Xenon for sale in Australia through distributor Fusion Automotive. Entry into the Australian market marks an important milestone in the continued expansion of Tata Motors global footprint. 17 P a g e

18 Tata Motors has launched of the new Tata Nano CNG emax. The Tata Nano CNG emax is powered by a fuel efficient, state-of-the-art engine, with CNG and Petrol bi-fuel system options. PT Tata Motors Distribusi Indonesia (TMDI), wholly owned subsidiary of Tata Motors Ltd forayed into the Indonesian automotive industry with the launch of three new exciting Tata passenger vehicles - the Tata Aria, the Tata Vista and the Tata Safari Storme. Tata Motors has launched the Tata Xenon Pick-up with best-in-class looks, operating economics and fuel efficiency in the Nepal market. Tata Motors has entered into partnership with DRB-HICOM, Malaysia's biggest conglomerate, for the import, distribution and assembly of Tata Motors Commercial Vehicles in Malaysia. 18 P a g e

19 Financial Highlight (CONSOLIDATED) Balance sheet as at March31st, E 19 P a g e (A*- Actual, E* -Estimations & Rs. In Millions) TATA MOTORS LTD. FY12A FY13A FY14E FY15E SOURCES OF FUNDS (Rs.in.mn) Shareholder's Funds Share Capital Reserves and Surplus Sub Total - Net worth Minority interest Non Current Liabilities Long term borrowings Deferred Tax Liabilities Other Long term Liabilities Long Term Provisions Sub Total - Non Current Liabilities Current Liabilities Short term borrowings Trade Payables Other Current Liabilities Short Term Provisions Sub Total - Current Liabilities Total Liabilities ( ) APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets Intangible assets Capital Work in Progress Intangible assets under development a) Sub Total - Fixed Assets b) Non-current investments c) Goodwill on consolidation d) Long Term loans and advances e) Deferred Tax Asset f) Other non-current assets Sub Total - Non Current Assets Current Assets Current Investment Inventories Trade receivables Cash and Bank Balances Short-terms loans & advances Other current assets Sub Total - Current Assets Total Assets (1+2)

20 Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Profit After Tax Minority Interest Share of Profit & Loss of Asso Net Profit Equity capital Reserves Face value EPS P a g e

21 Quarterly Profit & Loss Statement for the period of 31 st Mar, 2013 to 31 st Dec, 2013E Value(Rs.in.mn) 31-Mar Jun Sep Dec-13E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Exceptional Items Profit Before Tax Tax Profit After Tax Minority Interest Share of Profit & Loss of Asso Net Profit Equity capital Face value EPS Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) EBITDA Margin (%) 13.87% 13.43% 14.07% 14.36% PBT Margin (%) 8.17% 7.22% 7.33% 7.26% PAT Margin (%) 8.19% 5.22% 5.25% 5.19% P/E Ratio (x) ROE (%) 41.63% 26.23% 20.82% 18.50% ROCE (%) 40.10% 40.49% 36.35% 35.69% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV P a g e

22 Outlook and Conclusion At the current market price of Rs , the stock P/E ratio is at x FY14E and x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs and Rs respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 12% and 13% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 5.10 x for FY14E and 4.57 x for FY15E. Price to Book Value of the stock is expected to be at 2.32 x and 1.89 x respectively for FY14E and FY15E. 22 P a g e

23 MAHINDRA & MAHINDRA LTD A USD 16.2 billion multinational group based in Mumbai, India, Mahindra employs more than 155,000 people in over 100 countries. M&M was set up in 1945 to make general purpose utility vehicles for the Indian market and soon it started manufacturing agricultural tractors and light commercial vehicles (LCVs). Later the company expanded its operations to secure a significant presence in many more significant sectors. M&M also has controlling stake in REVA Electric Car Company and acquired South Korea's SsangYong Motor Company in Financial Highlights The Gross Revenues and Other Income of Mahindra & Mahindra Ltd for the quarter ended 30th September 2013 is Rs million as against Rs million in the corresponding period last year. The profit after tax for the quarter is Rs million as against Rs million in Q2 FY13 a growth of 9.7%. Mahindra Vehicle Manufacturers Ltd (MVML) is a 100% subsidiary of the company with a view to sourcing contemporary products for expanding the market offerings of the company. The Gross Revenues and Other Income of Mahindra & Mahindra Ltd and MVML (Entity) for the quarter ended 30th September 2013 is Rs million as against Rs million during the corresponding period last year. The profit before tax of Entity for the current quarter is Rs million as against Rs million in Q2 previous year. After providing for tax, the profit is Rs million against Rs million in Q2 last year - a growth of 5.1%. The operating margin of the Entity for the current quarter is 14.5% as compared to 13.8% in Q2 last year. The deceleration in the Gross Revenues in the quarter is due to the challenging times the Indian auto industry, with volumes shrinking by 4% during Q2 FY14. Despite this, the entity could deliver a growth in the profits in the quarter due to a strong sales performance by its Farm Equipment Sector and a tight control on material costs and all expenses. In the Passenger Utility Vehicle segment, the Entity sold vehicles in the current quarter with a market share of 39.6%. In the Cars segment, the Entity sold 2879 Verito and Verito Vibe Cars. The Entity also exported 8059 Vehicles in Q2 FY14. The domestic tractor industry continued to show robust growth with sales of tractors in Q2 FY14 against tractors sold in Q2 FY13 - a growth of 21.2%. In this period, the Company s domestic sales at tractors grew by 22.3% over the tractors sold in Q2 last year. Company s market share was 40.5% as against 40.2% in Q2 last year. 23 P a g e

24 Results updates- Q2 FY14, Months Sep-13 Sep-12 % Change Net Sales (9.00) PAT EPS EBITDA Latest Updates During the quarter, In the Passenger Utility Vehicle segment, the Entity sold vehicles in the current quarter with a market share of 39.6%. In the Cars segment, the Entity sold 2879 Verito and Verito Vibe Cars. The Entity also exported 8059 Vehicles in Q2 FY14. During Q2 FY14, the Company s domestic sales at tractors grew by 22.3% over the tractors sold in Q2 last year. Mahindra & Mahindra Ltd has launched the Xylo D2 MAXX, with 9 seats option, in Bangalore at a price of Rs lacs. M&M has launched the Mahindra Scorpio Pik-Up range (Single Cab) in Tunisia, in partnership with ETS Zouari Group. A special state-of-the-art facility has been set up to assemble the vehicles with an annual capacity of 2,000 units per annum. Ssangyong Motor, part of the Mahindra Group, has started selling the New Korando C in the global market with its launch in Europe. During the quarter, the Company has completed a transaction agreement with CIE Automotive S.A., Spain (CIE) in the Auto Component business. 24 P a g e

25 FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March31st, E M&M LTD. FY12A FY13A FY14E FY15E SOURCES OF FUNDS (Rs.in.mn) Shareholder's Funds Share Capital Reserves and Surplus Sub Total - Net worth Non Current Liabilities Long Term Borrowing Deferred Tax Liability (Net) Other Long term Liabilities Long Term Provisions Sub Total - Non Current Liabilities Current Liabilities Short Term Borrowing Trade Payables Other Current Liabilities Short Term Provisions Sub Total - Current Liabilities Total Liabilities (1+2+3) APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets Intangible assets Capital Work in Progress Intangible assets under development a) Sub Total - Fixed Assets b) Non- Current Investments c) Long Term loans and advances d) Other non-current assets Sub Total - Non Current Assets Current Assets Current Investment Inventories Trade receivables Cash and Bank Balances Short-terms loans & advances Other current assets Sub Total - Current Assets Total Assets (1+2) P a g e

26 Annual Profit & Loss Statement for the period of 2012 to 2015E Value(Rs.in.mn) FY12A FY13A FY14E FY15E Description 12m 12m 12m 12m Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Reserves Face value EPS Quarterly Profit & Loss Statement for the period of 31 st Mar, 2013 to 31 st Dec, 2013E Value(Rs.in.mn) 31-Mar Jun Sep Dec-13E Description 3m 3m 3m 3m Net sales Other income Total Income Expenditure Operating profit Interest Gross profit Depreciation Profit Before Tax Tax Net Profit Equity capital Face value EPS P a g e

27 Ratio Analysis Particulars FY12A FY13A FY14E FY15E EPS (Rs.) EBITDA Margin (%) 13.64% 13.23% 13.70% 13.64% PBT Margin (%) 11.32% 11.00% 11.32% 11.21% PAT Margin (%) 9.04% 8.29% 8.71% 8.63% P/E Ratio (x) ROE (%) 23.67% 22.89% 21.38% 19.30% ROCE (%) 32.09% 33.90% 31.31% 29.65% Debt Equity Ratio EV/EBITDA (x) Book Value (Rs.) P/BV Outlook and Conclusion At the current market price of Rs , the stock P/E ratio is at x FY14E and x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs and Rs respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 13% over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 9.53 x for FY14E and 8.63 x for FY15E. Price to Book Value of the stock is expected to be at 3.07 x and 2.54 x respectively for FY14E and FY15E. 27 P a g e

28 HERO MOTOCORP LTD Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of two - wheelers, based in India. HMCL offer one of the widest ranges of two wheelers with over 19 different products across the 100 cc, 125 cc, 150 cc, 225 cc and scooter categories. Hero MotoCorp Limited manufactures and sells motorized two-wheelers and spare parts, as well as provides related services in India. The company provides motorcycles and scooters. Financial Highlights With sales of 14,16,276 two-wheelers in Q2 FY 14, the company registered a total turnover of Rs mn and net profit after tax (PAT) of Rs mn. HMCL had reported a total turnover of Rs. Rs mn and PAT of Rs mn in the corresponding quarter in the previous fiscal. EBIDTA margin for the second quarter of this financial year stood at 14.5 per cent. The cumulative sales for first half of the year (April-Sept 13) stands at 29,75,558 two-wheelers. The company registered a total turnover of Rs mn and net profit after tax of Rs mn in this period. EBIDTA margin for the H1 FY14 stood at 14.7 per cent. HMCL recently commenced construction of its Rs 450 Crore Hero Centre of Global Innovation and Research & Design (R&D) at Kukas, Jaipur in Rajasthan. In July 2013, Hero MotoCorp began its quest in Africa with the launch of brand Hero in Kenya, Burkina Faso and Ivory Coast. HMCL has also set-up its first international assembly unit at Nairobi in Kenya. The company followed it with the launch of operations in Peru in Latin America. As of today, Hero two-wheelers sell in 11 markets across the globe. The Company has reached the historic milestone of 50 million unit s production. Over the past two years, it has been working hard to build a foundation to realize their aspirations of a New Hero. This New Hero will plans to enter into 50 countries with 20 manufacturing facilities across the globe and 100 million cumulative two-wheelers sold by In the short term, HMCL will plans to launch Brand Hero in 10 more international markets by the end of this year. And by next year, it will plan to have six assembly facilities spread across three continents. Results updates- Q2 FY14, Months Sep-13 Sep-12 % Change Net Sales PAT EPS EBITDA P a g e

29 A NEW vision for a NEW Hero With HMCL fast augmenting its presence globally and further strengthening its leadership in the domestic market, the company unveiled a global vision for brand Hero - to be achieved by year 2020: Surpass 100 million units in cumulative production Annual bike and scooter sales of 12 million More than 20 manufacturing and assembly plants across the globe Sales in more than 50 countries Turnover of Rs 60,000 crore Latest Updates HMCL recently commenced construction of its Rs 450 Crore Hero Centre of Global Innovation and Research & Design (R&D) at Kukas, Jaipur in Rajasthan. HMCL has launched brand Hero and its range of two-wheelers in Peru, marking the iconic brand s foray into the Latin American market. And also entered into a partnership with MOTOCORP S.A.C a part of the reputed EFE Group of Peru - to bring its two-wheelers to this market. The Company has reached the historic milestone of 50 million unit s production. Over the past two years, it has been working hard to build a foundation to realize their aspirations of a New Hero. This New Hero will plans to enter into 50 countries with 20 manufacturing facilities across the globe and 100 million cumulative two-wheelers sold by In the short term, HMCL will plans to launch Brand Hero in 10 more international markets by the end of this year. And by next year, it will plan to have six assembly facilities spread across three continents. HMCL has recently showcased next-gen features to be introduced in its new product line-up, namely, i3s Technology (Idle Stop & Start System) for two-wheelers which will soon make its debut in the all-new Splendor ismart; Integrated Braking System (IBS) that is being introduced in the all-new Pleasure and Electronic Immobilizer which will debut on the new 150cc Xtreme. Hero has filed for patents for these technological innovations. Hero MotoCorp Ltd is setting up two new plants at Neemrana, Rajasthan and Gujarat and it has integrated a R&D Centre at Kukas, Jaipur with an investment of Rs crore. HMCL launched the country's first-ever warranty of 5 years on all its two-wheelers (5 years or 70,000 km on motorcycles, whichever is earlier and 5 years or 50,000 km on scooters, whichever is earlier). 29 P a g e

30 Investments Hero MotoCorp s newly-incorporated wholly-owned American subsidiary - HMCL (NA). Hero MotoCorp is investing US$25 million for a total stake of 49.2% in the share capital of Erik Buell Racing (EBR). The first tranche of US$15 million has already been invested by HMCL. The second tranche of US$10 million is proposed to be invested within the next nine months. The equity partnership with EBR is reflective of its long-term vision of transforming Hero MotoCorp to a truly global two-wheeler major with footprints spread across continents, offering a wide range of technologically-advanced two-wheelers. Hero MotoCorp recently launched its own retail finance arm, Hero FinCorp, with a phase-wise expansion plan. Having been launched in Delhi, the retail financing services will shortly be extended to the National Capital Region and then to the rest of the northern market in the next phase. The initial plan is to make Hero FinCorp services available at about 200 dealerships in various parts of the country by March 2014, and extend it to as many as 450 dealerships by March Expansion Setting up a fourth plant at Neemrana in Rajasthan with an annual installed capacity of 750,000 units. Setting up a fifth plant at Halol in Gujarat, with an annual installed capacity of 1.2 million in the initial phase, which will grow to 1.8 million in the next phase. Setting up a new state-of-the-art integrated R&D centre at Kukas, Rajasthan. Consistent expansion across all three existing plants. Setting up a Global Parts Centre (GPC) at Neemrana, Rajasthan. 30 P a g e