Introduction. The industry has seen tremendous growth over last 5 years

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2 Introduction Why automotive industry? The industry has seen tremendous growth over last 5 years Highly sensitive to demand and can be affected by external factors Capital intensive industry What are we doing? Analyzing the financial ratios, financial statements to gauge the health of three different companies

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4 Liquidity Measurement Ratio Current Ratio Ind. Ave. FY2009 FY2008 FY2007 FY2006 FY2005 Maruti Tata M&M Quick Ratio Ind. Ave. FY2009 FY2008 FY2007 FY2006 Fy2005 Maruti Tata M&M

5 Profitability Indicator Ratio Net Profit Margin Ind. Ave. Fy2009 FY2008 FY2007 FY2006 FY2005 Maruti 5.20% 5.68% 9.34% 10.29% 9.53% 7.57% Tata 3.90% 6.96% 6.94% 7.35% 7.02% M&M 6.22% 9.45% 10.34% 10.28% Return on Assets Ind. Ave. FY2009 FY2008 FY2007 FY2006 Fy2005 Maruti 8.67% 11.95% 18.58% 20.87% 21.52% 18.21% Tata 4.79% 14.37% 17.59% 18.04% 18.72% M&M 9.00% 15.91% 20.59% 22.60% 16.73% Return of Equity Ind. Ave. FY2009 FY2008 Fy2007 Fy2006 Fy2005 Maruti 13.78% 17.31% 20.56% 22.79% 21.81% 19.49% Tata 8.19% 25.98% 27.96% 27.74% 30.09% M&M 16.03% 25.51% 30.18% 29.60% 25.66%

6 Debt Ratio Debt Ratio Ind. Ave. FY2009 Fy2008 Fy2007 Fy2006 Fy2005 Maruti 31.55% 6.85% 10.00% 8.00% 1.29% 6.56% Tata 49.82% 44.00% 36.00% 34.66% 37.77% M&M 44.00% 37.00% 32.00% 23.20% 34.30% Interest Coverage Ratio Ind. Ave. Fy2009 Fy2008 Fy2007 FY2006 Fy2005 Maruti Tata M&M

7 Operating Performance Ratio Total Assets Turnover Ind. Ave. FY2009 Fy2008 Fy2007 FY2006 FY2005 Maruti Tata M&M Inventory Turnover Ind. Ave. FY2009 FY2008 FY2007 FY2006 FY2005 Maruti Tata M&M

8 Cash Flow Indicator Ratios Operating Cash Flow-to-Sales Ratio Ind. Ave. FY2009 Fy2008 Fy2007 Fy2006 Fy2005 Maruti 8.06% 7.87% 10.13% 13.69% 10.00% 9.70% Tata 5.04% 21.40% 8.29% -1.10% 7.27% M&M 12.42% 7.30% 11.70% 8.00% 5.75% Dividend Payout Ratio Ind. Ave Fy2009 Fy2008 FY2007 Fy2006 Fy2005 Maruti 23.00% 8.29% 9.78% 9.72% 9.69% 7.73% Tata 28.80% 32.51% 35.34% 37.13% 41.68% M&M 37.29% 29.10% 30.39% 32.45% 33.54%

9 Investment Valuation Ratio Earnings per Share (EPS) Ind. Ave FY2009 FY2008 FY2007 FY2006 FY2005 Maruti Tata M&M Price/Sales Ratio Ind. Ave FY2009 FY2008 FY2007 FY2006 FY2005 Maruti Tata M&M Price-Earning Ratio Ind. Ave FY2009 FY2008 FY2007 FY2006 FY2005 Maruti Tata M&M

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11 Trend Analysis Liquidity ratios Leverage ratio % % 60.00% Debt Ratio 1.00 CR 40.00% D/E Ratio FY2005 FY2006 FY2007 FY2008 QR 20.00% 0.00% FY2005 FY2006 FY2007 FY2008 TIE Asset turnover FY2005 FY2006 FY2007 FY2008 FA Turnover TA Turnover Inv Turnover 40.00% 30.00% 20.00% 10.00% 0.00% Profitability ratios FY05 FY06 FY07 FY08 FY09 Op Profit Margin Net Profit Margin ROA ROE BEP

12 Trend Analysis 7 Investment valuation EPS/10 Price/Book Value/10 PE Ratio/10 Price/Sales Dividend Yield 1 0 FY05 FY06 FY07 FY08 FY09

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14 Analysis FY 04 to FY 08 Gradual increase in operating income over the years FY 08 operating income was 120% of that of FY 04 For FY 08 In FY 08 Fixed asset turnover is 2.68( In FY ), Total asset turnover is 2.06 (relatively constant over 5 years) Current ratio has fallen to 0.65 from As Total asset turnover is constant, Current assets in terms of short term investments have fallen, investments in long terms assets have increased causing increase in total assets thereby causing decrease in ROA and Fixed asset turnover as assets have increased at higher rate than sales and net income Factors causing negative impact Other recurring income fell drastically to 389 crore against 887 crore in FY 07 Debt to equity ratio increased to 0.8 thus interest expense rose from 1.75% to 2% Thus, due to higher interest and tax expense PAT was only 6.78% despite highest PBDIT Factors causing positive impact Expenses capitalized was highest at -1,131 crore (reducing total expense) Depreciation was lowest Quick ratio almost equal to current ratio at 0.66 and inventory turnover was highest at 14.63%

15 For FY 07 Operating income was highest and had record growth of 32% YOY with operating income in FY 07 at 26,664 crore against 20,088 crore in FY 06 Factors causing negative impact Cost for material consumed was highest at 73.24% of operating income, more than in FY 08 which had comparative higher sales Declining other sources of income Factors causing positive impact Depreciating expenses was lowest Improved recovery as write offs were 0.32% of operating income was better than that of previous years Despite record YOY growth due to factors mentioned above, duel to factors mentioned above PAT was at 6.32% as compared to 6.78% in FY 06

16 For FY 06 Adjusted PBDIT was 14.10% was highest Factors causing negative impact Increase in dept financing caused interest expense to rise 1.74% of operating income highest over the years Higher Tax expense as compared to FY 05 and FY 07 Thus due to higher interest and tax expense PAT was only 6.78% despite highest PBDIT Factors causing positive impact Availability of cheap raw material % of operating Efficient operations Administrative expense lowest Other recurring income was highest at 3.41% of operating income

17 Relation between PAT-Other source of income and expense capitalization FY-04 FY-05 FY-06 FY-07 FY-08 PAT Other source of income Expense capitalization % % % FY-04 FY-05 FY-06 FY-07 FY-08 Debt to Equity EPS normalised 20.00% 15.00% 10.00% 5.00% 0.00% FY-04 FY-05 FY-06 FY-07 FY-08 SSGR YOY growth Relation between EPS and Debt to equity ratio SSGR vs Growth rate

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19 ROE and its decline: An analysis Sales/TA NPM (%) TA/CE

20 DuPont Analysis As observed, Net profit margin is reduced by a bigger margin It can be concluded based on DuPont analysis that the decline in net profit margin (i.e. operational efficiency) is a major contributor to the decline in ROE.

21 Trend Analysis 92.00% 91.50% 91.00% 90.50% 90.00% 89.50% 89.00% 88.50% 88.00% 87.50% 87.00% 86.50% Expenses 8% 7% 6% 5% 4% 3% 2% 1% 0% Financial Expenses Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08 8% 7% 6% 5% 4% 3% 2% 1% 0% Administrative Expenses Mar ' 04 Mar ' 05 Mar ' 06 Mar ' 07 Mar ' 08

22 Altman Bankruptcy Prediction Model Z Tata Motors Maruti M&M

23 Conclusion As per the analysis, Maruti Suzuki looks to be the best among the three in terms of financial risk As per the FY2008 data and the annual report loss of 25 billion rupees, Tata motors shows signs of decline M & M's operational inefficiencies are prime cause of concern for the company and a key driver for it to land into distress zone in Altman's prediction model

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