FINANCIAL PERFORMANCE ANALYSIS OF MAHINDRA AND MAHINDRA COMPANY A PRE & POST MERGER PERSPECTIVE

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1 FINANCIAL PERFORMANCE ANALYSIS OF MAHINDRA AND MAHINDRA COMPANY A PRE & POST MERGER PERSPECTIVE Sneh Lata 1, Dr. Rbin Anand 2 1 Research Schlar, Department f Cmmerce, JJT University, Jhunjhunu, (Rajasthan) India. 2. Assistant Prfessr,Department f Cmmerce,Manhar Memrial (P.G.) Cllege Fatehabad, Haryana. ABSTRACT Mergers and acquisitins in autmbile sectr have becme familiar in the majrity f all the cuntries in the wrld. With the help f mergers and acquisitins in the autmbile sectr, the Cmpanies can achieve significant grwth in their prductivity, becme mre efficient fr new innvatin and technlgy and minimize their expenses t a cnsiderable extent.in this research paper, I have selected merger f Mahindra and Mahindra Cmpany and Ssang Yng as sample size t analyze merger and acquisitin in this sectr. My bjective f this research paper is t analyze financial perfrmance f merged cmpanies pre-merger and pst-mergerwith the help f financial parameters like, Grss Prfitmargin, Net Prfit margin, perating Prfit margin, Return n Capital Emplyed, Return nequity, and Debt Equity Rati etc. The cllectin f data cvers financial perfrmance f selected cmpany frm 2007 t The statistical tls are arithmetic mean, standard deviatin, t-test and p-value etc. Finallythe study indicates that there is n imprvement in financial perfrmance f acquirer cmpany after merger. Keywrds: Mergers, Acquisitins, Financial Perfrmance, Ratis. I. INTRODUCTION The autmbile sectr is ne f the mst imprtant instrument f the natinal develpment, ccupies a unique place in a natin s ecnmy. Deregulatin in the financial market,market liberalizatin, ecnmic refrms have witnessed astunding changes in car industry leading t incredible cmpetitiveness and advanced technlgy leading t a new era f autmbile sectr. Cmpanies grwth is pssible in tw ways internal and external. Internal grwth ccurs when the cmpany grws frm its wn business activity using funds frm ne year t expand the cmpany the fllwing year. External grwth ccurs when cmpany grws by merger r acquisitin f antherbusiness. The main mtive behind the Merger is t create synergy that is ne plus ne ismre than tw (1+1=3). Merger and Acquisitins help the cmpanies in getting the benefits like [1] Achieving cst efficiency Engage new market area 1188 P a g e

2 Help in new innvatin and technlgy advancement Ecnmies f scale Industry cnslidatin Divesting nn-cre assets Gegraphical benefits Eliminatin r reductin in cmpletin and risk etc. II.COMPANY PROFILE Mahindra & Mahindra was set up as a steel trading cmpany in 1945 in Ludhiana as Mahindra & Mhammed by brthers K.C. Mahindra and J.C. Mahindra and Malik Ghulam Mhammed.After India gained independence and Pakistan was frmed, Mhammed immigrated t Pakistan where he became that cuntry's first finance minister. The cmpany changed its name t Mahindra & Mahindra in It is ne f the largest vehicle manufacturers by prductin in India and the largest manufacturer f tractrs in the wrld. It is a part f Mahindra Grup, an Indian cnglmerate.it was ranked 21st n a list f tp cmpanies in India by Frtune India 500 in [2] SsangYng Mtr Cmpany (meaning Duble Dragns Mtr Vehicles) is the furth largest Suth Kreanbased autmbile manufacturer. It is a subsidiary f Indian multinatinal Mahindra & Mahindra. A 70% share f SsangYng was acquired by Mahindra & Mahindra Limited in February 2011, after being named the preferred bidder in 2010 t acquire the bankruptcy-prtected cmpany. Mahindra's acquisitin was apprved by Suth Krea's Free Trade Cmmissin. [3] Mahindra Grup & SsangYng Cmpany On Nvember 23, 2010, SsangYng Mtr Cmpany Limited (SYMC) and India s Mahindra & Mahindra Ltd. (M&M) its preferred bidder annunced the signing f a definitive agreement in Seul. The agreement which was signed by Mr. Yil Lee and Mr. Yungtae Park, Jint Receivers f SYMC and Dr. PawanGenka, President, Autmtive & Farm Equipment Sectrs, M&M, in the presence f key staff and advisrs t bth grups.the securing f a slid partner wh has bth financial capability and is engaged in diverse markets will allw SsangYng t emerge as a glbal SUV player thrugh the strengthening f R&D, investments in prduct develpment, better business cmpetitiveness and glbal sales expansin. The labur unin f SYMC, M&M and SYMC has als signed a Tripartite Agreement which cntains prvisins fr emplyment prtectin, lng-term investment and cmmitment fr n labr dispute. Deal in Mnitry Terms [4] Ttal cst f the acquisitin f US$ 463 millin with US$ 378 millin in new stcks and US$ 85 millin in the crprate bnds Exchange Rate Used in merger : US $ I = KRW P a g e

3 Mahindra will acquire 70% stake Deal expected t be cncluded by March 2011 III. REVIEW OF LITERATURE ShubhraJhri (2014) In this paper authr has tried t study the effect f five specific mergers in autmbile industry n the sharehlders wealth that taken place during year An empirical study is cnducted t examine pre t pst merger stck perfrmance and als deals with the synergies that the merging cmpanies have achieved pst integratin. Wei Zheng&Zhijun Sheng (2015) In this paper researcher examinedthe impact f merger and acquisitins f Chinese autmbile enterprises. Main bjective f the study is t understand prblems such as plitical barriers, legal barriers and cultural cnflicts etc. in implementatin in M&A and cuntermeasures that make ideal results when they implement the M&A. Bijy Gupta &Parimalendu Banerjee (2017) Examined the impact f merger and acquisitins n financial perfrmance f selected acquirer firms acrss India by selecting seven different units merged during Varius financial ratis applied t assess the prfitability and liquidity psitin f the selected firms. The analysis is cnducted with the help f statistical tl paired t test used n accunting ratis by SPSS t test the significance f the study. The study revealed insignificant imprvement f acquiring firms after merger. Authrs fundthe efficiency f acquiring firms deterirated in pst-merger perid. IV. OBJECTIVES OF THE STUDY The study has been undertaken t make a cmparative analysis f the impact f merger n financial perfrmance f Mahindra and Mahindra Cmpany. V. RESEARCH METHODOLOGY Hypthesis Mergers and Acquisitin imprves the financial perfrmance f Mahindra and Mahindra Cmpany and hypthesis fr the study are: H 0 = There is n significance difference between the pre-merger and pst- merger perfrmancef Mahindra and Mahindra Cmpany H 1 = There is significance difference between the pre-merger and pst- merger perfrmance fmahindra and Mahindra Cmpany Sample, Data Surces and Perid f the Study 1190 P a g e

4 The current study chses ne cmpany as Sample t assess the impact f mergers and acquisitins n the financial perfrmance f selected cmpany. The financial data has been cmpiled fr the financial year 2007 t 2017 n an annual basis. The pre-merger (fur years prir) and pst-merger (after six years) f the financial ratis have being cmpared. The year f merger is cnsidered as base year and dented as 0 and it is excluded frm the evaluatin.the present study is based n secndary data. The data is cllected frm the website and annual reprts f cmpanies. Tls and Techniques fr Analysis Rati Analysis Arithmetic mean Standard deviatin T test VI. DATA ANALYSIS AND INTERPRETATION In this study merger f Mahindra cmpany (acquirer) and SsangYng (Target Cmpany) in The table 1 presents the data f varius financial ratis f Mahindra and Mahindra Cmpany. Inthe pre-merger scenari fr the cnsidered 4 years, the fllwing financial ratis PBDIT margin, Debt equity rati and current rati initially increases r remain cnstant and later n decreased. Whereas the Net prfit margin, Return n capital emplyed, return n assets, quick rati and Return n equity exhibit the mixed trend thrughut the perid. In the pst-merger scenarifr the cnsidered 6 years, it was bserved that PBDIT margin, Net prfit margin, return n capital emplyed, return n assets, Return n equity and current rati shwed increasing trend fr the tw r three years later n shw decreasing trend but quick rati and interest n cverage rati shw decreasing trend whereas earning yield remains cnstant in first three years and after that it decreased. Table 1: Financial Ratis f Mahindra and Mahindra Cmpany 1191 P a g e

5 Surce: Financial statement f Mahindra and Mahindra Cmpany, Table 2 presents the descriptive statistics and analysis f the varius ratis f Mahindra and Mahindra Cmpany. It reveals the average values f mean f pre merged years are greater than pst merged perid in respect f all financial ratis that shwn in table. Standard deviatin shws the variatin in pre and pst-merger. PBDIT Margin, debt equity, quick rati and interest n cverage rati shw high variatin whereas rest f ratis shw lw variatin. T knw whether there is significant difference in the financial ratis befre and after merger, t-test is applied using MS- excel. Summary f analysis presented in table at 5% level f significance. As table reveals t- value f all ratis are greater than the p-value f the ratis at 5% level f significance. Null hypthesis is rejected whereas alternate hypthesis is accepted and cncluded that there is significant difference in ratis befre after merger f Mahindra and Mahindra Cmpany. Table 2: Summary Analysis f T-test Surce: calculated using excel * shw value 5% level f significance. VII. LIMITATIONS OF THE STUDY The study was limited in terms f financial perfrmance analysis and rati analysis nly. The study is depends nly n secndary data n primary data has been taken s the fresh infrmatin is nt available P a g e

6 VIII. CONCLUSION AND SUGGESTIONS Different cmpanies shake hands with intentin t create synergies, prfit efficiency, t imprve cmpetitiveness, enter int new market areas, etc. But mergers and acquisitins may nt be always fruitful fr expansin and grwth f acquirer cmpanies. The result f present study reveals that financial perfrmance f selected sample declines. The cmparisn f pre and pst-merger financial ratis f the sample shws that there is decline in the mean value f acquirer cmpany in respect f all the indicatr ratis selected fr the study. The reasn behind decline f perfrmance f cmpany can be ther mergers that take place in recent years. REFERENCES Bijy Gupta & Dr. Parimalendu Banerjee, Impact f merger and acquisitins n financial perfrmance: Evidence frm selected cmpanies in India, IMS Business Schl Presents Dctral Cllquium 2017, ISBN: ShubhraJhri," Mergers & Acquisitins: An insight int Value Creatin and Pst Merger Synergies "Pacific Business Review Internatinal Vl.6, N. 9, March Wei Zheng&Zhijun Sheng, Research n the Prblems and Cuntermeasures f Chinese Autmbile Enterprises Transnatinal Merger and Acquisitin, Business and Management Research Vl. 4, N. 2; P a g e