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Financial Ratios

Analysis of
Mahindra &
Mahindra Limited

Under the guidance of

Financial Accounting
Prof. Jayanta Kr.
MBA (IB) 2015-17
Seal
Tushar Saklecha Roll No.50
Biprojit Roychaudhary Roll
No.61
Juhi Arya Roll No.69
Victor Ganguly Roll No.102

Table of Contents

A Schematic Representation of Common Financial Ratios..Error! Bookmark not


defined.
Gross Profit Margin................................................................................................. 4
Operating Profit Margin.......................................................................................... 5
EBIT Margin............................................................................................................ 6
Net Profit Margin.................................................................................................... 7
Net Income to Total Asset...................................................................................... 8
Total Asset Turnover Ratio...................................................................................... 9
Earnings per Share.............................................................................................. 10
Dividend per Share.............................................................................................. 11
Current Ratio....................................................................................................... 12
Quick Ratio.......................................................................................................... 13
Inventory Turnover Ratio...................................................................................... 14
Debt-equity Ratio................................................................................................. 15
Long Term Debt to Total Capital Ratio..................................................................16
Interest Cover...................................................................................................... 17

Gross Profit
Margin

Margin on
Sales

Operati ng
Profit Margin
EBIT Margin
Net Profit
Margin

Profitability

Return on
Investment

Net Income
to Total
Asset

Efficiency

Total Asset
Turn Over

Return per
Share
Financial
Ratios

Earning per
Share
Dividend per
Share
Current
Ratio

Short term

Quick Ratio
Inventory
Turnover

Solvency
Debt Equity

Long term

Long term
Debt to Total
Capital
Interest
Cover

1. Gross Profit Margin


It is the amount of surplus available after subtracting the COGS (Cost of
Goods Sold) from Total Sales Revenue.

GPM= (Gross Profit x 100) / Sales


Gross Profit Margin
FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
8.35
5.26
5.96
Maruti Suzuki India Ltd.
7.13
3.77
5.5
Tata Motors
9.95
10.07
8.99
Ashok Leyland Ltd.
8.46
7.03
3.97
TVS Motors
3.41
4.05
3.54

FY1314
6.3
6.94
10.2
-0.93
4.03

FY1415
4.36
8.52
9.83
6.1
4.11

Gross Profit Margin


12
10
8
6
4
2
0
-2

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: M&M Ltds gross profit margin has come down and moved up
again in the last 5 fiscal years, but as compared to Tata Motors-it has
always been less. M&M Ltd must focus on its pricing and cost structure. The
margin decreased is more because of the prevailing market conditions,
where automobile sector has taken a hit. Only Maruti Suzuki did reasonably
well in these years, sustaining the overall growth. Year 2013-14, was quite
good for M&M Ltd as its gross profit was the highest compared to others.

2. Operating Profit Margin


It is the reflection of the operation of a company or reflection of
performance of the management.

Operation Profit= EBDIT-Depreciation


OPM= (Operating Profit x 100) / Sales
Operating Profit Margin
FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
16.55
12.42
13.26
Maruti Suzuki India Ltd.
9.9
6.99
9.76
Tata Motors
13.77
13.46
13
Ashok Leyland Ltd.
10.85
9.78
7.02
TVS Motors
5.45
6.18
5.91

FY1314
13.67
11.7
14.96
1.67
5.81

FY1415
12.22
13.47
14.93
7.56
5.84

Operating Profit Margin


18
16
14
12
10
8
6
4
2
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: Based on the data, it is very well inferred that pricing strategy
and operating efficiency of M&M Ltd has been reasonable well. It has also
reflected that M&M Ltd has forayed into new products being launched every
year. M&M Ltd has EARNING relatively higher per rupee sale as compared
to most of its competitors. This margin has decreased in the last fiscal.

3. EBIT Margin
All the non-operating surplus or deficit is adjusted to the operating profit
margin, to obtain the earnings before interest and taxes.

EBIT = Revenue COGS Operating Expenses


Where, COGS stands for Cost of Operating Goods

Earnings Before Interest and Tax Margin


FY10FY11FY12FY1311
12
13
14
Mahindra & Mahindra Ltd.
13.79
9.33
10.17
10.67
Maruti Suzuki India Ltd.
7.03
3.68
5.4
6.81
Tata Motors
9.92
10.03
8.95
10.16
Ashok Leyland Ltd.
8.43
7.01
3.95
-2.1
TVS Motors
3.4
4.04
3.53
4.02

FY1415
9.2
8.37
9.8
4.45
4.1

Earnings Before Interest and Tax Margin


16
14
12
10
8
6
4
2
0
-2
-4

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: In the last 5 fiscal years, EBIT for M&M Ltd has been the highest
compared to rest all companies. It clocked the highest profitability in the
fiscal of 2010, but has reduced since then falling to its lowest in the last
fiscal. M&M Ltd has over the years enjoyed a credit free risk loan from
investors because of strong EBIT, but specially in the last fiscal this has
reduced as compared to some other players.

4. Net Profit Margin


The profit after tax or net income is the overall surplus available out of the
sales. This is also the amount available to the shareholders. This is
influenced by three major factors: operating efficiency, financial efficiency
and taxation. Net Profit Margin is also used to compare margins of various
players in the same industry.
Net Profit
Revenue

Net Profit Margin =

Where Net Profit = Revenue COGS Operating Expenses Interest & Taxes
Net Profit Margin
FY10FY1111
12
Mahindra & Mahindra Ltd.
8.35
5.26
Maruti Suzuki India Ltd.
6.41
4.65
Tata Motors
7.59
8.15
Ashok Leyland Ltd.
5.64
4.4
TVS Motors
1.94
1.78

FY1213
5.96
5.57
5.23
3.47
2.67

FY1314
6.3
6.41
6
0.29
2.22

FY1415
4.36
7.49
5.32
2.46
3.18

Net Profit Margin


9
8
7
6
5
4
3
2
1
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: According to the graph, it clearly shows that M&M Ltd has
maintained almost equal trend as compared to the other four companies.
M&M Ltd and all its rivals have been able to extract profit almost equally
from its sales in those fiscal years. This indicator is intended to be a
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measure of the overall success of a business- a high margin indicates that


the company is pricing its products correctly and is exercising good cost
control. It gives a clear picture while comparing business with other players
in the same industry.

5. Net Income to Total Asset


The rate of profit the company is able to earn after meeting the cost of
financing a portion of the total assets. This is the amount available to the
shareholders, in relation to the total amount of resources used in the
business.

Net income to total asset ratio= (Net Profit x 100) / Average


Total Asset

Net Income to
FY1011
Mahindra & Mahindra Ltd.
116.6
8
Maruti Suzuki India Ltd.
189.3
1
Tata Motors
222.9
2
Ashok Leyland Ltd.
151.8
6
TVS Motors
98.51

Total Asset
FY11FY1212
13
82.96
90.25
115.7
4
226.0
1
128.5
6
84.62

FY1314
90.54

FY1415
50.8

142.5
8
144.8
7
78.1

145.3
7
139.9
2
4.92

184.4
3
134.0
2
60.28

130.5
8

136.6

170.2
9

Net Income to Total Asset


250
200
150
100
50
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: The Net Income to Total Asset for M&M Ltd has always been high
for the initial years as compared to its rival companies, but has decreased
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in the last fiscal and is below compared to all. In fact TVS motors has done
pretty well here, where it has achieved the highest.

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6. Total Asset Turnover Ratio


The total asset turnover ratio tries to relate sales to total assets used. The
ratio assesses the efficiency of the use of total asset i.e. their ability to
generate revenue

Total Asset Turnover Ratio= (Sales x 100) / Average Total


Asset
Total Asset Turnover
FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
1.23
1.59
1.5
Maruti Suzuki India Ltd.
2.55
2.16
2.17
Tata Motors
3.3
3.02
3.21
Ashok Leyland Ltd.
2.37
2.6
1.98
TVS Motors
4.2
3.97
4.07

FY1314
1.35
1.92
2.52
1.48
5.17

FY1415
1.21
2.08
2.93
2.15
4.64

Total Asset Turnover


6
5
4
3
2
1
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: As clearly seen in the graph, the Total Asset Turnover ratio of
M&M Ltd has been below the industry average. On the other hand,
strangely TVS Motors which is quite a conservative player, has the highest
Asset Turnover. The ratio is on the downward slide in the last fiscal. So TVS
Motors as such has proven to be quite an efficient player in turning its
assets to sales, whereas M&M Ltd is lagging behind is this aspect.

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7. Earnings per Share


The most commonly used measure of expressing corporate earnings. This is
computed by dividing the net income by the number of equity shares
outstanding.

EPS=

Net IncomeDividents on preferred stocks


Average outstanding shares

Earnings Per Share


FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
43.36
46.89
54.61
Maruti Suzuki India Ltd.
79.21
56.6
79.19
Tata Motors
28.55
3.91
0.95
Ashok Leyland Ltd.
4.75
2.13
1.63
TVS Motors
4.1
5.24
2.44

FY1314
61.02
92.13
1.04
0.11
5.51

FY1415
53.47
122.85
-14.72
1.18
7.32

Earnings Per Share


140
120
100
80
60
40
20
0
-20
-40

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: The share price of any company will decide how well the
company is doing and hence it becomes a key indicator. It is an important
component in deciding the price to earning valuation ratio. It also shows the
measure of profitability and it is viewed as the earning power of the
respected firms. The EPS of M&M Ltd has been rising continuously but only
during the last fiscal it has seen a drastic drop. It has performed better than
the rest of the other companies but is far lagging behind the Maruti Suzuki

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Ltd as the latter has been the undoubtedly the Numero-Uno in the
automobile segment.

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8. Dividend per Share


This is another important per share calculation. It shows the cash income
available to the shareholder on each share. This is different from EPS as a
certain amount of earning is retained with company as reserve and the
other part is distributed as dividend among the shareholders.

Dividend per Share =

Dividend
Total Outstanding Equity shares

Dividends Per Share


FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
11.5
12.5
13
Maruti Suzuki India Ltd.
7.5
7.5
8
Tata Motors
20
4
2
Ashok Leyland Ltd.
2
1
0.6
TVS Motors
1.1
1.3
1.2

FY1314
14
12
2
-1.4

FY1415
12
25
-0.45
1.9

Dividends Per Share


30
25
20
15
10
5
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: The Company has been distributing its cash to the shareholders
on a steady basis until last year, where-in the distribution took a hit. While
the industry DPS had been growing, factors are not in much favour of M&M
shareholders.

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9. Current Ratio
Current ratio measures the relationship of current assets with current
liabilities. This is one of the most important Solvency ratios.

Current Ratio=

Mahindra & Mahindra Ltd.


Maruti Suzuki India Ltd.
Tata Motors
Ashok Leyland Ltd.
TVS Motors

Current Liabilities
(Current Assets)

Current Ratio
FY10FY1111
12
1.39
1.39
1.57
1.13
0.7
0.83
1.02
0.91
1
0.71

FY1213
1.47
1.04
0.81
0.73
0.85

FY1314
1.65
0.78
0.94
0.78
0.87

FY1415
1.43
0.69
0.8
0.94
0.87

Current Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: The current assets for the company had been at par for FY 10-11
and 11-12, which saw a marginal growth in FY 12-13 and FY 13-14 on Yearon-Year basis. But last year shows a dip in currents assets which is in line
with most of the companies in the industry.

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10. Quick Ratio


Quick ratio or acid test ratio is another important solvency ratio. It is
computed by taking assets, which are quick to be converted into cash and
dividing them by the current liabilities. As a practical simplification, it is
usual practice to subtract the inventories from the current assets, to arrive
at the quick assets.

Quick Ratio=

Mahindra & Mahindra Ltd.


Maruti Suzuki India Ltd.
Tata Motors
Ashok Leyland Ltd.
TVS Motors

(Current AssetInventory )
Current Liabilities

Quick Ratio
FY10FY1111
12
1.34
1.37
1.27
1.03
0.72
0.7
0.51
0.51
0.51
0.47

FY1213
1.48
0.9
0.7
0.56
0.49

FY1314
1.64
0.68
0.78
0.67
0.52

FY1415
1.6
0.42
0.66
0.69
0.58

Quick Ratio
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: Quick Ratio is a step ahead from Current Ratio- taking into
account the available cash at disposal which is growing on a marginal basis
until FY 13-14, it saw a slight fall in FY 14-15 which is much in line with the
way other companies in the industry have been performing.

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11. Inventory Turnover Ratio


Inventory turnover tries to assess the velocity with which inventories are
covered to revenue. Inventories represent resources of the firm invested for
the purpose of facilitating operations. Excess inventory represents a
wasteful use of resources.

Inventory Turnover= (Cost of Goods Sold) / (Average Inventory)


Inventory Turnover Ratio
FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
7.26
8.8
8.79
Maruti Suzuki India Ltd.
28.82
21.79
26.43
Tata Motors
8.98
9.37
9.23
Ashok Leyland Ltd.
5.06
5.76
6.58
TVS Motors
11.79
11.8
12.76

FY1314
9.96
28.19
8.68
8.36
13.68

FY1415
8.93
20.96
9.1
10.36
10.89

Inventory Turnover Ratio


35
30
25
20
15
10
5
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: An important ratio that is directly related to how well the


money is utilized in terms of stock turning, which also results in higher
profits and reduces the amount of abnormal loss for the company. The
stock turnover ratio had been constantly growing except for FY 14-15,
where it saw a fall. The industry response had been mixed during the
tenure and much derived by their offering.

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12. Debt-equity Ratio


Creditors have prior claims on the assets of the company and to that
extent, the owners equity form the extent of margin of safety for the
lenders claims. If a debt is used successfully the returns to shareholders
would also increase.

Total Debt to Equity= (Current + Long term Liabilities) / (Net


Worth)

Debt Equity Ratio


FY10FY1111
12
Mahindra & Mahindra Ltd.
0.99
1.13
Maruti Suzuki India Ltd.
0.01
0.09
Tata Motors
1.6
1.17
Ashok Leyland Ltd.
0.88
0.83
TVS Motors
1.28
0.62

FY1213
1.16
0.08
1.16
1.11
1.02

FY1314
1.21
0.08
0.84
1.19
0.62

FY1415
1.14
0.01
1.23
0.63
0.83

Debt Equity Ratio


1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: Debt to Equity is a bar for stakeholders to depict how well the
company is- in terms of stability. The ratio shows higher stability if it is less
than 1. The ratio is in line with what the industry is going through, except
for the old players who are more self-sufficient to manage on their equity
and cash reserves. In FY 14-15, the company has managed to lower its debt
burden in accordance to the equity.
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13. Long Term Debt to Total Capital Ratio


A measurement of a company's financial leverage, calculated as the
company's debt divided by its total capital. Debt includes all short-term and
long-term obligations. Total capital includes the company's debt and
shareholders' equity, which includes common stock, preferred stock,
minority interest and net debt.

Long Term Debt to Total Capital= (Long term Liabilities) / (Net


Worth)

Long-Term Debt Equity Ratio


FY10FY11FY1211
12
13
Mahindra & Mahindra Ltd.
0.84
0.96
1
Maruti Suzuki India Ltd.
0.02
0.01
0.04
Tata Motors
0.91
0.85
0.85
Ashok Leyland Ltd.
0.88
0.79
0.87
TVS Motors
1.13
1.21
0.94

FY1314
1.09
0.03
0.69
1.01
0.51

FY1415
0.86
0.01
1
0.63
0.46

Long-Term Debt Equity Ratio


1
0.8
0.6
0.4
0.2
0

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: The ratio shows that M&M has efficiently managed to lower down
their long-term debt equity ratio in FY 14-15, which had been constantly
growing ever since FY 11-12. This shows that company has managed to
grow well and keep its debt in control for the past year.

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14. Interest Cover


This ratio measures the relationship of earnings before interest and taxes to
be fixed interest commitment. Larger the cover, greater is the safety of the
lenders interest. Alternately, it also shows the risk in case of the firms
earnings decrease.

Interest Cover= (EBIT) / (Interest Expense)

Mahindra & Mahindra Ltd.


Maruti Suzuki India Ltd.
Tata Motors
Ashok Leyland Ltd.
TVS Motors

Interest Cover
FY10FY1111
12
5.28
5.82
38
35.82
5.28
5.82
5.24
3.7
3.52
3.57

FY1213
5.01
16.45
5.01
1.48
2.77

FY1314
5.19
21.24
5.19
-0.32
4.55

FY1415
5.5
23.85
5.5
1.87
7.21

Interest Cover
45
40
35
30
25
20
15
10
5
0
-5

FY10-11

FY11-12

FY12-13

FY13-14

FY14-15

Analysis: IN FY 14-15, M&M has shown positive signs of better interest


coverage ratios which is well in line with the performance of the industry.
But in terms of absolute number, there are companies ahead of M&M who
have better stability.

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