136281820 a Report on Indian Automobile Industry

8/12/2019 136281820 a Report on Indian Automobile Industry

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TABLE OF CONTENT

S.NO. PARTICULARS

Chapter 1. Introduction

Chapter 2. Objective of the Project

Chapter 3. Analysis of Indian Automobile Industry

Fundamental Analysis

i. Economyii. Industry

iii. Company- Financial & Non-FinancialTechnical Analysis

i. Share Price Analysisii. Moving Average

iii. Moving Average Crossoveriv. Bollinger Bandv. M.A.C.D

Chapter 4 Conclusion & Recommendations

Chapter 5 Bibliography

Annexure


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INTRODUCTION

The automotive industry in India is one of the larger markets in the world and had previously

been one of the fastest growing globally, but is now seeing flat or negative growth rates.[1] India's

passenger car and commercial vehicle manufacturing industry is the sixth largest in the world, with an

annual production of more than 3.9 million units in 2011.[2] According to recent reports, India overtook

Brazil and became the sixth largest passenger vehicle producer in the world (beating such old and new

auto makers as Belgium, United Kingdom, Italy, Canada, Mexico, Russia, Spain, France, Brazil), grew 16

to 18 per cent to sell around three million units in the course of 2011-12.[3] In 2009, India emerged as

Asia's fourth largest exporter of passenger cars, behind Japan, South Korea, and Thailand.[4] In 2010,

India beat Thailand to become Asia's third largest exporter of passenger cars.

As of 2010, India is home to 40 million passenger vehicles. More than 3.7 million automotive vehicles

were produced in India in 2010 (an increase of 33.9%), making the country the second (after China)

fastest growing automobile market in the world in that year.[5][6] According to the Society of Indian

Automobile Manufacturers, annual vehicle sales are projected to increase to 4 million by 2015, no longer

5 million as previously projected.

The majority of India's car manufacturing industry is based around three clusters in the south, west and

north. The southern cluster consisting of Chennai is the biggest with 35% of the revenue share. The

western hub near Mumbai and Pune contributes to 33% of the market and the northern cluster around the

National Capital Region contributes 32%. Chennai, with the India operations of Ford, Hyundai, Renault,

Mitsubishi, Nissan, BMW, Hindustan Motors, Daimler, Caparo, and PSA Peugeot Citron is about to

begin their operations by 2014. Chennai accounts for 60% of the country's automotive exports.[8]

Gurgaon and Manesar in Haryana form the northern cluster where the country's largest car manufacturer,

Maruti Suzuki, is based. The Chakan corridor near Pune, Maharashtra is the western cluster with

companies like General Motors, Volkswagen, Skoda, Mahindra and Mahindra, Tata Motors, Mercedes

Benz, Land Rover, Jaguar Cars, Fiat and Force Motors having assembly plants in the area. Nashik has a

major base of Mahindra & Mahindra with a UV assembly unit and an Engine assembly unit. Aurangabad

with Audi, Skoda and Volkswagen also forms part of the western cluster. Another emerging cluster is inthe state of Gujarat with manufacturing facility of General Motors in Halol and further planned for Tata

Nano at their plant in Sanand. Ford, Maruti Suzuki and Peugeot-Citroen plants are also set to come up in

Gujarat.[12] Kolkata with Hindustan Motors, Noida with Honda and Bangalore with Toyota are some of

the other automotive manufacturing regions around the country.


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Indian automotive companies

Maruti Suzuki is the largest Indian passenger vehicle manufacturer in the local marketMaruti Swift in India. Maruti Suzuki is 54.2% owned by the Japanese Suzuki Motor

Corporation Chinkara Motors: Beachster, Hammer, Roadster 1.8S, Rockster, Jeepster,

Sailster

Force Motors: One Hindustan Motors: Ambassador ICML: Rhino Rx Mahindra: Major, Bolero, Scorpio, Thar, Xylo, Verito, Genio, XUV500, Quanto. Premier Automobiles Limited: Sigma, RiO

San Motors: Storm Maruti Suzuki (subsidiary of Japanese auto maker Suzuki) 800, Alto, Alto800, WagonR,

Estilo, A-star, Ritz, Swift, Swift DZire, SX4, Omni, Eeco, Gypsy, Ertiga

Tata Motors: Nano, Indica, Vista, Indigo, Manza, Indigo CS, Sumo, Grande, Venture,Safari, Xenon, Aria

Jaguar Land Rover (subsidiary of Tata Motors) Land Rover Freelander 2


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OBJECTIVE OF THE PROJECT

The objective of this project is deeply analyze our Indian Automobile Industry for investment

purpose by monitoring the growth rate and performance on the basis of historical data.

The main objectives of the Project study are:-

a) Detailed analysis of Automobile industry which is gearing towards internationalstandards

b) Analyze the impact of qualitative factors on industrys and companys prospectsc) Comparative analysis of two tough competitors TATA Motors and Maruti Suzukid) Application of various Technical Tools and Fundamental tools (like Financial and

nonfinancial statements)


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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 following two

approaches:

1). Fundamental Analysis (E.I.C Approach)

a. Economy

b. Industry

c. Company

2).Technical Analysis

1) FUNDAMENTAL ANALYSIS

a). ECONOMY

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 isgrowing rapidly in the past few years. This is the pie- chartshowing contributions of

different sectors in Indian economy.


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The per capita Income is near about Rs38,000 reflecting improvement in the living standards of

an average Indian.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 peopleemployed in the auto-component and auto ancillary industry then

the number goes even higher.

As the world economy slips 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 predicted it to be 6.5 per cent for FY 2009-10 Mr. Montek Singh

(Planning Commission of India). Following is the graph showing a trend of Indian GDP trend in

past 3 years.

Contribution of various sectors to GDP

57%

17%

26%

service

agriculrure

industry


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Recession

All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of

the year,industry had to face the hard truth and witnessed the fall in sales compared to last year.

In December 2008, overall production fell by 22 % over the same month last year. Global

recession has hit the Indian auto industry, India is strong and growing industry but the impact of

recession is evident now on industry as sales & growth of automobile companies have declined.

Passenger Vehicles segment registered negative growth. One of its supporting facts is that the

sales in December 2008 for passenger vehicles fell by 13.86% over December 2007 Two

Wheelers registered minor growth of 1.85 % during AprilDecember 2008. However, Two

Wheelers sales recorded 15.43 percent fall in December 2008 over the same month last

year. Although the sector was hit by economic slowdown, overall production (passenger

vehicles, commercial vehicles, two wheelers and three wheelers) increased from 10.85 million

vehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased

marginally from 1.77 million to 1.83 million while two-wheelers increased from 8.02 million to

8.41 million. Total number of vehicles sold including passenger vehicles, commercial vehicles,

two-wheelers and three-wheelers in 2008-09 was 9.72 million as compared to 9.65 million in

2007-08.

Inflation

Despite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of

sales in auto sector. A moderate amount of inflation is important for the proper growth of an

economy like India because it attracts more private investment. The fall in wholesale prices from

a year earlier is mainly due to a statistical base effect and doesnt suggest contraction in demand,

the Reserve Bank of India said few week back, while revising its inflation forecast for the FYthrough March to around 5% from 4%.

In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to

$20 per barrel five years back), Indian automobile Industry was not as much affected and experts

think that Indian automobile industry will continue to grow this year despite all obstacles- oil


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price hike, higher interest rates. However, 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. The effect of inflation has

taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise

in price of the raw materials to buildna car. The car market and the car industry witnessed a fall

of 8-9%.

FDIs

In India FDI up to 100 percent, has been permitted under automatic route to this sector, which

has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto

parts industry.

India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India

are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a

target of attracting foreign investment worth US$ 5 billion for the next seven years to increase

India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent

by 2015. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25%

compare to 2007-08, while in April-May 2009 it was around Rs.497 Cr.

Foreign Exchange

India holds the third largest stock of reserves among the emerging market economies after China

and Russia. The overall approach to the management of India's foreign exchange reserves in

recent years reflects the changing composition of the balance of payments and the 'liquidity risks

associated with different types of flows and other requirements.

Taking these factors into account, India's foreign exchange reserves continued to be at a

comfortable level and consistent with the rate of growth, the share of external sector in the

economy and the size of risk-adjusted capital flows. Following is the table shows the trend of

foreign reserves held by central bank in last FY. Reserves came down cause of recession all over

the world however India still able to maintain its reserves hence a minor fall was seen compare


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to all other country which shows great strength in long-term for Indian Economy. Increase in

Exports specially from auto industry shows an expectations of huge income from western

countries and new $200 bl. target for exports by 2011 helps in increasing.

INDIAN AUTOMOBILE INDUSTRY

1 FCA (Foreign Currency Assets): FCAs are maintained as a multicurrency portfolio

comprising ajor currencies, such as, US dollar, Euro, Pound sterling, Japanese yen, etc. and is

valued in terms of US dollars.

2. SDR (Special Drawing Rights): Values in SDR have been indicated in parentheses.

3. Gold: Physical stock has remained unchanged at approximately 357 tonnes.

4. RTP refers to the Reserve Tranche Position in the IMF.

EXPORT

India's automobile exports have grown consistently and reached $4.5 billion in 2009, with United

Kingdom being India's largest export market followed by Italy, Germany, Netherlands and South

Africa. India's automobile exports are expected to cross $12 billion by 2014.

According to New York Times, India's strong engineering base and expertise in the

manufacturing of low-cost, fuel-efficient cars has resulted in the expansion of manufacturing

facilities of several automobile companies like Hyundai, Nissan, Toyota, Volkswagen and

Maruti Suzuki. In 2008, South Korean multinational Hyundai Motors alone exported 240,000

cars made in India. Nissan Motors plans to export 250,000 vehicles manufactured in its India

plant by 2011.Similarly, US automobile company, General Motors announced its plans to export

about 50,000 cars manufactured in India by 2011.

In September 2009, Ford Motors announced its plans to set up a plant in India with an annual

capacity of 250,000 cars for US$500 million. The cars will be manufactured both for the Indian

market and for export. The company said that the plant was a part of its plan to make India the


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hub for its global production business. Fiat Motors also announced that it would source more

than US$1 billion worth auto components from India.

A Tata Safari on display in Poznan, Poland.

In July 2010, The Economic Times reported that PSA Peugeot Citron was planning to re-enter

the Indian market and open a production plant in Andhra Pradesh with an annual capacity of

100,000 vehicles, investing EUR 700M in the operation.[80] PSA's intention to utilise this

production facility for export purposes however remains unclear as of December 2010. In 2009

India (0.23m) surpassed China (0.16m) as Asia's fourth largest exporter of cars after Japan

(1.77m), Korea (1.12m) and Thailand (0.26m) by allowing foreign carmakers 100% ownership

of factories in India, which China does not allow.

The Maruti Ertiga, a model exported by Maruti Suzuki India.

In recent years, India has emerged as a leading center for the manufacture of small cars.

Hyundai, the biggest exporter from the country, now ships more than 250,000 cars annually from

India. Apart from Maruti Exports' shipments to Suzuki's other markets, Maruti Suzuki also

manufactures small cars for Nissan, which sells them in Europe. Nissan will also export small

cars from its new Indian assembly line. Tata Motors exports its passenger vehicles to Asian and

African markets, and is in preparation to launch electric vehicles in Europe in 2010. The firm is

also planning to launch an electric version of its low-cost car the Tata Nano in Europe and in the

U.S. Mahindra & Mahindra is preparing to introduce its pickup trucks and small SUV models in

the U.S. market. Bajaj Auto is designing a low-cost car for Renault Nissan Automotive India,

which will market the product worldwide. Renault Nissan may also join domestic commercial

vehicle manufacturer Ashok Leyland in another small car project.[81] While the possibilities are

impressive, there are challenges that could thwart future growth of the Indian automobile

industry. Since the demand for automobiles in recent years is directly linked to overall economic

expansion and rising personal incomes, industry growth will slow if the economy weakens.


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Indian Automobile Industry at Global level:

India ranks 1st in the global two-wheeler market

India is the 4th biggest commercial vehicle market in the world

India ranks 11th in the international passenger car market

India ranks 5th pertaining to the number of bus and truck sold in the world

India is the second largest tractor manufacturer in the world.

Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact car

section of car market in India.

Sales of different Auto Companies speed up even before festive season Maruti by 29%, TATA

by 11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc.

It is expected that the Automobile Industry in India would be the 7th largest automobile market

within the year 2016.

Projected Growth rate in Automobile Industry

Passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.75 millionunits by 2014.

The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million units.

To emerge as the destination of choice in the world for design and manufacture of automobiles

and auto components with output reaching a level of US$ 145 billion accounting for more than

10% of the GDP and providing additional employment to 25 million people by 2016.


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International Cars & Motors LimitedAmb

Commercial Vehicles

TAFE TractorsParwanoo

Jharkhand

Commercial Vehicles

Tata MotorsJamshedpur

[edit]Karnataka

Two wheelers

TVS MotorMysore

Honda Motorcycle & Scooter India Pvt. Ltd. - Narsapura

Passenger Vehicles

Mahindra REVA Electric VehiclesBangalore

Toyota Kirloskar Motor Private LimitedBidadi

Commercial Vehicles

Scania Commercial Vehicles India Private LimitedBangalore

TAFE TractorsDoddaballapur

Tata MotorsDharwad

Volvo Buses India Private LimitedHoskote

Madhya Pradesh


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Two wheelers

Mahindra & MahindraPithampur

Commercial Vehicles

Eicher MotorsPithampur

Hindustan MotorsPithampur

Force Motors Private LimitedPithampur

TAFE TractorsMandideep

Maharashtra

Two wheelers

Bajaj AutoWaluj Aurangabad, Chakan\

KTM SportmotorcyclesChakan

Vespa ScootersBaramati Pune

Kinetic EngineeringAhmednagar, Pune

Passenger Vehicles

Mahindra & Mahindra Automotive DivisionNashik, Chakan

Ssangyong Motor CompanyChakan

Tata Motors Limited

Tata MotorsPimpri Chinchwad

Jaguar Cars and Land RoverPune

Mercedes-Benz Passenger CarsChakan


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Fiat AutomobilesRanjangaon Pune

Volkswagen Group Sales India Private Limited

VolkswagenChakan

Audi AGAurangabad

koda Auto Aurangabad

Chinkara MotorsKarlekhind Alibag

Premier Automobiles LimitedPimpri Chinchwad

Commercial Vehicles

Ashok LeylandBhandara

Bajaj AutoWaluj Aurangabad

Force MotorsPune

Mahindra NavistarChakan

MAN Trucks IndiaAkurdi Pune

Mercedes-Benz Buses IndiaChakan

Piaggio VehiclesBaramati Pune

Premier Automobiles LimitedPimpri Chinchwad

Punjab

Commercial Vehicles

SML Isuzu LimitedNawanshahar

[edit]Rajasthan


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Kamaz Vectra MotorsHosur

TAFE TractorsChennai

TVS MotorsHosur

[edit]Uttar Pradesh

Commercial Vehicles

Ashok LeylandPantnagar

Tata MotorsLucknow

Two Wheeleers

India Yamaha MotorGreater Noida

Passenger Vehicles

Honda Siel Cars IndiaGreater Noida

b.) INDUSTRY ANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the developed countries the

automobile industries are stagnating as a result of drooping markets, whereas the automobile

industry in the developing nations, have been consistently registering higher growth rates every

passing year for their domestic flourishing domestic automobile markets.

Being one of the fastest growing sectors in the world its dynamic growth phases are explained by

the nature of competition, Product Life Cycle and consumer demand. The industry is at the

crossroads with global mergers and relocation of production centers to emerging developing

countries.

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.


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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.

Industrial Analysis of any industry can be done based on the following headings:

1. Five Forces Model

2. BCG Matrix

3. Industrial Life Cycle

4. SWOT Analysis

5. Industry Specific Index

1.) Five Forces Model

76.49%

15.96%

3.60% 3.95%

Atomobile Segment

two wheeler

passenger vehicle

three wheeler

commercial vehicle


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Michael Porter identifies five forces that influence an industry. These forces are

Degree of Rivalry

Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto

sector is intense due to the entry of foreign companies in the market. The industry rivalry is

extremely high with any being product being matched in a few months by the competitors. This

instinct of the industry is primarily driven by technical capabilities acquired over years of

gestation under the technical collaboration with international players.

Threat of Substitutes

The threat of substitutes to the automotive industry is fairly mild. Numerous other forms of

transportation are available, but none offer the utility, convenience, independence and value

offered by automobiles. The switching cost associated with using a different mode of

transportation, may be high in terms of personal time, convenience and utility.

Barriers to entry

The barriers to enter automotive industry are substantial. For a new company, the startup capital

required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive.

Although the barriers to new companies are substantial, establishing companies are entering the

new markets through strategic partnerships or through buying out or merging with other

companies. However, a domestic company, with local knowledge and expertise, has the potential

to compete its home market against the global firms who are not well established there.

Suppliers power In the relationship between the industry and its suppliers, the power axis is

tipped in industrysfavor. The industry is comprised of powerful buyers who are generally able

to dictate their terms to the suppliers.

Buyers Power


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In the relationship between the automotive industry and its ultimate consumers, the power axis is

tipped in the consumers favor. This is due to the fairly standardized nature and the low

switching costs associated with selecting from among competing brands.

2.) BCG Matrix

In an economy, different industries are present and different industries have different growth rate

as compared to the growth of the economy. In an economy, there are a number of major

industries and they all occupy different positions in the BCG matrix according to their growth

and contribution towards the economy. In the Indian economy, some of the major sectors are

FMCG, automobiles, banking and insurance, steel, telecom, software, pharmacology and retail

sectors and these can be placed in the different positions in the matrix as shown below:

3.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality 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.

In the growth phase, the product market has been established and there is at least some historical

guide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate

of sales and earnings growth. Indian Automotive Industry is booming with agrowth rate of

around 15 % annually.

The cumulative growth of the Passenger Vehicles segment during April 2007March

2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57

percent and Multi Purpose Vehicles by 21.39 percent in this period. The Commercial Vehicles

segment grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehiclesdeclined by 1.66 percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Three

Wheelers sales fell by 9.71 percent with sales of Goods Carriers declining drastically by 20.49

percent and Passenger Carriers declined by 2.13 percent during April- March 2008 compared to

the last year. Two Wheelers registered a negative growth rate of 7.92 % during this period, with


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motorcycles and electric two wheelers segments declining by 11.90 percent and 44.93% respect.

However, Scooters and Mopeds segment grew by 11.64% and 16.63% respect.

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.

As the product matures, growth slows as penetration reaches practical limits. Companies began

to focus on market share rather than growth. Industry demand tends to follow the overall

economy, but the scope of growth of the automobile sector is very much possible in India due to

the increasing income of the middle class and their income as well as standard of living.

4.) 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:

Strengths


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Large domestic market

Sustainable labor cost advantage

Competitive auto component vendor base

Government incentives for manufacturing plants

Strong engineering skills in design etc

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

Opportunities

Commercial vehicles: SC ban on overloading

Heavy thrust on mining and construction activity

Increase in the income level

Cut in excise duties

Rising rural demand

Threats

Rising input costs

Rising interest rates

Cut throat competition


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5.) Industry Specific Index

Industry specific index also called as sectoral index are those indices, which represent a specific

industry sector. All stocks in a sectoral index belong to that sector only. Hence an index like the

BSE auto index is made of auto stocks. Sectoral Indices are very useful in tracking the

movement and performance of particular sector. BSE Auto Index comprises all the major auto

stocks in the BSE 500 Index.


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BSE AUTO Index 5 Year Chart

COMPANY

Above is the Indian Auto Industry Index(BSE) shows the ups and downs over the period of 5

years.

Intially in 2003 when major giants got listed on stock exchange TATA Motors, Maruti Suzuki,

etc. Indian auto industry start picking up growth slowly in the first end of 1st quarter index

reaches to its highest in his history. Than we saw a steady fall in the index and in the mid 2006

reaches to years lowest point it again start booming and than year on year we saw a up and down

movement in the index as lots of new players came in Indian market with foreign colaboration

but when 2008 came with global slowdown it brings the demand of automobile so low that index

reaches to its lowest in past 5year . Most of the company even shut down their manufacturing

units for more than a week, production came down because of less demand in the economy. Also

no further launches were made in mid or late 2008 and postponed to next year. We have also saw

a fall in FDIs in automobile Industry. But in the beginning of 2009 right from 1st quarter auto

industry again start regaining and we saw a tremondous growth in auto industry which never

seen before not in india but all over the world. The demand of 2 and 4 Wheelers start increasing

rapidly which also force auto industry to employ more workers to meet demand and within the

2nd quarter of FY2009-10 Auto index reaches to its highest ever crossed mark of 6000. And this


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growth of industry will be carry further as festive season still to come, so there is a lot of scope

to growth in this industry.

c.) COMPANY ANALYSIS (Maruti Suzuki & TATA Motors)

The company analysis shows the longterm strenght of the company that what is the financial

Position of the company in the market where it stand among its competitors and who are the key

drivers of the company, what is 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.

Profile of Maruti Suzuki

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the

car segment, both in terms of volume of vehicles sold and revenue earned. Until recently,

18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan.

As of May 10, 2007, Govt. of India sold its complete share to Indian financial institutions. With

this, Govt. of India no longer has stake in Maruti Udyog.

The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit After Tax at Rs.

12,187ml.Maruti Suzuki India Ltd. has sold a total of 84,808 vehicles in August 2009, an

increase of 41.6%, compared to 59,908 vehicles in the same period of 2008. The company's

domestic sales in August 2009 increased 29.3% to 69,961 vehicles, compared to 54,113 vehicles

in August 2008. Total passenger car sales in August 2009 increased 30.5% to 69,629 units,

compared to 53,351 units in August 2008 The company's exports increased 156.2% to 14,847

units, compared to 5,795 units in August 2008.

Profile of Maruti Suzuki

Tata Motors Limited is Indias largest automobile company, reported gross revenue (stand-alone)

of Rs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year marked by severe

demand contraction in the automobile industry. Revenues (net of excise) for the year were Rs.

25660.79 crores compared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The Profit

before Tax was Rs.1013.76 crores compared to Rs.2576.47 crores in 2007-08, a decline of


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60.7%. The Profit after Tax for the year was Rs.1001.26 crores compared to Rs.2028.92 crores, a

decline of 50.7%.

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 worlds fourth largest truck manufacturer, and the worlds second largest bus

manufacturer.

Following is the financial and Non-Financial analysis of Maruti Suzuki & TATA Motors.

Financial Analysis

1. Financial Statements

RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI

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 both the companies had a rising EPS but in 2009 both

of them fall and the effect more on Tata motors as they bought two brands Ford Motors and fall

in sales results in low EPS. But as trend shows TATA motors have potential so an shareholder

expect better in future.


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EPS = Net income- Dividends on Preferred stock

Average Outstanding shares

The trend shows that Tatas net profit margin is quite stable until it falls to 3.77 in 2009. While

the net profit of Indias no.1 car manufacturer Maruti Suzuki shows a negative trend from 2007

onwards. But the future prospect for both the companys profit is higher. Profit margins come

down as recession hits economy badly hence sales get reduced and cost get increased very much.

Net profit Ratio = (Net profit) 100(Net sales)


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Both giants of Automobil industry shows positive trend in Sales Revenue over the past 5year.

However recession brought hurdles but both companies have potential to grow in future as lots

of products still to add in their portfolio. Moreover increased demand in foreign market also

seems to be a positive signal for better future.

The quick ratio is a very stringent measure of solvency. A general rule of thumb suggests that the

quick ratio should be around 1. Maruti is always showing a positive trend as its ratio is always

greater than 1 except in 2008, while TATA motors was doing good till 2007, but the

performance decreased from 2008 onwards as shortage of cash was there and current liabilities

and provision increased by Rs800Cr. A high debt to equity ratio suggests that a company has

financed its growth mostly via debt. We see that the debt equity ratio of TATA motors is very

high compared to that of Maruti. It means that a lot of debt is used by TATAs to finance its

increased operations. Sometimes the cost of the debt financing may outweigh the return that the

company generates on the debt through investment and business activities and can lead to

bankruptcy. Maruti is going very swiftly in this field.

Debt-Equity Ratio= Total Debt


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Total Equity

The current ratio is a convenient and reliable tool for

measuring a company's level of liquidity. The ratio

acts as an indication that the firm is able to generate funds to make all needed payments in the

future; thus, the ratio indicates whether the firm is likely to be a going concern. Both the

companies possess a good ratio but the ratio which is close to 2 is desirable, so we see in graph

that Maruti has more strong liquidity than TATA Motors as its current ratio is always greater

than 1. Maruti is more successful in paying off its liabilities. Expansion plans of TATA brought

down its cash & Bank Balance and increase of outside liabilities. 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 was much higher than that of Maruti, it always provided dividend of above 10 per share

to its shareholders while maruti stick to below 5 per share, even though the fall in dividend in

2009, still both the companies are earning good profit.

Dividend Per Share= Total amount of Dividend Share Outstanding


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Government Policies Towards Indian Automobile Industry

Automobile industry in India also received an unintended boost from stringent government auto

emission regulations over the past few years. This ensured that vehicles produced in India

conformed to the standards of the developed world.

Though it has an advantage in India, thanks to low costs and government policies it soon faces

stiff competition from it multinational competitors all eyeing for a share in the ever growing

Indian auto sector. The policies adopted by Government will increase competition in domestic

market, motivate many foreign commercial vehicle manufactures to set up shops in India, whom

will make India as a production hub and export to nearest market.

Bring in a minimum foreign equity of US $ 50 Million if a joint venture involved majority

foreign equity ownership

Automatic approval for foreign equity investment upto 100% of manufacture of automobiles

and component is permitted

FIIs including overseas corporate bodies (OCBs) and NRIs are permitted to invest up to 49 per

cent of the paid-up equity capital of the investee company, subject to approval of the board of

directors and of the members by way of a special resolution. .

Investments in making auto parts by a foreign vehicle maker will also be considered a part of

the minimum foreign investment made by it in an auto-making subsidiary in India. The move is

aimed at helping India emerge as a hub for global manufacturing and sourcing for auto parts.

Specific component of excise duty applicable to large cars and utility vehicles will be reduced

to 15,000 rupees per vehicle from 20,000 rupees earlier.

The Proposal by the Govt. to set up an expert group to advise on a viable and sustainablesystem of pricing petroleum products, as this will surely had an impact on the Automobile

Industry.

The announced reduction on the basic customs on bio-diesel is great news for all companies

working on environmental saving technologies.


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CONCLUSION

Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for

FY2009-10 compare to last year growth rate which was just 0.7% and the above facts and figures

in our study also support this truth.

Indian Automobile has a lot of scope for both two wheelers and four wheelers due to

development in infrastructure of the country and especially the rural sector in which demand of

two wheeler has increased even in recession. According to Indian Statistical Organization the per

capita income (Rs.38000) is increasing and national income at the rate of 14.4% which shows

potential to buy vehicle in auto industry. The growth rate of Indian Automobile is so fast that by

2016 Indian Industry will be world 7 largest manufacturer in all sections.

The Indian auto market is still untapped the majority of the people in country dont own a four

wheeler and all the major auto companies are trying to increase their sales by several moves.

Like TATA has launch NANO the peoples car and now TATA motors isalso planning to come

out with an electric car as well as hybrid car, moreover in two wheeler segment many companies

like Mahindra and Mahindra grow even more than expectations.

From the Technical Analysis of both companies we come to know that the share price of Maruti

will move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range ofRs. 430 to Rs. 490 if certain correction made in the market.

We have also come to know that share price movement of TATA Motors is just according to the

movement of SENSEX, whenever there is a negative sentiment in the market regarding TATA

Motors there is a steep fall in the stock price of TATA Motors but we have seen quick recovery

in its share prices to regain its primary trend E.g as we seen in last 3-4 months TATA recovers

approx.90% after downfall. By analyzing the current trend of Indian Economy and Automobile

Industry we can say that being a developing economy there is lot of scope for growth and thisindustry still have to cross many levels so there is huge opportunities to invest in and this is

proving as more and more foreign Companies setting up there ventures in India.


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RECOMMENDATIONS

By analyzing the industry on various parameters with the help of implementing Fundamental and

Technical tools we came to know that this industry has a lot of potential to grow in future. So

recommending to invest in Automobile Industry have 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 around the

world. The returns which came out of this industry were very impressive recently, as if we take

an example of TATA motors it gives approx 90% return in a period of just 3 months while

Maruti Suzuki shows always a buy and hold position because there is possibility of growth in

future, same situation is in two wheeler segment with market leader Hero-Honda a debt free

company also have bright future ahead. The numbers which came out in the end of financial year

2009 prove that even in the period of recession the overall sales went up is sufficient to supportto this fact. Through Technical analysis of TATA Motors and Maruti 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 in further rise in share prices until and unless any negative reaction or sentiments comes

in the Economy. 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 so holding the shares for long time could be a wrong step, so at this point of

time those who invested earlier can book their profit or new investors can buy now and sell with

in short period of time by earning profit in short period of time.


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BIBLIOGRAPHY

www.bseindia.com

www.googlefinance.com

www.yahoofinance.com

www.google.co.in

www.moneycontrol.com

www.worldfact.com

www.rbi.org.in

FDI statistic government of India

India Central Statistical Organization

Economic Times

136281820 a Report on Indian Automobile Industry

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