(93958143) 24333238 Indian Automobile Industry Analysis

8/13/2019 (93958143) 24333238 Indian Automobile Industry Analysis

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INDIAN AUTOMOBILE INDUSTRYAN ALYSIS OF

PROJECT REPORT

ON

ANALYSIS OF INDIAN AUTOMOBILE INDUSTRY

SUBMITTED TO : SUBMITTED BY:

MR. KUMAR BIJOY ISHEETA NIRMAL (195)DEEPIKA GARG (188)RASHMI SHARMA (215)

ROSHAN AGARWAL(218)VIKAS GUPTA (229)NIKHIL MAHAJAN (240)

NEW DELHI INSTITUTE OF MANAGEMENT60, 50(B&C), TUGHLAKABAD INSTITUTIONAL AREA

NEW DELHI-110062

NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)GROUP-15, FINANCE-II


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DECLARATION

We hereby declare that the work presented in this Project entitled Analysis of

I ndian Automobile I ndustrysubmitted to Prof. Bijoy kumar (visiting Faculty) a

New Delhi Institute Of Management, New Delhi is an authentic record of our

original work.

Signature of Mentor Signature of Candidates

Date:



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AN ALYSIS OF INDIAN AUTOMOBILE INDUSTRY

GROUP-15, FINANCE-IINEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)

ACKNOWLEDGEMENT

The satisfaction and joy that accompanies the successful completion of a task is incomplete without

mentioning the name of the person who extended his help and support in making it a success.

We are greatly indebted to Mr. Bijoy (Guest Faculty at NDIM), my Project Guide and Mentor fo

devoting his valuable time and efforts towards my project. We thank him for being a constant source o

knowledge, inspiration and help during this period of making project.

ISHEETA NIRMALDEEPIKA GARGRASHMI SHARMAROSHAN AGARWALVIKAS GUPTA

NIKHIL MAHAJAN


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PREFACE

Indian automobile industry has grown leaps and bounds since 1898, a time when a car had touched the

Indian streets for the first time. At present it holds a promising tenth position in the entire world with

being # 1 in Two Wheelers and # 4 in commercial vehicles. Withstanding a growth rate of 18% per

annum and an annual production of more than 2 million units, it may not be an exaggeration to say that

this industry in the coming years will soon touch a figure of 10 million units per year.

The automobile industry in Indiathe ninth largest in the world with an annual production of over 2.3

million units in 2008is expected to become one of the major global automotive industries in the

coming years.

In this project we have undergone a detailed analysis of India automobile industry by using Fundamenta

and Technical tools. In order to better understand the performance of the industry we have made

comparative analysis of Two players Tata motors as (leading player) and Maruti Suzuki.

The project report is divided into 5 chapters. The first two chapters include Executive Summery &

objective of the research. The third chapter deals with analysis of automobile Industry which entailsfundamental and technical analysis of Indian Automobile Industry. The fourth chapter deals with

Conclusion & Recommendations and the last chapter includes Bibliography.


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TABLE OF CONTENT

S.NO.

PARTICULARS

PAGE NO.

Chapter 1. Executive Summary of the Project

Chapter 2. Objective of the Project

Chapter 3. Analysis of Indian Automobile

Industry

Fundamental Analysis

a. Economyb. Industryc. Company

- Financial & Non-Financial

Technical Analysis

a. Share Price Analysisb. Moving Averagec. Moving Average Crossoverd. Bollinger Bande. M.A.C.D

Chapter 4 Conclusion & Recommendations

Chapter 5 Bibliography

Annexure


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EXECUTIVE SUMMARY

The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new

business and manufacturing practices in the light of liberalization and globalization. The sector seems to

be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand.

The Indian automobile market is gearing towards international standards to meet the needs of the global

automobile giants and become a global hub.

A detailed analysis of Automobile industry has been covered in respect of past growth and performance.

Under this project to better understand the Industry we have used Fundamental and Technical tools to

make it more authentic n meaningful. An E.I.C approach has been followed under Fundamental Analysis

which covered effect of Recession, the impact of inflation, FDIs, Export, GDP etc. on Automobile

Industry. The Industry Analysis has been done with the help of five forces model, BCG Matrix, SWOT

analysis, industry life cycle and the industry specific index. For Company Analysis as a part of

Fundamental tool we have undergone with the comparative analysis of TATA Motors as our leading

company with Maruti Suzuki Indias largest Car manufacturer. The fundamental aspect consists financia

and Non-Financial analysis of both the company. In the Technical aspect we have considered Share pric

analysis, moving average, moving average crossover, Bollinger bands and M.A.C.D. of both the

company by keeping TATA Motors as our leading company.

At the end conclusion and recommendations have been specified so as to make the research work more

meaningful and purposeful.


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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:

Detailed analysis of Automobile industry which is gearing towards

international standards

Analyze the impact of qualitative factors on industrys and companys prospects

Comparative analysis of two tough competitors TATA Motors and Maruti Suzuki

Application of various Technical Tools and Fundamental tools (like Financial and Non-

financial 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 growththrough 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 bee

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 termsof nominal factory output. The service sector is

growing rapidly in the past few years. This is the pie- chart

showing contributions of different sectors in Indian economy.

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 employmenDirectly and indirectly it employs more than 10 million people and if we add the number of peoplemployed 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 take

conservative approach towards lending to corporate sector, the GDP growth has downgraded it to 7.1 pe



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cent for 2008-09 and predicted it to be 6.5 per cent for FY 2009-10 Mr. Montek Singh (Plannin

Commission of India). Following is the graph showing a trend of Indian GDP trend in past 3 years.

Source:India Central Statistical Organization

The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is nea

about 5% and will be double by 2016. The automotive industry in India grew at a computed annuagrowth rate (CAGR) of 11.5 percent over the past five years, but growth rate in last FY2008-09 was only0.7% with passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21.7%

RecessionAll 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 December2008, overall production fell by 22 % over the same month last year. Global recession has hit the Indianauto industry, India is strong and growing industry but the impact of recession is evident now on industryas sales & growth of automobile companies have declined. Passenger Vehicles segment registerednegative growth.

One of its supporting facts is that the sales in December 2008 for passenger vehicles fell by 13.86% oveDecember 2007 Two Wheelers registered minor growth of 1.85 % during April December 200However, Two Wheelers sales recorded 15.43 percent fall in December 2008 over the same month layear. Although the sector was hit by economic slowdown, overall production (passenger vehiclecommercial vehicles, two wheelers and three wheelers) increased from 10.85 million vehicles in 2007-0to 11.17 million vehicles in 2008-09. Passenger vehicles increased marginally from 1.77 million to 1.8million while two-wheelers increased from 8.02 million to 8.41 million. Total number of vehicles solincluding passenger vehicles, commercial vehicles, two-wheelers and three-wheelers in 2008-09 wa9.72 million as compared to 9.65 million in 2007-08.

InflationDespite of negative inflation these days (-.21% on 22-Aug-09) we saw an increasing trend of sales auto sector. A moderate amount of inflation is important for the proper growth of an economy like Indibecause it attracts more private investment. The fall in wholesale prices from a year earlier is mainly duto a statistical base effect and doesnt suggest contraction in demand, the Reserve Bank of India said fewweek back, while revising its inflation forecast for the FY through March to around 5% from 4%.



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In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 pebarrel five years back), Indian automobile Industry was not as much affected and experts think thIndian automobile industry will continue to grow this year despite all obstacles- oil price hike, highinterest rates. However, the effect of inflation has affected every sector which is related to camanufacturing and production. The increase in the price of fuel and the steel due to inflation has led to

slower growth rate of the car industry in India. The effect of inflation has taken the rise in the price ratof the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to buila car. The car market and the car industry witnessed a fall of 8-9%.

FDIsIn India FDI up to 100 percent, has been permitted under automatic route to this sector, which has led ta turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industryIndia enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 2to 30 per cent lower than their western counterparts the Investment Commission has set a target oattracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in thglobal auto components market from the existing 0.9 per cent to 2.5 per cent by 2015. FDI inflows i

Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25% compare to 2007-08, while iApril-May 2009 it was around Rs.497 Cr.

Foreign Exchange

India

Source- FDI Statistics Govt. of

India holds the third largest stockof reserves among the emergingmarket economies after China andRussia. The overall approach to

the management of India'sforeign exchange reserves inrecent years reflects the changingcomposition of the balance ofpayments and the 'liquidity risks'associated with different types offlows and other requirements. Source: rbi.org.in

Taking these factors into account, India's foreign exchange reserves continued to be at a comfortabllevel and consistent with the rate of growth, the share of external sector in the economy and the size orisk-adjusted capital flows. Following is the table shows the trend of foreign reserves held by centra

bank in last FY. Reserves came down cause of recession all over the world however India still able tmaintain its reserves hence a minor fall was seen compare to all other country which shows greastrength in long-term for Indian Economy. Increase in Exports specially from auto industry shows aexpectations of huge income from western countries and new $200 bl. target for exports by 2011 helps iincreasing.

Note:



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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

Society of Indian Automobile Manufacturers (SIAM), automobile sales (including passenger vehiclecommercial vehicles, two-wheelers and three-wheelers) in the overseas markets increased to 1.53 milliounits in 2008-09 from 1.23 million units in 2007-08. Export of passenger vehicles increased from218,401 in 2007-08 to 335,739 units in 2008-09.

There is a continuous increase in the export of automobiles since the financial year 2002-03, except fothe decline in the export of commercial vehichles in the financial year 2008-09, which may be attributeto the global economic recession.

Despite recession, the Indian automobile market continues to perform better than most of the otheindustries in the economy in coming future, more and more MNCs coming in India to setup theventures which clearly shows the scope of expansion.

Current Scenario of Automobile Industry in Economy

With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in near futureTwo wheeler segment sales grew up by 12.8% with the modest 2.6% growth rate, under this segment thmarket leader Hero Honda registered growth of 12% in its domestic sales where as Bajaj Autdisappointed as sales plunging by 23%, on the other hand car sales has been grew up by a healthy 22.7%in last February and Commercial Vehicles reported slower sales. It is assumed that in coming festivseason to meet demand, carmakers going to produce 70000units/month more over the averag

1.3lac/month with help of 5000 new hands. Source: Economic Times



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GROUP-15, FINANCE-II


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 worldIndia 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 ocar market in India. Source: Economic TimesSales of different Auto Companies speed up even before festive season Maruti by 29%, TATA b11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc.

Source: Economic Times (3/09/09)It is expected that the Automobile Industry in India would be the 7th largest automobile market withinthe 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 millio

units 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 aut

components with output reaching a level of US$ 145 billion accounting for more than 10% of the GD

and providing additional employment to 25 million people by 2016.

b.) INDUSTRY ANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the developed countries thautomobile industries are stagnating as a result of drooping markets, whereas the automobile industry ithe developing nations, have been consistently registering higher growth rates every passing year fotheir domestic flourishing domestic automobile markets.

Being one of the fastest growing sectors in the world its dynamic growth phases are explained by thnature of competition, Product Life Cycle and consumer demand. The industry is at the crossroads witglobal 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 sectois far from being saturated, leaving ample opportunity for volume growth.

Segmentation of Automobile Industry

The automobile industry comprises of Heavy

NEW DELHI INSTITUTE OF MANAGEMENT- PGDM(2008-10)


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of any institution, in erms of theindustry In the Indian automobile sMahindra and Mahindra, Tata Motore placed in one of the following fo

tars we place the companies with higies who have low marke growth ratinclude the companies with low rela

companies who have low relative m

marke growth rate and the marector the major players are Marutirs, Hero Honda and Bajaj auto. Inur categories: Star Cash Cows, Do

h marke growth and high marketand high relative market share, thive market share and high marketarket share and low market growth


BCG matrix

is used todetermine therelativeposition ofthecompanies ofan industry or

STARS

Hero

Mahindra&

Bajaj

Question Marks

TVS

General Mototrs

Dogs

different SBUsCash Cows t t ket share of th

company in the . , Suzuki LimiteGeneral motors, the BCG matrithe companies a , gs an

Question marks. In the S t sharcash cows are the compan t e category of the question marks growth rate and dogs include thrate.

COMPANY BCG MATRIX

H

M

a

r

k

e

t

G

r

o

w

t

hMaruti

TATA

Low

H Relative market Low




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3.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycleclassification 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 ardeveloping, and there is high risk of failure. However, successful companies can grow at extraordinarrates. 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 tground demand estimates. The industry is growing rapidly, often at an accelerating rate of sales andearnings growth. Indian Automotive Industry is booming with a growth rate of around 15 % annuallyThe cumulative growth of the Passenger Vehicles segment during April 2007March 2008 was 12.1percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi PurposVehicles by 21.39 percent in this period. The Commercial Vehicles segment grew marginally at 4.07percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light CommerciaVehicles recorded a growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales oGoods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percentduring April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of7.92 % during this period, with motorcycles andelectric two wheelers segments declining by 11.90percent and 44.93% respect. However, Scooters andMopeds segment grew by 11.64% and 16.63% respect.The growth rate of the automobile industry in India isgreater than the GDP growth rate of the economy, sothe automobile sector can be very well be said to be inthe growth phase.

As the product matures, growth slows as penetration reaches practical limits. Companies began to focuson market share rather than growth. Industry demand tends to follow the overall economy, but the scopeof growth of the automobile sector is very much possible in India due to the increasing income of themiddle 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 procesEnvironmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (Wand those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of thstrategic environment is referred to as a SWOT analysis . SWOT analysis of the Indian automobile sectogives the following points:



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GROUP-15,NEW DELHI INSTITUTE OF MANAGEMENT PGDM(2008-10)


Strengths

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 overloadingHeavy 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

5.) Industry Specific Index

Industry specific index also called as sectoral index are those indices, which represent a specific industrsector. All stocks in a sectoral index belong to that sector only. Hence an index like the BSE auto index imade of auto stocks. Sectoral Indices are very useful in tracking the movement and performance oparticular sector.

BSE Auto Index comprises all the major auto stocks in the BSE 500 Index.

FINANCE-II-


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Automobile Industry Index at BSE for 5 Year


BSE AUTO Index 5 Year Chart

COMPANY

Source:Googlefinance.com

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

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

auto industry start picking up growth slowly in the first end of 1 st quarter index reaches to its highest i

his history. Than we saw a steady fall in the index and in the mid 2006 reaches to years lowest point

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

brings the demand of automobile so low that index reaches to its lowest in past 5year . Most of thcompany even shut down their manufacturing units for more than a week, production came dow

because of less demand in the economy. Also no further launches were made in mid or late 2008 an

postponed to next year. We have also saw a fall in FDIs in automobile Industry. But in the beginning o

2009 right from 1st quarter auto industry again start regaining and we saw a tremondous growth in aut

industry which never seen before not in india but all over the world. The demand of 2 and 4 Wheeler

start increasing rapidly which also force auto industry to employ more workers to meet demand and with



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

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

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 othe company in the market where it stand among its competitors and who are the key drivers of thcompany, what is the future plans of the company, what are the policies of government towards thcompany 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 carsegment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of thecompany 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 longerhas 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 of41.6%, compared to 59,908 vehicles in the same period of 2008. The company's domestic sales in Augus2009 increased 29.3% to 69,961 vehicles, compared to 54,113 vehicles in August 2008. Total passengercar sales in August 2009 increased 30.5% to 69,629 units, compared to 53,351 units in August 2008 Thecompany'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) ofRs.28599.27 crores (2007-08: Rs.33093.93 crores) in 2008-09, a year marked by severe demandcontraction in the automobile industry. Revenues (net of excise) for the year were Rs. 25660.79 crorescompared to Rs.28739.41 crores in 2007-08, a decline of 10.7%. The Profit before Tax was Rs.1013.76crores compared to Rs.2576.47 crores in 2007-08, a decline of 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 vehicleswith winning products in the compact, midsize car and utility vehicle segments. The company is theworlds fourth largest truck manufacturer, and the worlds second largest bus manufacturer.

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



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Financial Analysis

1. Financial Statements

RATIO ANALYSIS OF TATA MOTORS AND MARUTI SUZUKI

EPS measures the profit available to the equitshareholders per share, that is, the amount that thecan get on every share held. Till 2008 both thcompanies had a rising EPS but in 2009 both of themfall and the effect more on Tata motors as they boughtwo brands Ford Motors and fall in sales results low EPS. But as trend shows TATA motors havpotential so an shareholder expect better in future.

EPS = Net income- Dividends on Preferred stock

Average Outstanding shares

The trend shows that Tatas net profit margin is quistable until it falls to 3.77 in 2009. While the net profit oIndias no.1 car manufacturer Maruti Suzuki shows negative trend from 2007 onwards. But the futurprospect for both the companys profit is higher. Profmargins come down as recession hits economy badhence sales get reduced and cost get increased vermuch.

sales)

Net profit Ratio = (Net profit) 100

(Net

Both giants of Automobile

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 are



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still to add in their portfolio. Moreover increased demand in foreign market also seems to be

positive signal for better future.

The quick ratio is a very stringent measure osolvency. A general rule of thumb suggests that thquick ratio should be around 1. Maruti is alwayshowing a positive trend as its ratio is alwaygreater than 1 except in 2008, while TATA motorwas doing good till 2007, but the performanc

decreased from 2008 onwards as shortage of caswas there and current liabilities and provisioincreased by Rs800Cr.

A high debt to equity ratio suggests that company has financed its growth mostlvia debt. We see that the debt equity ratof TATA motors is very high compared tthat of Maruti. It means that a lot of debt used by TATAs to finance its increaseoperations. Sometimes the cost of the debfinancing may outweigh the return that thcompany generates on the debt througinvestment and business activities and ca

lead to bankruptcy. Maruti is going very swiftly in this field.

Debt-Equity Ratio= Total Debt

Total Equity

The current ratio is a convenient and reliable tool fmeasuring a company's level of liquidity. The ratiacts as an indication that the firm is able to generat



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funds to make all needed payments in the future; thus, the ratio indicates whether the firm is likely to ba going concern. Both the companies possess a good ratio but the ratio which is close to 2 is desirable, swe see in graph that Maruti has more strong liquidity than TATA Motors as its current ratio is alwaygreater than 1. Maruti is more successful in paying off its liabilities. Expansion plans of TATA broughdown its cash & Bank Balance and increase of outside liabilities.

Tata motors and Maruti Suzuki both the companie

showed a positive trend in paying dividends ti

2008, but the scenario changed in 2009 as both th

companys dividend per share fell. According t

graph TATAs dividend was much higher than that o

Maruti, it always provided dividend of above 10 pe

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

a.) Balance Sheets

Maruti Suzuki TATA Motors



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Above is the updated share holding pattern of

TATA motors which shows that Indian promoter

share in the company is 41% that means if they

are not in the position to raise further money from

general public, Company already raised huge

money by selling their large stake to institutional

investors about 27%. General Public also have

quite large stake in the company

2. Board of Director

Being a venture of Japanese compan

Suzuki big stake of the company is held by foreig

promoters which shows that they can dive

their part(small part) to raise money in future

However institutional investors also held 39%

major stake in the company but general publ

have very small part which shows that les

presence of share in the secondary market henc

low volume trading in stock market.

TATA Motors Maruti Suzuki

Mr. Ratan Tata ChairmanMr. N.A. Soonawala DirectorMr. R. Gopalakrishnan DirectorMr. S.M. Palia DirectorMr. S. Bhargava DirectorMr. V. K. Jairath DirectorMr. Ravi Kant Vice Chairman

Mr. J. J. Irani DirectorMr. N. N. Wadia DirectorMr. R.A. Mashelkar DirectorMr. n Munjee DirectorMr. Prakash M Telang Director

3. Upcoming Ventures & Products

TATA Motors

Mr. R. C. Bhargava ChairmanMr. Shinzo Hakanishi MD and CEOMr. Manvinder Singh Banga DirectorMr. Amal Ganguli DirectorMr. D. S. Brar DirectorMr. Keiichi Asai DirectorMr. Osamu Suzuki Director

Mr. Shuji Oishi DirectorMs. Pallavi Shroff DirectorMr. Kenichi Ayukawa DirectorMr. Tsuneo Shashi Director &

ManagingExecutive

Office (Production)

Tata Motors is try to be in a position to dominate the Indian Auto industry, at least in four-wheeler

segment. Tata Motors have announced that they are interested in the idea of designing electric cars. Totake it a step further Tata has also initialized plans for the manufacture of a hybrid car which it will

market with Chryster in the U.S.

After the launch of Nano, Tata also apparently has its eye on the European and U.S. markets. The

company hopes to have a version for Europe by 2011 and one for the U.S perhaps by 2012. Tata Motors



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Maruti APV June 2010

Maruti Jimny July 2010

4. Government Policies Towards Indian Automobile Industry

Automobile industry in India also received an unintended boost from stringent government autoemission regulations over the past few years. This ensured that vehicles produced in India conformed tothe standards of the developed world.

Though it has an advantage in India, thanks to low costs and government policies it soon faces stiffcompetition from it multinational competitors all eyeing for a share in the ever growing Indian autosector. The policies adopted by Government will increase competition in domestic market, motivatemany foreign commercial vehicle manufactures to set up shops in India, whom will make India as aproduction 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 to15,000 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 sustainable system

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.

2.) TECHNICAL ANALYSIS

Technical analysts track price movements and trading volumes in various securities to identify patterns ithe price behavior of particular stocks, mutual funds, commodities, or options in specific market sectorsor in the overall financial markets.The goal is to predict probable, often short-term, price changes in theinvestments that they study, which allows them to choose an appropriate trading strategy. Following isthe Technical Analysis of TATA Motors & Maruti Suzuki to understand their pattern and behavior ofshare prices in the market.

Implication of DOW THEORY



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In the graph shown above, is shown that the share prices of Tata motors were increasing in the year2009, but it then suddenly decreased near the month of June2009, but then started increasing again.

The second enet of Dow Theory is tha trends have three phases; Accumulation, Public participation anExcess. The accumulation phase is one in which the exper traders are actively taking positions which aragainst the majority of people in the market. The public participation phase, which is when the public at

large catches on to wha the experts know and begin to trade in the same direction and in the Excessphase, where rampan speculations occur and the smart moneystarts to exit their positions.

GROUP-15, FINANCE-IINEW DELHI INSTITUTE OF MANAGEMENT PGDM(2008-10)


The Dow Theory is valid even in todays volatile and technology driven market. The Dow Theor

addresses not only technological analysis and price action, but also price philosophy.Dow Theory i

broken down into six basic tenets.

AccumulatiPublic

Continua

Exces

Upstrea Correc

The first tenet of Dow Theory is that the market has three trends; Uptrends are defined as a time when

successive rallies in a security price close at levels higher than those achieved in previous rallies;Downtrends, which are defined as when the market makes lower lows and lower highs and Correctionswhich are defined as a move after the market makes a move sharply in one direction where the marketrecedes in the opposite direction before continuing in its original direction.

it

t t d

t

tt

-


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Upstrea

m

Primary

trend

DeviatiReaction

rally

The third tenet of Dow Theory is that the market counts all news, meaning that once news is released it i

quickly reflected in the price of an asset.

In the case of Tata motors, as the market started recovering after December2008, theshare prices started

increasing but they again saw a decline, which may be attributed to the news of breach of JLR contract

with Ford Motors which may cause Rs.3bl panelty. The sales of Tata motors decreased by 4% in June

end2009 which can be one more reason for the decline in stock prices of Tata motors.

The above graph also illustrates the sixth tenet, which says that trends exist until definitive signals prove

that they have ended. The market may show moves which are against the primary trend but this do not

mean that the trend is over and the market will normally resume its prior trend.

In the case of Tata motors, when the prices were decreasing during recession, the stock price evenincreased once, but the market then again followed its prior trend of declining prices.

SENSEX AND TATA MOTORS



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Tenet four of Dow Theory is that the averages must confirm each other, that means that the performance

of related industries should move in one direction for the health of a particular industry. When the

performances diverge, it is warning that change is in the air. However, we can see that the movement ofstock prices of Tata motors and SENSEX are more or less in the same direction. One thing which very

clear is TATA motors react very badly whenever there is a negative sentiments comes in market results

SENSEX comes down, and TATA motors also comes down. Different sets of colored line in above chart

prove this fact.

Tenet five is that Trends are confirmed by volume. In case of Tata motors, when the people stopped

investing during recession, prices went down and after recession, when people came back to the market,

prices also increased.



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1. Resistance & Support Level

This Technical tool helps in telling that what would be the price band of share price in which it move innear future on the basis of past high and low levels made by a particular scrip. Resistance Level showsthe price above which share price will not move in normal case on the other hand Support level shows

the minimum share price which can be touched by share or crossing of this share will not be there innormal market condition Following is the Resistance & Support level of Maruti Suzuki & TATA Motorsfor the period of 2 months:

ResistanceLevel

Support levelRS.1275 approx.

(1-Jul-09 to 7-Sept-

Resistance

Level

Support LevelRs.430 approx.

As it is seen in the past 4 mon

TATA share price moved up and

keeps making on new level so perf

resistance level for this share is n

easy to predict as performance of t

share is very good compare to

scrips of this segment.The above band of resistance and support level shows that the price of shares will move in between this

range only until unless any wrong reaction came out in economy or when any correction takes place the

prices will move in between this band only.



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2. Simple Moving Average (50 periods)-Medium Term

A

Moving Average is an indicator that shows the average value of a security's price over a period of time.The method of interpreting a moving average is to compare the relationship between a moving averageof the security's price with the security's price itself. In above figure we have compare the share price ofTata Motor and Maruti with moving average of 50 period of Tata Motors, Maruti respectively.A buy signal is generated when the security's price rises above its moving average and a sell signal

generated when the security's price falls below its moving average. It is designed to keep you in line witthe security's price trend by buying shortly after the security's price bottoms and selling shortly after

tops. Yellow area in the graph indicates buy signal and Green area indicates sell signal. In the near futurboth the companies show buy signal as their security prices rises above its moving average. It shows thboth companies are performing better, so industry as whole is also performing outstanding. So keepinghold position for the companies would be profitable in future.



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3. Long Term Simple Moving Average (200 periods)

In the above chart Moving Average is an indicator that shows the average value of a security's price over

a period of time. We have compare the share price of Tata Motor and Maruti with moving average of 200period of Tata Motors, Maruti respectively by taking share prices of 5 year to take out the Movingaverage for 200 periods. This Tool of 200 Periods tells us about the position of share to buy or sell for along period say for 9-12 months.

A buy signal is generated when the security's price rises above its moving average and a sell signal igenerated when the security's price falls below its moving average. Yellow area in the graph indicateBuy signal and Green area indicates Sell signal. In the near future both the companies show Buy signa



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as their security prices rises above its moving average. This shows that an investor can kept a holposition or can buy for longer period of time but as we can see in case of Maruti the moving average linis also rising which shows that Buy n hold position for very long period could be unprofitable a minocorrection in the share price can bring down the share price line and then moving average line will easilcross the share price line.

4. TATA MOTORS MACD

Sell

OverbougOverso Buy

Above graph shows the MACD of TATA motors for the period of 6 months. The MACD is the difference

between a 26-day and 12-day exponential moving average. A 9-day exponential moving average(EMA)

called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. here

are three popular ways to use the MACD: crossovers, overbought/oversold, and divergences.

Crossovers: Yellow area shows that there was situation when sell position occurred in the end of month

June till mid of July as MACD curve below EMA or Signal line shows a sell situation otherwise we sawa buy position of TATA Motors most of the time Light Green area shows that investor want to buy and

wan to be in hold position. The trend of buying is seems to be over here or in coming few days and a

selling or booking of profit could be seen hence MACD line could fall below EMA in coming time.

MARUTI SUZUKI MACD



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Overboug Overso

Crossover: The above graph shows the MACD of Maruti Suzuki, here Yellow area shows the selling

position as MACD line is below EMA line the Light Green area shows the buy position which occur last

time in the end of July but now buy position for Maruti is created as EMA or signal line seems to be

below MACD line and it will probably continue in near future.

For both TATA Motors & Maruti Suzuki

Overbought/Oversold: The amount of green lines in above graph on the up side shows the overbought

situation by the investor which mean that investor buy more shares at this time and oversold situation

occurs when green line is on the downside.

5. Moving Average Crossover

A crossover occurs when a faster Moving Average (i.e. a shorter period Moving Average-20 periods)

crosses either above a slower Moving Average (i.e. a longer period Moving Average-50 periods) which iconsidered a bullish crossover or below which is considered a bearish crossover. M.A.C helps in telling

buying opportunities when the shorter moving average crosses above the longer moving average and

selling opportunities when the shorter moving average crosses below the longer moving average.

Following is the MAC of TATA Motors & Maruti Suzuki to understand the position of both companies

average share movement:

S


20 Periods


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GROUP-15, FINANCE-IINEW DELHI INSTITUTE OF MANAGEMENT PGDM(2008-10)


20 Periods

B

50 Periods

Above is the MAC graph of TATA Motors for the period of 6 months in which Sdenote the sellingsituation or position whereas Bis the point after approx 1 month when we saw a bounce back in shareprices hence a buy signal occurs which is because, longer moving average of 50 periods cut shortermoving average from the lower side and shows a holding position of shares in coming future also. Theincreasing trend in the prices after buy signal of shares shows that good amount of profit could beachieved in future if stick with hold position.

A move below the moving average suggests that the bears are in control of the price action and that theasset will likely move lower, above yellow circle shows that area when price fall below average price an

then it move onto lower side.

Below is the MAC graph of Maruti Suzuki for past 6 months in which we havent see any sell position

till yet the movement of share price is always on the positive side that is increasing so we can say that

buying opportunities is always there in case of Maruti Suzuki. A cross above a moving average suggests

that the bulls are is in control and that the price may be getting ready to make a move higher and Maruti

Share Prices show that trend of moving up prices.

-


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BuNo Sell Position or

Always Position of

6.) BOLLINGER BAND

Bollinger bands are used to measure a markets volatility. Basically, this little tool tells us whether thmarket is quiet or whether the market is LOUD! When the market is quiet, the bands contract; and whethe market is LOUD, the bands expand.

TATA Motors

On the graph it can be seen the overall trend of the market and quick reference for supply and demand awell as support and resistance areas by using a 20 days moving average and 2 standard deviation icalculating the Bollinger Bands. As we can see in the graph is that the at most of the time the graph liebetween the middle band and the upper band which shows an increasing price trend in the market and itcalled Riding the Band. When the stock is outside the upper end of the Bollinger band it is considered a


Maruti


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OVERBOUGHT,which means that stock has gone up too fast and when a stock is outside the loweband it is OVERSOLD.An oversold stock has gone down too fast. During the months of April, Maymid July and mid august the stock of TATA motors crossed the upper band which means that during thesperiods the prices rose very fast, while in mid of July the stock went below the lower band, i.e. Thprices fell too fast and are susceptible to bargain hunting. The overbought and oversold stocks are apt t

reverse course. Its also seen that the volatility increased to new highs after July because the bandstarted to widen. Its better to buy stocks when it touches the lower band, but in regards all othetechnical factors should be considered while buying.

Initially the bands show slight slope and lie approximately parallel to each other, this means that the pric

of the stock is oscillating up and down between the bands through a channel. The stock also showoverbought many times during the six months but it did not show any oversold trend, therefore becomes an important factor in determining the price trend as it tells that the prices have not fallen verfast in these six months. During the june month the bands contracted very much which shows lovolatility, but then onwards the bands started to widen which creates high volatility and looking at thfuture scenario it may be analysed that the stock will see a fall as at the end of august the band waoverbought, because when price is trading near the upper or lower Bollinger band line, there is possibility of trend reversal.

The buy and sell signals are not given when prices reach the upper or lower bands. Such levels merelindicate that prices are high or low on a relative basis. A security can become overbought or oversold foan extended period of time. Knowing whether or not prices are high or low on a relative basis ca

enhance the interpretation of other indicators, and it can assist with timing issues in trading.

CONCLUSION



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Indian Automobile Industry is in the growth phase and the expected growth rate is 9-10% for FY2009-1

compare to last year growth rate which was just 0.7% and the above facts and figures in our study als

support this truth.

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

infrastructure of the country and especially the rural sector in which demand of two wheeler ha

increased even in recession. According to Indian Statistical Organization the per capita incom

(Rs.38000) is increasing and national income at the rate of 14.4% which shows potential to buy vehic

in auto industry. The growth rate of Indian Automobile is so fast that by 2016 Indian Industry will b

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 wheel

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

launch NANO the peoples car and now TATA motors is also planning to come out with an electric car awell as hybrid car, moreover in two wheeler segment many companies like Mahindra and Mahind

grow even more than expectations.

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

move in the band of Rs.1275 to Rs.1425 and that of TATA Motors will move in the range of Rs. 430 t

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 th

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

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

developing economy there is lot of scope for growth and this industry still have to cross many levels s

there is huge opportunities to invest in and this is proving as more and more foreign Companies settin

up there ventures in India.

Recommendations



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

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

recommending to invest in Automobile Industry have no doubt is going to be a good and smart optio

because this industry is booming like never before not only in India but all around the world. The returnwhich came out of this industry were very impressive recently, as if we take an example of TATA motor

it gives approx 90% return in a period of just 3 months while Maruti Suzuki shows always a buy an

hold position because there is possibility of growth in future, same situation is in two wheeler segmen

with market leader Hero-Honda a debt free company also have bright future ahead. The numbers whic

came out in the end of financial year 2009 prove that even in the period of recession the overall sale

went up is sufficient to support to this fact. Through Technical analysis of TATA Motors and Maruti

can be recommended that for now Maruti share price shows that its a time to hold the position or bu

more shares as there is scope in further rise in share prices until and unless any negative reaction o

sentiments comes in the Economy.

Investing in Maruti Suzuki for long time could be a good option whereas in TATA motors there is

chance of getting correction, as it already went on high side in a very short period of time so holding th

shares for long time could be a wrong step, so at this point of time those who invested earlier can boo

their profit or new investors can buy now and sell with in short period of time by earning profit in sho

period of time.

BIBLIOGRAPHY



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(93958143) 24333238 Indian Automobile Industry Analysis

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