RATIO ANALYSIS OF TATA MOTORS, MARUTI SUZUKI AND MAHINDRA & MAHINDRA

EARNINGS PER SHARE

YEARS Mar09 Mar10 Mar11 Mar12 Mar13 TATA 19.48 39.26 28.55 3.91 0.95 MARUTI 42.18 86.45 79.21 56.60 79.19 MAHINDRA 30.69 36.89 45.33 48.88 56.80

100 90 80 70 60 50 40 30 20 10 0 Mar09 Mar10 Mar11 Mar12 Mar13

TATA MARUTI MAHINDRA

Interpretations EPS measures the profit available to the equity shareholders per share, that is, the amount that they can get on every share held. Till 2009-13 Mahindra and Maruti had a rising EPS when compare to Tata motors, it because of the slump in domestic and international markets and sharp fall in sales and net profits which resulted in low EPS. Tata motors decreased at a considerable rate from 2009 to 2013. Mahindra is not much affected as its sales have increased from the previous year. But as trend shows Mahindra motors has potential so a shareholder can expect better in future.

SALES YEARS Mar09 Mar10 Mar11 Mar12 Mar13 TATA 28538.20 38173.39 52067.87 59220.87 49319.73 MARUTI 23381.50 32174.10 40865.50 39495.30 49090.00 MAHINDRA 14668.50 20323.63 25569.55 34353.63 43412.65

70000 60000 50000 40000 30000 20000 10000 0 Mar09 Mar10 Mar11 Mar12 Mar13 TATA MARUTI MAHINDRA

Interpretations Maruti and Mahindra show a positive trend in sales over the past five years. Though slowdown in the economy brought hurdles but these companies have potential to grow in future as lots of products are still to add in their portfolio. Moreover increased demand in foreign market also seems to be a positive signal for better future. TATA has witnessed a decline in sales of each segment. Maruti and Mahindra are going swiftly.

DIVIDEND PER SHARE

YEARS Mar09 Mar10 Mar11 Mar12 Mar13 TATA 6.00 15 20 4 2 MARUTI 3.50 6.00 7.50 7.50 8.00 MAHINDRA 10.00 9.50 11.50 12.50 13.00

25 20 15 10 5 0 Mar09 Mar10 Mar11 Mar12 Mar13 TATA MARUTI MAHINDRA

Interpretations Tata motors company showed a positive trend in paying dividends till 2011, but the scenario changed in 2012 and 2013, the company dividend per share fell. According to graph Tatas dividend has fallen drastically while Maruti and Mahindra increased at a considerable rate . Mahindra has made a slight reduction from rs.9.50 per share in 2010 to rs.13.00 per share this year. Therefore Mahindra would be the best option for an investor.

RETURN ON EQUITY (ROE)

YEARS TATA MARUTI MAHINDRA

Mar09 1.94 8.48 3.66

Mar10 3.98 17.28 7.37

Mar11 2.85 15.83 9.06

Mar12 1.95 11.31 9.77

Mar13 0.47 15.84 11.35

20 18 16 14 12 10 8 6 4 2 0 Mar09 Mar10 Mar11 Mar12 Mar13

TATA MARUTI MAHINDRA

Interpretations ROE is one of the most important ratios used for measuring the overall efficiency of a firm and determines whether the investments in the firms are attractive or not. According the graph, ROE of TATA has declined to a large extent in 2013, making it a quite risky investment. Maruti and Mahindra ROE is showing a higher rate compared to TATA in 2013. As the investors would like to invest only where the return is higher, Mahindra would be attractive for investment.

DIVIDEND PAYOUT RATIO

YEARS TATA MARUTI MAHINDRA

Mar09 30.8 8.29 32.5

Mar10 38.2 6.9 25.7

Mar11 70.1 9.5 25.3

Mar12 102.3 13.2 25.6

Mar13 210.5 10.1 22.8

250 200 150 100 50 0 Mar09 Mar10 Mar11 Mar12 Mar13 TATA MARUTI MAHINDRA

Interpretations Dividend payout ratio is the percentage of earnings paid to shareholders in dividends. It provides an idea to an investor of how well earnings support the dividend payments. Maruti has maintained a stable payout ratio. Both TATA and Mahindra have increased their payout ratio in which Tata shows a higher payout ratio.

PRICE-EARNINGS RATIO (P/E RATIO) YEARS Mar09 Mar10 Mar11 Mar12 Mar13 TATA 9.25 19.2 43.7 70.4 90.5 MARUTI 18.48 16.4 15.9 23.8 16.7 MAHINDRA 23.2 16.2 18.22 17.9 17.7

100 80 60 40 20 0 Mar09 Mar10 Mar11 Mar12 Mar13 TATA MARUTI MAHINDRA

Interpretations

This ratio is widely used by investors to decide whether or not to buy shares in a particular company. As per the graph, in 2009, the P/E ratio of the three companies was the lowest compared to the 2013 year. TATA has the highest P/E ratio in 2013 which indicates that it is overvalued, so the investors can benefit by selling the shares. An investor can go for Mahindra as well as Maruti as they P/E ratio is the lowest in 2013 which indicates that it is undervalued and there is a scope for growth in the future.

FINDINGS
From the data analysis and interpretations of the ratios of three companies viz. Tata Motors, Maruti Suzuki and Mahindra and Mahindra, the following findings have been given: The three companies were performing well till 2011 with a positive trend in the earnings per share. But there was a downward trend in 2012. Especially, TATA has witnessed a steep fall in the year 2013. The sales trend has been upward and positive in case of all the three companies. The sales growth looks positive but in the year 2013, TATAs sales have declined whereas Maruti and Mahindra have maintained the same upward positive trend. In case of dividend per share, it has increased in all the three companies. Tatas dividend has fallen drastically while Maruti and Mahindra increased at a considerable rate . Mahindra has made a slight reduction from rs.9.50 per share in 2010 to rs.13.00 per share this year. The return on equity is decreased at considerable rate in Tata when compare to Maruti and Mahindra at the end of the 2013 year. The Maruti return on equity is high. Maruti had a stable dividend payout ratio . TATA and Mahindra have increased their payout ratio in which TATA shows a higher payout ratio. The three companies have witnessed a low price earnings ratio in 2010 compared to the previous years. But the ratio increased in 2013 in three companies. TATA has the highest P/E ratio in 2013 which indicates that it is overvalued and Marutis P/E ratio is the lowest in 2013 which indicates that it is undervalued and there is a scope for growth in the future.

By analyzing the current trend of Indian Economy and Automobile Industry I have found that being a developing economy there is lot of scope for growth and this industry still has to cross many levels so there are huge opportunities to invest in and this is being proved as more and more foreign companies are setting up there ventures in India. Increase in income level, increase in consumer demand, technology development, globalization, foreign investments are few of the opportunities which the industry has to explore for developing the economy.

SUGGESTIONS
By analyzing the automobile industry with the help of fundamental analysis, it has been revealed that this industry has a lot of potential to grow. So recommending investing in Automobile industry with 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 over the world. The three giants of Indian Automobile industry viz. TATA Motors, Maruti Suzuki and Mahindra and Mahindra have outperformed in the industry. From the company analysis, we can know that Mahindra would be a better option for an investor compared to TATA and Maruti. In view of the slump in the domestic and international market, TATA has recorded a slowdown in sales and income level. Its Earnings per share has also declined drastically. It has reduced its dividend per share from rs.20 in the previous year to rs.2 in 2013. The return on investment is also very low. In view of all these, TATA is not a better option for an investor. The global turmoil in financial markets has affected Maruti also. The company is maintaining a stable position. Its sales have grown over past five years. Inspite of the general economic slowdown, the sales of Maruti Suzuki increased from Rs 23380.50 Crore to Rs 49090.00 Crore. As it is maintaining a stable position, 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 of further rise in share prices. Despite the challenging business environment, Mahindra has maintained its upward sales level. Its Return on equity is much higher compared to TATA and Maruti. The dividend per share is rs.13 which is higher amongst the three companies. The company has potential to grow. It would be the best option for the investor. 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 and is experiencing a downfall from 2011.

Holding the shares for long time could be a wrong step and at this point of time those who invested earlier can book their profits. As Mahindras shares are undervalued, the investor can buy these shares. This is because a relatively lower P/E would save investors from paying a very high price that does not justify the value of an investment.

Few Suggestions for Right Stock Selection There are three factors which an investor must consider for selecting the right stocks. Business: An investor must look into what kind of business the company is doing, visibility of the business, its past track record, capital needs of the company for expansion etc. Balance Sheet: The investor must focus on its key financial ratios such as earnings per share, price-earning ratio; debt-equity ratio, dividends per share etc and he must also check whether the company is generating cash flows. Bargaining: This is the most important factor which shows the true worth of the company. An investor needs to choose valuation parameters which suit its business.

Investment rules Invest for long term in equity markets Align your thought process with the business cycle of the company. Set the purpose for investment. Long term goals should be the objective of equity investment. Disciplined investment during market volatility helps attains profits. Planning, Knowledge and Discipline are very crucial for investment.

CONCLUSION
The Automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2013. In 2013, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. The collapse in market place witnessed unprecedented turbulence in the wake of global financial meltdown. A runaway inflation touching a high point of 12% early in the year, the tight monetary policies followed by the authorities for most of the year to control inflation with the consequent high interest rates and weak consumer demand, have collectively had a devastating effect on the automotive sector. Maruti Suzuki India LTD. company has a trend of growth from till 2012.During the financial year 2009 the there is downfall in the growth of the company. The main reason behind this downfall is because of the global recession. The downfall of net profit during the financial year 2008-09 is 29.6% but it increased to TATA Motors, which was trying to consolidate its leadership position in the market, also had to face the impact of global meltdown. Amid the crippling economic crisis, Tata purchased Britains Jaguar Land Rover (JLR) from Ford Motor Company. Acquiring JLR saddled Tata with some tough losses. Dividends and earnings remain low. Inspite of it being a tough year for all the companies across the globe and in India, Mahindra has given a satisfactory performance. At present its shares are undervalued giving it a potential for growth. Global recession had a dampener effect on the growth of automobile industry but it was a short term phenomenon. The industry is bouncing back. One factor favoring this point is that India has become a hot destination for companies of diverse nature to invest in. Cut throat competition among top companies, lots of new car and vehicle model launches at regular intervals keeps the Indian auto sector moving.

A continuous effort at cost cutting and improving productivity will help the companies in making reasonable profits despite the impact of higher commodity prices and weaker rupee.

The analysis gives an optimistic view about the industry and its growth which recommends the investors to keep a good watch on the major players to benefit in terms of returns on their investments.

BIBLIOGRAPHY
Text Books Security Analysis and Portfolio Management by Punithavathy Pandian, Vikas Publications. Security analysis and portfolio management by V.A. Avadhani Financial Markets and Services by Gordon and Natarajan, Himalaya Publications. Financial Management by Shashi K Gupta and R. K Sharma, Kalyani Publications. Newspapers Economic times Business line Websites www.nseindia.com www.bseindia.com www.investopedia.com www.moneycontrol.com www.indiainfoline.com www.sebi.gov.in www.tatamotors.com www.marutisuzuki.com www.mahindra.com www.yahoofinance.com

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