CONTENTS

1. Overview

2. Objective of the Project

3. Analysis of Indian Automobile Industry

4. Fundamental Analysis
 Economy
 Industry
 Company - Financial & Non-Financial

5. Conclusion

6. References
  OVERVIEW
 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 ninth position in the entire world

withbeing # 1 in Two Wheelers and # 4 in commercial vehicles.

 Withstanding a growth rate of 13% 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.

 It is expected that the Automobile Industry in India would be the 7th

largest automobile market within the year 2016.

OBJECTIVES
The objective of this project is deeply analyzing 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

 Analyse the impact of qualitative factors on industry’s and company’s

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)
 ANALYSIS OF AUTOMOBILE INDUSTRY
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

ECONOMY
GDP and Automobile Industry:
In absolute terms, India is 16th in the world in terms of nominal factory output
(its $1.22 trillion)
Data source: World Bank, World Development Indicators November 20, 2009
GDP and Automobile Industry:

 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.
 The market value of Automobile Industry is more than US$8 bl. and
Contribution in Indian GDP is near about 5% and will be double by 2016.

Recession:
 Global recession has hit the Indian auto industry, impact of recession
is evident now on industry as sales & growth of automobile companies
have declined. Passenger Vehicles segment registered negative
growth.
 In December 2008, overall production fell by 22 % over the same
month last year. The sales in December 2008 for passenger vehicles
fell by 13.86% over December 2007.
 Two Wheelers registered minor growth of 1.85 % during April –
December 2008.
  Although the sector was hit by economic slowdown, overall
production increased from 10.85 million vehicles in 2007-08 to 11.17
million vehicles in 2008-09.

FDI’s:
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.
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.
Increase in Exports especially from auto industry shows an expectation of huge
income from western countries and new $200 bl. target for exports by 2011
helps in increasing.

Industry Analysis:
Segmentation of Automobile Industry:
The automobile industry comprises of Heavy vehicles (trucks, buses, tempos,
tractors); passenger cars; Two-wheelers; Commercial Vehicles; and Three-
wheelers.

AUTOMOBILE EXPORT
BCG MATRIX

FIVE FORCES ANALYIS

SWOT ANALYSIS
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 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
5 YEARS BSE AUTO INDEX
 In 2003 when major giants got listed on stock exchange TATA Motors,
Maruti Suzuki, etc. Indian auto industry start picking up growth slowly.
 During year 2007on year we saw a up and down movement in the index
as lots of new players came in Indian market with foreign collaboration.
 2008 came with global slowdown it brings the demand of automobile so
low that index reaches to its lowest in past 5year.
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.

 The turnover for the fiscal 2008-09 stood at Rs. 203,583 Million & Profit
After Tax at Rs. 12,187ml.

PROFILE OF TATA MOTORS

 Tata Motors Limited is India’s 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.
 The Profit before Tax was Rs.1013.76 crores 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 vehicles with winning products in the compact, midsize car and utility
vehicle segments.
 The company is the world’s fourth largest truck manufacturer, and the world’s second
largest bus manufacturer
EARNING PER SHARE

NET PROFIT
SALES
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 still to add in their portfolio.
Moreover, increased demand in foreign market also seems to be a positive
signal for better future.

Quick ratio
Maruti is always showing a positive trend as its ratio is always greater than 1
except in 2008, while TATA motors were 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
DEBT EQUITY RATIO

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 TATA’s to finance its increased
operations.
CURRENT RATIO

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.
DIVIDEND PER RATIO
According to graph TATA’s 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

NON-FINANCIAL ANALYSIS

 Indian promoter share in the company is 41%,

 Company has already raised huge money by selling their large stake to institutional investors
about 27%.
 General Public also have quite large stake in the company compare to its competitors.
 Being a venture of Japanese company Suzuki big stake of the company is
held by foreign promoters which shows that they can divest their
part(small part) to raise money in future. However institutional investors
also held 39% major stake in the company but general public have very
small part which shows that less presence of share in the secondary
market hence low volume trading in stock market.

TATA MOTORS
 Tata Motors have announced that they are interested in the idea of
designing electric cars. To take it a step further Tata has also initialized
plans for the manufacture of a hybrid car which it will market with
Chrysler 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, is now aiming to launch its cars in Indonesia and is also
planning to sell Nano in South America with the help of Fiat.

 After launching the world’s cheapest car, Nano, Tata Motors is looking
east, towards neighboring Myanmar to boost its sales by setting up a
truck manufacturing plant.

 As part of its expansion plans in Southeast Asia, Tata Motors had inked a
joint venture with Thailand’s Thonburi Auto Assembly’s to manufacture
up to 35,000 one tone pickup trucks a year over the next 3-5 years
MARUTI SUZUKI
 Maruti Suzuki has expanded the capacity at its Manesar plant to 1.7 lakhs unit per
annum from January 2009. By the year 2010, Suzuki Motors plan to increase their
dealership in India.

 As Maruti Suzuki eyes one million sales by 2010, they have firmed up a massive
expansion plan of its service network and plans to expand it to 1700 towns and cities
from the current of about 1200.

 They have also been coming with specific sales promotion programmes targeted at
anterior regions, among them is the “Mera Sapna Meri Maruti: New Panchayati
Scheme”.

 The Haryana government has allotted 700 acres of land to Maruti Suzuki for hi – tech
Research & Development complex at Rohtak. The upcoming facility, will see an
investment in the range of Rs. 1,000 cr. to 1,500 cr. And will introduce world class
R&D facilities into India.

 In a move ahead, Maruti Suzuki India limited launched the Estilo with all new overall
looks and advanced technological features.

 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.

 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
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.
GOAL:
The goal is to predict probable often short-term price changes in the
investments, which allows investors to choose an appropriate trading strategy.
Implication of DOW THEORY

TECHNICAL ANALYSIS
1. 1 st Tenet
 Uptrends
 Downtrends
 Corrections
2. nd Tenet
 Accumulation
 Public Participation
 Excess
3 rd Tenet  Market counts all the information and quickly reflected into the price of an asset
4. 4 th Tenet The averages must confirm each other that mean 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.

Implication of DOW THEORY

Tenet five:
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.
RESISTANCE AND SUPPORT LEVEL
This Technical tool helps in finding the future price band of the share on the basis of past high and
low levels made by a particular script. Resistance Level shows the price above which share price will
not move in normal case.
Maruti Suzuki & TATA MOTORS
SIMPLE MOVING AVERAGE

TATA MOTORS MACD

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.
BOLLINGER BAND
Bollinger bands are used to measure a market’s volatility. Basically, this little
tool tells us whether the market is quiet or LOUD! When the market is quiet, the
bands contract; and when the market is LOUD, the bands expand.
CONCLUSION
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
don’t 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
people’s car and now TATA motors are also planning to come out with an
electric car as well as hybrid car, moreover in two-wheeler segments many
companies like Mahindra and Mahindra grow even more than expectations.
Industry has a lot of potential to grow in future. So, I recommend investing in
Automobile Sector. There is no doubt that it is going to be a good and smart
investment decision because the industry is booming like never before.
Investing in Maruti Suzuki for a long time could be a good decision whereas in
TATA motors there is a chance of getting correction, as it already went on high
side in a very short span of time, so holding the shares for a long time could be
a wrong step. At this point of time those who invested earlier can book their
profit or new investors can buy now and sell within a short period of time after
earning profits.
The recent returns from the industry were very impressive; TATA motors
recorded 90% of return in previous quarter while Maruti Suzuki showed always
a buy and hold position due to good future prospect, and two wheeler segment
also performed equally well.
 Through Technical analysis I found that there is scope of further rise in the
Maruti shares prices until and unless any negative reaction or sentiments arises
in the Economy. Thus, it is recommended that investors should hold the position
or buy more shares.
IMPACT OF UNION BUDGET ON AUTO MOBILES
The auto sector has seen significant rise in sales and the 22% rise in sales for
April-December 2009 period over the previous year.
The partial roll back of stimulus measures is anticipated very much and so, the
rise in excise duty from 8 to 10% across board and from 20% to 22% for SUVs
and MUVs has already been priced in the stock prices.
The hike in excise duty on petrol and diesel may weigh negative on the auto
industry as such. But the rise in disposable income for the consumer is expected
to more than compensate for the above negative factors as the demand for
passenger vehicles and two wheelers rises.
Neutral for stocks like Ashok Leyland, Mahindra & Mahindra. Positive for
stocks like Hero Honda, Bajaj, Maruti.