CIA-1B
Security Analysis and
Portfolio Management
Fundamental Analysis
Submitted by: Vidhan Mehra
Mayank Jha
Shiv Khandelwal
Janit Trehan
Submitted to: Prof. Tapas Das, School of Business and
Management.
Industry Selected:
AUTOMOBILE INDUSTRY
India’s annual production in FY 2021 was 22.7 Mn vehicles
and 13 million vehicles from April to October 2021.
In the Automobile market in India, Two-wheelers and
passenger cars accounted for 81.2% and 14.6% market share,
respectively. Passenger car sales are dominated by small and
midsized cars.
Overall, Indian automobile export was 4.1 million vehicles in
FY21. Indian automobile exports stood at 1,419,430 units
from April 2021 to June 2021 as compared to 436,500 units in
April 2020 to June 2020.
The $118 bn Automobile industry is expected to reach $300
bn by 2026.
Expected to reach 72 vehicles per 1000 people by 2025
India accounts for 40% of total $31 bn of global engineering
and R&D spend. 8% of the country’s R&D expenditure is in
the automotive sector.
7.1% -Share in India's GDP
35 Mn- Employment generated
40%- Share in global R&D
4.7%-Share in India's exports
Companies Selected
The companies selected by us are:
TATA MOTORS- Tata Motors Limited designs, develops, manufactures, and sells a
range of automotive vehicles. The company offers passenger cars; utility vehicles;
intermediate and light commercial vehicles; small, medium, and heavy commercial vehicles;
defense vehicles; pickups, wingers, buses, and trucks; and electric vehicles, as well as related
spare parts and accessories. It also manufactures engines for industrial and marine
applications; aggregates comprising axles and transmissions for commercial vehicles; and
factory automation equipment, as well as provides information technology and vehicle
financing services.
The company offers its products under the Tata, Daewoo, Fiat, Jaguar, and Land Rover
brands. It operates in India, China, the United States, the United Kingdom, rest of Europe,
and internationally. The company was formerly known as Tata Engineering and Locomotive
Company Limited and changed its name to Tata Motors Limited in July 2003. Tata Motors
Limited was incorporated in 1945 and is headquartered in Mumbai, India.
EICHER MOTORS- Eicher Motors Limited, an automobile company, manufactures
and sells motorcycles and commercial vehicles in India and internationally. The company
owns the Royal Enfield motorcycle brand that offers Classic, Bullet, Himalayan, Interceptor
INT 650, Continental GT 650, and Thunderbird models. It designs, develops, manufactures,
assembles, and sells two-wheelers, as well as sells related parts and accessories.
The company, through its joint venture, Volvo Eicher Commercial Vehicles Limited,
manufactures and sells light and medium duty trucks, heavy duty trucks, and buses under the
Eicher brand; Volvo trucks; and engineering components and aggregates. Eicher Motors
Limited was founded in 1948 and is based in Gurugram, India.
MARUTI SUZUKI- Maruti Suzuki India Limited manufactures, purchases, and sells
motor vehicles, components, and spare parts primarily in India, rest of Asia, Europe, Africa,
Oceania, and Latin America. The company offers passenger vehicles, multi utility vehicles,
and multi-purpose vehicles. It is also involved in the facilitation of pre-owned car sales, fleet
management, and car financing.
In addition, the company offers driving school, accessories, insurance, auto card, pre-owned
car, and financing products and services. As of March 31, 2021, it had a network of 4,044
workshops across 2,014 towns and cities. The company was formerly known as Maruti
Udyog Limited and changed its name to Maruti Suzuki India Limited in September 2007.
The company was incorporated in 1981 and is headquartered in New Delhi, India.
Maruti Suzuki India Limited is a subsidiary of Suzuki Motor Corporation.
Financial Analysis
FUND FLOW ANALYSIS- Fund flow analysis is the calculation of working
capital of a company. A funds flow statement explains the changes in a
company's working capital. It considers the inflows and outflow of funds
(source of funds and application of funds) for a particular period.
1) TATA MOTORS-
2017- Current assets- current liabilities 12,757.07-21,538.35= -8,781.28
2018- Current assets- current liabilities 14,971.66 - 24,218.95= -9,247.29
2019- Current assets- current liabilities 13,229.30- 22,940.81=-9,711.51
2020- Current assets- current liabilities 13,568.76-25,810.82=-12,242.06
2021- Current assets- current liabilities 15,854.59-26.251.55=-10396.96
Tata motors has negative fund flow suggests lower inflows, higher outflows, or both. While
occasional shifts may not be indicative of issues within the company, prolonged negative
fund flows can be a sign there are some issues present, as this is a reflection of income not
being sufficient to meet the company's expenses.
2) EICHER MOTORS-
2017- Current assets- current liabilities =1,360.36-1,481.96=-121.6
2018- Current assets- current liabilities =2,524.42-2,194.63=329.79
2019- Current assets- current liabilities = 4,384.43-1,978.24=2,406.19
2020- Current assets- current liabilities =6,336.60-1,861.12=4,475.48
2021- Current assets- current liabilities =8,747.69-2,428.71=6,318.98
Positive cash flow indicates that a company's liquid assets are increasing, enabling it to
cover obligations, reinvest in its business, return money to shareholders, pay expenses, and
provide a buffer against future financial challenges.
3) MARUTI SUZUKI-
2017- Current assets- current liabilities 8,776.20-13,226.40=-4,450.20
2018- Current assets- current liabilities 7,921.40-15,442.10=-7,520.70
2019- Current assets- current liabilities 12,361.60-14,150.30=-1,788.7
2020- Current assets- current liabilities 8,427.40-11,294.80=-2,867.4
2021- Current assets- current liabilities 18,526.70-16,106.70=2,420
Tata motors has negative fund flow suggests lower inflows, higher outflows, or both. While
occasional shifts may not be indicative of issues within the company, prolonged negative
fund flows can be a sign there are some issues present, as this is a reflection of income not
being sufficient to meet the company's expenses.
RATIO ANALYSIS- Ratio analysis is a quantitative method of gaining insight into a
company's liquidity, operational efficiency, and profitability by studying its financial
statements such as the balance sheet and income statement.
Debt-equity ratio- The debt-to-equity ratio shows the proportions of equity and debt a
company is using to finance its assets and it signals the extent to which shareholder's
equity can fulfil obligations to creditors, in the event a business declines.
1) TATA MOTORS-
2021 2020 2019 2018 2017
Debt-Equity
Ratio 1.29 1.1 0.88 0.92 0.81
Net debt to equity ratio is considered high and is constantly increasing making it look
unattractive in comparison to its competitor Eicher motors.
2) EICHER MOTORS-
2021 2020 2019 2018 2017
Debt-Equity
Ratio 0.01 0.01 0.01 0.02 0.01
Debt level- the company has more cash than debt
Debt to Equity ratio has been constant since the past 4 years and is on a decreasing track
The company is well covered by operating cash flow
The company has a solid interest coverage and earns more interest than it pays.
MARUTI SUZUKI-
2021 2020 2019 2018 2017
Debt-Equity
Ratio 0.01 0 0 0.01 0.01
Debt level- the company has more cash than debt
Debt to Equity ratio has been constant since the past 4 years and is on a decreasing track
The company is well covered by operating cash flow
The company has a solid interest coverage and earns more interest than it pays.
Current ratio- The current ratio is a liquidity ratio that measures a company's ability to
pay short-term obligations or those due within one year. It tells investors and analysts how a
company can maximize the current assets on its balance sheet to satisfy its current debt and
other payables.
1) TATA MOTORS-
Ratio 2021 2020 2019 2018 2017
Current Ratio 0.59 0.58 0.6 0.59 0.61
The current ratio of tata motors suggest that it does not have adequate current assets to meet
its short term liabilities as the average current ratio should be around 1:3
2) EICHER MOTORS-
Ratios 2021 2020 2019 2018 2017
Current Ratio 2.4 1.77 1.26 0.61 0.34
The current ratio of Eicher Motors suggest that it has adequate current assets to meet its short
term obligations.
3) MARUTI SUZUKI-
RATIOS 2021 2020 2019 2018 2017
Current Ratio 0.62 0.55 0.47 0.46 0.56
The current ratio of Maruti suzuki suggest that it does not have adequate current assets to
meet its short term liabilities as the average current ratio should be around 1:3
Asset Turnover ratio- The asset turnover ratio measures the efficiency of a company's
assets in generating revenue or sales. It compares the dollar amount of sales (revenues) to its
total assets as an annualized percentage. Thus, to calculate the asset turnover ratio, divide net
sales or revenue by the average total assets.
1) TATA MOTORS-
Ratio 2021 2020 2019 2018 2017
Asset Turnover Ratio 0.88 0.9 1.56 1.41 1.24
Asset turnover ratio tata motors has been declining consistently, it is still around
an adequate level as the optimum ratio is around 0.25-0.50 but the company is
certainly unattractive in front of its competitors.
2) EICHER MOTORS
Ratios 2021 2020 2019 2018 2017
Asset Turnover Ratio 2.27 2.87 4 5.37 6.76
Asset turnover ratio tata motors has been declining consistently because the
automobile industry has not been performing well but the company is still able
to maintain an attractive asset turnover ratio.
3) MARUTI SUZUKI
RATIOS 2021 2020 2019 2018 2017
Asset Turnover
Ratio 2.3 2.7 3.6 4.09 4.55
Asset turnover ratio tata motors has been declining consistently because the
automobile industry has not been performing well but the company is still able
to maintain an attractive asset turnover ratio.
Return on equity - The return on equity is a measure of the profitability of a business in
relation to the equity. Because shareholder's equity can be calculated by taking all assets and
subtracting all liabilities
1) TATA MOTORS-
Tata motors has an unattractive ROE as it is currently
not profitable
2) EICHER MOTORS
Eicher motors has a moderate return on equity but
considering the industry average, the company is
attractive.
3) MARUTI SUZUKI
Maruti Suzuki has a moderate return on equity but
considering the industry average, the company is
attractive.
FINANCIAL HEALTH OF THE COMPANY
1) TATA MOTORS-
Company’s short term assets do not cover its short term liabilities
Company’s short term assets do not cover its long term liabilities
2) EICHER MOTORS
Company’s short term assets exceeds its short term liabilities
Company’s short term assets exceeds its long term liabilities
3) MARUTI SUZUKI
Company’s short term assets exceeds its short term liabilities
Company’s short term assets exceeds its long term liabilities
FUTURE PLANS OF THE COMPANY
1) TATA MOTORS- The company might seem like is running behind its competitors
on the basis of fundamental ratios but the company has well laid out and extensive
plans in the electric vehicle sector. TATA motors might emerge out as the victor in
the near future because of its leading involvement in the EV sectors and partnership
with giants like TESLA.
Tata Motors will invest as much as $2 billion (Rs 15,000 crore) over the next four years
to launch 10 new electric vehicles just as its broader passenger vehicles division —
which was in losses till a few years ago — hopes to turn around and generate free cash
flow by 2022-23
2) EICHER MOTORS- The company that rules the motorcycles segment of the Indian
market has been attractive to investors because of its excellent financials and has no
hope of slowing down.
The company plans to align its strategies with the global call for action against
climate change and support the automobile sector to transition toward a low carbon
economy. Lal also said that Eicher Motors aims to build trust and leave a positive
impact on its manufacturing units as well as across its entire product value chain.
3) MARUTI SUZUKI- Over the next five years, Suzuki will invest over 1 trillion yen
(approx. Rs 69,000 crore), most of which will be dedicated to research and
development of electrification solutions for its future models.
In India, Suzuki foresees its Indian arm, Maruti Suzuki, gradually making the
transition to having more electrified vehicles in its line-up. According to the mid-term
plan, Maruti Suzuki will focus on promoting hybrid vehicles in its range, and also
introduce a full electric vehicle
ECONOMY’S IMPACT
1) TATA MOTORS- Like most other carmakers in India, Tata Motors too failed to
avoid the impact of Covid-19 crisis on sales in May. The Indian vehicle manufacturer
registered a drop of 40 per cent in domestic passenger vehicles sales last month,
compared to 2019
The slump in month-on-month sales figures, however, appear as major gains if
compared to May last year, when Tata Motors could sell only 3,152 units due to the
nationwide lockdown enforced to curb spread of Covid-19 virus
2) EICHER MOTORS-
The profitability of Eicher for Q1 2020-21 will be impacted due to countrywide
lockdown. In the months of April 2020, May 2020 and June 2020, the Company could
sell only 91 units, 19,113 units and 38,065 units, respectively. The definitive impact
on Q1 2020-21 profitability and revenue will be announced post consideration and
approval of Q1 2020-21 financial results by the Board.
Eicher does not have long-term borrowings or loans. The working capital facilities of
the Company are running smooth and are backed with adequate assets. These working
capital facilities are sufficient to meet the financial requirements of the Company.
3) MARUTI SUZUKI-
Due to the economic slump and the impact of Covid-19, Maruti Suzuki is facing its
most significant challenge in over two decades. In fiscal year 2020-21 , output fell for
the third year in a row to an 11-year low, while sales volume fell for the second year
in a row to the lowest level since 2015.
Last fiscal year, the business produced roughly 1.08 million automobiles, down from
1.17 million the year before and even lower than the all-time high of 1.62 million
recorded in 2018.
