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Portfolio Abhishek's Project

Portfolio Abhishek's Project

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ANALYSIS OF COMPANY SCENARIO

Submitted by:Abhishek Kumar Jaiswal Reg No. HRD1108302 SBS - FINANCE
MAHINDRA & MAHINDRA Page 1

INDEX
CONTENTS  Introduction PAGE NO. 3

 Major Acquisitions Done By the Company In 2010-11 5

Financial Performance of the Company 7 Dividend Summary of the Company 9

 Split Summary 10  Financial Statements of the Company for the Financial  year 2010-11. 11 Balance Sheet Profit And Loss a/c Cash Flow Key Ratios 12 14 16 17

 Graphical Representation of Company Scenario 19
MAHINDRA & MAHINDRA Page 1

 Horizontal Analysis 22

Vertical Analysis 22 Determination of Value of a Share 23

LIST OF FIGURES Contents no. Figure

 Major divisions of the company……………..1.1  Networth……………………………………..1.3  Total Share Capital…………………………..1.4
  

Sales turnover chart………………………….1.5 Earning per share chart………………………1.6 Chart of debt and equity ratio………………..1.7

MAHINDRA & MAHINDRA

Page 1

design. to Mahindra& Mahindra Ltd in 1970.Company has over the past eight years acquired a leadership position in India in the field of research. Soon established as the Jeep manufacturers of India. CRISIL upgraded the rating for Long Term Banking facilities to AA+/Stable from the earlier AA/ Stable. starting with assembly under licence of the iconic Willys jeep in India. Company has been rated by CRISIL. M&M is the leader in the utility vehicle segment in India with its flagship UV Scorpio and enjoys a growing global market presence in both the automotive and tractor businesses. During the year. During the year. ICRA Limited (ICRA) and Credit Analysis & Research Limited (CARE) for its banking facilities under Basel II norms. Through its Mahindra Defence Systems Division (MDS). has revised the rating assigned to the company's long-term debentures to `AA+' to `AAA'. development and manufacture of armoured and light military vehicles. M&M later branched out into the manufacture of light commercial vehicles (LCVs) and agricultural tractors. Credit Rating and Information Services of India Ltd. It soon expanded into manufacturing general-purpose utility vehicles. ICRA and CARE have maintained a Long Term Rating of LAA+/Stable and CARE AA+ respectively. . The name of the company was changed from Mahindra Van Wijk &Visser Ltd.Introduction:The Company was Incorporated and converted into Public Limited in 1955 at Mumbai. Today. Company has been ranked in the list of top 10 companies in India by the Carbon Disclosure Leadership Index 2010and the MAHINDRA & MAHINDRA Page 1 .

In the Naval Systems business. assisting organizations in maintaining their competitive edge by protecting Information. Decoy Launchers and Composites for various Naval and other applications. process and technology. Company currently manufactures Sea Mines. Company also secured a second place in the Green Business Leadership Awards 2010-11. Major divisions of the company:- MAHINDRA & MAHINDRA Page 1 .Standard & Poor ESG India Index 2010. instituted by Financial Express and Emergent Ventures. Torpedo Launchers. In the Special Services Group business. Company provides corporate risk management consultancy services. Physical and Personnel Assets through implementing the security strategy encompassing people.

2 A premier manufacturer of sports utility vehicles (SUV) and recreational vehicles (RV) in Korea. SYMC was MAHINDRA & MAHINDRA Page 1 .Fig 1.1 MAJOR ACQUISITIONS DONE BY THE COMPANY IN 2010-2011 1) Acquisition of Ssangyong Motor Company Limited (SYMC) Fig 1.

waste management. SYMC has a strong domestic network of over 130 dealers and exports to over 90 countries through over 1.MACE. water. in Mahindra Consulting Engineers Limited (MACE).01% is held by Mahindra Consulting Engineers Employees Stock Option Trust and /or its beneficiaries. The total acquisition cost was approximately US$ 463 Million.founded in 1954 and has been manufacturing automobiles for more than five decades. wastewater. Maharashtra and is known for its quality products.16% of the Equity Share Capital of MACE. urban planning. whilst 30. a subsidiary of the Company is engaged in engineering. industrial infrastructure. etc. MACE entered into a strategic partnership with SAFEGE.83% is held by SAFEGE and balance 15.EPC established in 1981 is based in Nasik. environment. EPC has grown as one of the top five companies in India in the micro-irrigation space. MAHINDRA & MAHINDRA Page 1 . project advisory and infrastructure consulting activities covering urban infrastructure. company has acquired 38% of the paid-up Equity Share Capital through aPreferential Allotment in EPC Industries Limited (EPC). a company listed on the Bombay Stock Exchange Limited. transportation. 2) EPC Industries LTD. keeping the opportunities in Agricultural Sector in mind. France and post induction of the strategic partner. your Company holds 54. rural infrastructure. 3) SAFEGE – Its a France based Multi Disciplinary Consultancy Company.200 dealers.

Central Asia and Africa. Ltd– In order to address the large and growing market for uparmoured vehicles globally especially in West Asia. Mahindra Emirates Vehicle Armouring FZ LLC or MEVA in the Emirate ofRas-Al.Khaimah in the UAE for armouring of vehicles.Khaimah Transport Investments Co. in June.60% to Rs. LLC through its Investment wholly owned subsidiary Mahindra Overseas Company (Mauritius) Limited to form a Joint Venture company viz. Financial Performance of the company:The Automotive and Farm Divisions of Company has secured their best performance for the second year in a row reflecting in substantial growth in the net income of the Company by 26.4) Joint Venture with Arabia Holdings Limited and Ras-Al-Khaimah Transport Investments Co.2010.803 crores in the year MAHINDRA & MAHINDRA Page 1 . 23. your Company had entered into a Joint Venture with Arabia Holdings Limited and Ras-Al.

Companys tractor exports has grown by 33. This has also helped the Company to improve its market share which now stands at 42% as compared to 41.478.079.7% to reach 11. MAHINDRA & MAHINDRA Page 1 . Interest.02. 2. 2.088 crores in the previous year.50 million at the beginning of the year. Similarly.7%.662 crores as against Rs. The Company had outstanding Foreign Currency Convertible Bonds (FCCBs) aggregating USD 189.812 tractors as compared to 8. Exceptional items and Taxation recorded an increase of 19.4% in the previous financial year.18.3.37% at Rs.56 crores earned in the previous year.51% at Rs.73 crores as against Rs.766 crores as against Rs.801 crores in the previous year.2% over the previous year. Company registered a volume growth of 62. Chile and South Africa.66. Major subsidiaries such as Mahindra & Mahindra Financial Services Limited with a 38. This growth was driven by volume growth in SAARC. Profit after tax clocked an increase of 27. The consolidated Group Profit for the year after exceptional items.359 tractors in the previous year recording a growth of 21.81% growth in its consolidated Profits deserve special mention. 3.837 tractors exported in the previous year. In the Overseas market. Consequent to the remarkable performance.49% growth in its consolidated Profits and Mahindra Lifespace Developers Limited with a 37. 3.513 tractors as compared to 1.under review from Rs. The subsidiary companies of Company continue to contribute to the overall growth of the Company. thus completing 28 years of leadership in the Indian tractor industry.155 crores in the previous year. prior period adjustments and tax and after deducting minority interests is Rs. the Profit for the year before Depreciation. 2. Company outperformed the tractor industry with domestic sales of 2.

803 crores in the year under review from Rs.The automotive and farm division of the Company has secured their best performance for the second year in a row reflecting in substantial growth in the net income of the Company by26. The Special Dividend is being recommended in view of the Profit made by the Company on the sale of its entire holdings in Owens Corning (India) Limited.51% at Rs. 2. The proposed dividend will be paid on an MAHINDRA & MAHINDRA Page 1 .801 crores in the previous year. 2011.The company has repaid foreign currency loan aggregating Rs.60% to Rs.18. Exceptional items and Taxation recorded an increase of 19.37% at Rs.23 as at 31st March.1 per Ordinary (Equity) Share aggregating Rs. Similarly.5 each.155 crores in the previous year.50 per Ordinary (Equity) Share of the face value of Rs. the Profit for the year before Depreciation. The Company’s total Debt to Equity Ratio was 0.088 crores in the previous year. 23.50 per Ordinary (Equity) Share and also a Special Dividend of Re.10. Profit after tax clocked an increase of 27. Consequent to the remarkable performance. 3.662 crores as against Rs.200 crores during the year.176 crores and Non-Convertible Redeemable Debentures (NCDs) of Rs. payable to those Shareholders whose names appear in the Register of Members as on the Book Closure Date. Interest.766 crores as against Rs.11. 2. 3. DividendCompany has recommended a dividend of Rs. It has successfully raised External Commercial Borrowings aggregating USD 150 million from banks at attractive terms and at benchmark pricing.

The equity dividend outgo for the Financial Year 2010-11.8. inclusive of tax on distributed Profits (after reducing the tax on distributed Profits of Rs.5 each paid for the previous year).8.99 crores (as against Rs.64 crores (as against Rs.802.75 per share(15%)Spec Page 1 30-05-11 14-07-11 Final 230.50 per share(210%)Divi dend & Rs.98 crores payable by the subsidiaries on the dividends receivable from them during the current Financial Year) would absorb a sum of Rs.623.75 per Ordinary (Equity) Share aggregating Rs.00 MAHINDRA & MAHINDRA .10.enlarged capital base of Rs.75 per Ordinary (Equity) Share and also a Special Dividend of Rs.75 per share(175%)Divi dend + Rs. DIVIDEND SUMMARY OF THE COMPANY Dividend Declared Announce ment Date Effective Date Dividend Dividend Type (%) Remarks Rs.75 crores comprising the dividend of Rs.0.289.306.1.21 crores in the previous year).50 per Ordinary (Equity) Share of the face value of Rs.9.00 24-05-10 08-07-10 Final 190.00 per share(20%)Spec ial Dividend Rs.0.17.

00 100.00 115. 2010.00 AGM (25% Final Dividend + Special Dividend 15%) AGM AGM SPLIT SUMMARY Mahindra and Mahindra had last split the face value of its shares from Rs 10 to Rs 5 in 2010. Splits History Mahindra) Announcement Date 25-01-2010 Old FV 10 (Mahindra New FV 5 Ex-Split Date 29-03-2010 and MAHINDRA & MAHINDRA Page 1 .00 40.The share has been quoting on an ex-split basis from March 29.ial Dividend 19-05-09 16-05-08 23-05-07 07-03-07 19-05-06 09-07-09 Final 03-07-08 Final 05-07-07 Final 23-03-07 Interim 29-06-06 Final 100.00 75.

BALANCE SHEET Mar '11 Mar '10 Sources Of Funds Total Share Capital 293.95 272.62 282.FINANCIAL STATEMENTS OF THE COMPANY FOR THE FINANCIAL YEAR 2010-11.62 239.07 238.03 MAHINDRA & MAHINDRA Page 1 Mar '09 Mar '08 Mar '07 .

1 5.4 1 6 6 1.552.86 10.2 1.529.18 11.65 3.3 5.841.211.062.180.325.9 4.405.62 282.6 3.2 4.274.5 6 4 7 2. Depreciation Net Block Capital Work in Progress Investments Inventories .6 10.350.830.3 1.188.292.6 1.311.6 3.0 3.00 0.786.00 0.26 106.3 6 0 5 4.47 12.998.880.00 0.398.00 617.542.313.95 272.07 238.718.841.97 0.5 3.00 0.00 9.02 MAHINDRA & MAHINDRA Page 1 Unsecured Loans 1.1 878.0 6 3 1 12.77 9 8 2 2.01 0.296.866.098.94 329.7 2.237.007.653.959.18 1.60 11.639.937.72 5.0 2.0 2.060.9 1.7 1.00 0.969.587.9 7.62 239.552.296.710.48 9.67 4.00 0.302.Equity Share Capital Sh Application Money Pref Share Capital Reserves Revaluation Reserves Networth Secured Loans 293.277.326.9 8 8 3 3 0 4.23 9 7 7 0 407.23 602.1 2.974.00 8.537.188.8 1.7 6.78 1.328.31 886.15 6 6 0 12.4 3.70 Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum.96 649.071.215.084.09 12.3 9.849.364.527.45 981.243.541.03 33.4 4.694.0 1.710.052.41 7 6 5 5.627.732.6 1.636.327.374.

58 415.6 1.5 1.289.72 MAHINDRA & MAHINDRA Page 1 .4 3.034.53 17.005.881.19 5 0 3.797.653.718.89 5 8 447.3 9.2 7.85 138.56 Advances 0 1 4 Deffered Credit 0.1 5.7 0 1 7 1.43 6 4.496.9 6.7 2.9 2.268. Loans & 5.739.61 310.552.46 605.43 148.91 181.317.82 550.9 8 8 3 3 2 1.44 347.710.399.854.188.555.65 910.00 3.3 1.62 475.02 191.2 2.2 2.296.00 4.721.6 10.632.402.043.937.295.3 2.822.096.06 938.520.52 283.525.17 635.89 2.54 943.307.2 3.70 985.55 13.03 167.796.00 0.Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits 7 1 1.021.8 1.816.5 2.04 6 7 0 1.995.916.35 9 7 174.50 Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 0.18 Total CA.619.7 6.354.4 1.00 0.46 715.7 3.922.64 4 5.00 0.47 866.468.062.224.138.004.12 12.522.08 700.008.55 12.7 -978.673.220.00 0.102.081.5 2.258.2 3 7 6 1.011.277.

55 165.16 65.89 18.516.825.24 10.238.30 1.035.11 13.584.301.47 3.283.59 Page 1 3.22 11.15 68.61 87.439.11 531.85 1.69 7.417.96 264.604.963.85 134.024.33 257.323.20 3.231.55 20.69 132.49 6.461.199.894.93 120.33 853.092.12 1.56 1.94 11.40 19.97 98.63 14.26 1.10 25.33 Expenses Selling and Admin 1.83 20.136.301.933.34 563.56 15.51 MAHINDRA & MAHINDRA .733.807.587.17 6.04 1.96 149.82 91.23 1.57 1.65 73.081. Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost 16.66 1.477.21 -59.65 -156.13 202.52 96.59 1.157.569.71 143.29 210.37 9.PROFIT AND LOSS A/C ------------------------------------in Rs.20 70.08 11.640.668.13 12.92 1.10 Expenses Preoperative -50.33 3.667.78 291.19 666.23 285.84 -46.60 209.41 24.83 -42.02 238.92 75.65 1.44 12.004.88 12.80 1.44 10.445.56 9.05 1.523.53 18.29 575.242.108.80 1.87 ExpCapitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation 1.057.310.647.937.83 8.646.33 13.99 2.09 23.80 891.52 3.02 1.208.08 413.310.55 4.63 Expenses Miscellaneous 261.86 370.284.86 156.791.735. Cr.016.109.921.458.441.65 23.35 1.89 1.03 -47.36 Other Manufacturing 98.145.

390.57 0.846.56 0.08 96.00 706.68 3.633.68 -19.88 115.43 2.00 549.23 0.854.39 1.01 0.103.53 0.00 148.51 759.16 Earning Per Share (Rs) 45.97 3.59 1.00 0.85 36.00 1.872.Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Tax Dividend Extra-ord 0.00 282.61 2.774.52 74.69 2.26 991.33 1.15 115.7 MAHINDRA & MAHINDRA Page 1 .08 2.431.61 38.49 48.10 2.49 350.00 181.33 44.89 190.040.37 2.437.75 1.519.406.00 191.418.00 278.00 174.33 Equity Dividend (%) Book Value (Rs) 230.00 72.726.00 0.00 138.23 Per share data (annualised) Shares in issue (lakhs) 5.00 199.061.068.61 2.83 33.78 3.087.40 1.380.91 2.37 0.659.50 3.48 0.77 0.19 1.02 30.75 836.54 857.69 100.47 5.66 2.00 282.10 1.338.23 42.406.519.77 303.73 46.662.00 0.

0 2075.4 1631.64 ase In Cash and 1138.13 Tax 0 0 7 9 Net Cash From 2336.91636.21 -437.8 1561.9 Operating 2979.99 4 8 Activities Net Cash (used in)/from -383.72 -783. Cr.7 1753.39 Investing 3734.3 1168.0 1026.18 387.08 Financing Activities Net (decrease)/incre 207.8 923.2 1241.4 -1941.6 3402.34 418.0 -950.6 1361.96 Cash Equivalents Opening Cash & 1543.75 825.CASH FLOW Cash Flow Mahindra Mahindra of ------------------and ------------------in Rs.5 1315.7 Mar '11 MAHINDRA & MAHINDRA Page 1 .15 Cash Equivalents 3 2 9 Closing Cash & 614.83 9 0 5 Activities Net Cash (used in)/from 1345.88 1361.87696.17 1750.91 811.6 1174.13 725. Mar Mar Mar Mar '10 '09 '08 '07 Net Profit Before 2756.

Cash Equivalents 1 3 9 RATIOS Key Financial Ratios of Mahindra and Mahindra Mar11 Mar '10 Investment Valuation Ratios Face Value 5.00 47.37 11.36 10.38 6.58 9.87 8.79 Share (Rs) Free Reserves Per Share 165.29 12.50 Operating Profit Per 58.34 10.10 Profitability Ratios Operating Profit 14.12 9.08 11.66 71.89 Cash Profit Margin(%) 12.31 Mar '09 Mar '08 10.68 9.45 Mar '07 10.38 9.84 120.00 11.14 Margin(%) 5.08 62.25 MAHINDRA & MAHINDRA .09 168.36 71.24 170.65 Margin(%) Profit Before Interest 12.29 16.81 135.68 9.73 416.00 11.45 9.00 10.50 53.50 47.14 (Rs) Bonus in Equity Capital 58.19 Adjusted Cash 12.50 48.19 Margin(%) Net Profit Margin(%) 11.34 9.45 8.04 14.00 9.29 14.97 14.23 7.67 11.42 473.73 12.41 7.32 60.12 10.84 11.81 7.14 Adjusted Net Profit 11.59 9.25 6.30 Page 1 327.00 Dividend Per Share 11.60 Share (Rs) Net Operating Profit Per 399.20 479.67 And Tax Margin(%) Gross Profit Margin(%) 12.84 12.

60 17.46 0.41 0.83 0.49 13.03 18.91 3.73 14.20 Coverage Ratio Financial Charges 44.49 3.83 9.18 27.77 0.49 18.82 13.26 16.75 14.86 Ratio Asset Turnover Ratio Average Holding Raw Material 4.86 0.09 137.37 21.46 77.71 30.84 1.26 12.74 26.31 1.18 27.64 Page 1 MAHINDRA & MAHINDRA .96 Employed(%) Return On Net Worth(%) 25.01 0.51 20.97 Investments Turnover 15.22 1.70 26.32 Ratio Debt Coverage Ratios Interest Cover 48.85 65.57 17.23 Fund Financial Charges 54.37 16.46 18.33 1.42 2.08 19.63 14.86 Quick Ratio 0.14 16.77 11.90 0.15 191.52 25.42 5.64 Debtors Turnover Ratio 17.86 0.64 0.77 11.64 3.56 2.Return On Capital 26.45 138.61 180.09 17.60 0.53 67.67 0.37 0.61 Debt Equity Ratio 0.86 9.39 19.36 Total Debt to Owners 0.22 14.41 Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio 15.85 Excluding Revaluations Return on Assets 175.11 0.92 3.64 25.88 1.84 16.98 148.28 147.95 191.33 Worth(%) Return on Assets 174.22 16.85 1.91 16.87 181.90 0.85 15.74 0.56 12.90 27.74 3.52 26.23 13.08 Ratio Total Assets Turnover 1.99 16.23 Long Term Debt Equity 0.69 0.77 14.05 12.05 Funds(%) Liquidity And Solvency Ratios Current Ratio 0.64 Ratio Fixed Assets Turnover 4.04 Including Revaluations Return on Long Term 27.92 Adjusted Return on Net 24.24 0.51 1.

09 Cash Profit Earning Retention Ratio 67.43 30.61 2.67 75.81 69.28 1.97 6.88 148.87 25.17 3.72 36.55 74.59 7.80 23.41 Composition Expenses as Composition of Total 4.83 Times Earnings Per Share 45.77 16.91 SOME GRAPHICAL REPRESENTATION OF COMPANY SCENARIO MAHINDRA & MAHINDRA Page 1 .39 25.85 13.69 138.22 29.79 Consumed Selling Distribution Cost 4.15 Net Profit Dividend Payout Ratio 26.11 70.11 7.65 67.89 30.37 69.39 4.39 5.51 4.10 23.22 1.00 Working Capital Profit & Loss Account Ratios Material Cost 70.29 27.44 Ratio AdjustedCash Flow 0.40 66.72 Composition Imported Composition of Raw Materials 1.39 1.32 11.33 4.15 181.26 7.40 44.17 38.28 70.29 46.18 29.68 Sales Cash Flow Indicator Ratios Dividend Payout Ratio 30.56 67.Average Finished Goods 14.39 11.33 Book Value 174.19 37.40 7.24 Held Number of Days In -15.99 71.92 1.91 63.02 191.30 1.88 Cash Earning Retention 72.07 21.22 72.41 1.

4 MAHINDRA & MAHINDRA Page 1 .3 FIG 1.FIG 1.

FIG FIG 1.6 MAHINDRA & MAHINDRA Page 1 .

0 2.1 156.6 857.458.6 1.5 2.1 (0.8 759.1 1.846.040.1 0.2) 0.4 87.2 0.406.5 1.541.8 0.2 0.0 0.2 Mar '10 18.242.4 0.3 (1.8 303.0 2.1 0.1) 0.1 (0.8 0.9 2.3 30.3) (0.4 1.2 (0.774.103.519.406.5 70.0) 0.3 0.0) 0.2) 0.125.457.418.0 0.5 2.825.3 1.9 VERTICAL ANALYSIS:MAHINDRA & MAHINDRA Page 1 .5 199.0 (0.6 0.494.8 0.7 840.3 0.437.2 1.0 0.519.5 350.1 0.2 Mar '09 13.4 3.5) 0.001.035.9 46.5 19.0 (1.8 1.8 56.5 (0.9 9.0 1.8 1.3 72.3 0.652.9 20.0 Mar '07 10.931.4 10.3) (0.7 45.6 49.4 11.087.9 27.7 2.6 36.2) 1.7 (19.3) (0.3) Mar '08 12.3 0.2 0.2 0.1 991.057.1 58.0 3.1 15.894.0 1.9 3.5 1.4 0.1 1.HORIZONTAL FIG AND VERTICAL ANALYSIS HORIZONTAL ANALYSIS:Total Income Total Exp PBIT Interest PBT Extra-ordinary items PBT Tax PAT Shares EPS Mar '11 24.4 23.4 1.931.7 134.9 0.4 23.0 3.590.662.8 1.8 44.6 0.068.

94% 160.17% ) 2010 44. II.58% 23.82%) 179.50% 16.515.19% (24.12% 29.7 Increase by 30% MAHINDRA & MAHINDRA Page 1 .79% ) 14. Trend ) 24.95% (54.49% 13.Total Income Total Exp PBIT Interest PBT Extra-ordinary items PBT (Post Extra-ord Items) Tax PAT Shares EPS 2008 15.78% 26.27% 0.38% 22.15%) (100.37% (2.17% 33.21% 2011 28.87% 48.10% 2.00%) 173.61% 22.64% 280.29% 27.44% 2.58% 3.03% (100.51% 107.67% ) 53.83%) (13.88% Determination of Value of a Share: To determine the value of a share we need to find out I.5 1% (26.03% ) (34.77% 19.82% 2009 8.98% 148.03% (33.18% ) (23.53% 342.242.09% 12.07% 17.00%) (0. Projected EPS for the year ending 2012 Projected PE Ratio for the year ending 2012 Projection for the EPS of year 2012: Particulars Total Income Mar Mar '12 Assumption '11 (Project based on Past (Actual ed) Yrs.78% 29. 31.34%) 3.

21 70.51 2. Projection of PE Ratio for the year 2012: The other half of the valuation exercise is concerned with the price-earning ratio which reflects the price investors are willing to pay per rupee of EPS.519. The PE Ratio can be derived from the constant growth dividend model and the formula for which is given below: Dividend PE Ratio = Reqd.33 6 27. it represents the market’s summary evaluation of a company’s prospects.72 55.72 45.4 7 70. of Equity Shares (in Cr.341.45 86% of Total Income No change 25% of Income The earnings and the EPS forecasted are based on the assumptions mentioned in the above column and these assumptions are made on the past trend of the company.652.34 3.35 1. In essence. 42 3.6 1 857.) Earnings Per Share 89 20.085.103.86 4.412.256.590.86 3.01 58.1 0 58. Return on Equity – Expected growth rate in Dividends MAHINDRA & MAHINDRA Page 1 .Total Expense PBIT Interest Profit Before Tax Tax @ 25% Profit After Tax No.5 5 4.662.

51 30. The dividend payout ratio for 2012 is set equal to the average dividend payout ratio for the period of 2007-2011 0.3212+0.3233+0.3045+0.78 37 39 10.231.1 2.268. once dividends are set at a certain level they are not reduced unless there is no alternative.103. 1. 5.810.03 25.74 16. 24 55 88 60 04 26. 3. 1. Consequently. 4. 0 75 836.068.662.3378 =0. Equit RETURN ON EQUITY y = Equity The return on equity of Mahindra & Mahindra for the previous five years (2007-2011) was: Mar Mar Mar Mar Mar '11 '10 '09 '08 '07 2.A)Dividend Payout Ratio: Most companies consider their dividend commitment seriously.087. 7.32 5 94 B) Required Return on Equity: Return on equity is the most important indicator of financial performance. dividends are not increased unless it is clear that a higher level of dividends can be sustained.337.92% % % % % PAT Equity & Reserves ROE The average RETENTION & ROE of M&M is given below: Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 AVERA GE Page 1 MAHINDRA & MAHINDRA .540.3601+0. Further.18 25.

11.ROE RETENTION GROWTH RATE 25.1858 – 0.74 % 69.67 % 10.5 Po = Rs.1667 PE Ratio = = 17.99 % 24.99 % 16. Ke = Now the PE Ratio can be calculated by the above given formula as: 0.92 % 67.18 Historical Analysis: MAHINDRA & MAHINDRA Page 1 .88 % 17.88% 67.51 % 63.55 % 18.60 % 16.67% The growth rate of the company is calculated by the formula given below: GROWTH RATE = %ROE * % RETENTION The cost of equity is derived from the dividend discount model (DDM) and hence Do P Do = Rs.03 % 67. 700 g = 16.58%. the value of Ke will be 18.22 % 19.67% Hence.06% 16.85 % 25.32 % 30.329 4 0.59 % 26.18 % 66.

88 545 192 335 380 14.We have calculated the average of the PE Ratio for M&M and it depicted in the table below: Mar '11 45.48 We can combine these two estimates by taking a simple arithmetic average of them.47 The Weighted PE Ratio: We arrive at the two PE Ratio estimates: PE Ratio based on the constant growth DDM : 17.18 + 10.3 3 710 15.69 46.18 PE Ratio based on the historical analysis : 10.48 EPS MPS PE RATIO 36.77 6. Doing so.6 6 Mar '10 Mar '09 Mar '08 Mar '07 AVERA GE 10.48 2 = 13.15 44.26 8. we get the weighted PE Ratio of: 17. This means that both the estimates are accorded equal weight.83 Determination of Value Anchor and a Value Range: MAHINDRA & MAHINDRA Page 1 .89 30.26 7.

The value anchor is obtained as follows: Projected EPS * Appropriate PE Ratio = 55. it would be naïve to put great faith in a single point intrinsic value estimate. 840 Decision Buy Hold Sell REFRENCES MAHINDRA & MAHINDRA Page 1 . Practically we should define an intrinsic value range around a single point estimate. 840 Mare than Rs.45 * 13. Given this the value range. Hence by taking the value range of 10% we can define the intrinsic value range as 690 – 840. 767 As valuation is inherently an uncertain and imprecise exercise. 690 Between Rs. 690 and Rs.83 = Rs. decision rule may be as follows: Market Price Less than Rs.

 Wikipedia.com  Security and Portfolio Management by Prasanna Chandra.com.  www.moneycontrol.nseindia. MAHINDRA & MAHINDRA Page 1 . www.

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