ACCOUNTANCY PROJECT

2021 - 2022

Name:
Table of Contents

1 Introduction.........................................................................................................................................3
1.1 History.........................................................................................................................................3
1.2 Board of Directors........................................................................................................................5
2 Data for analysis..................................................................................................................................9
3 Tools for financial analysis...................................................................................................................9
4 Calculation of ratios.............................................................................................................................9
4.1 Liquidity Ratio (short term solvency ratios)...............................................................................10
4.1.1 Current ratio......................................................................................................................10
4.1.2 Quick ratio.........................................................................................................................11
4.2 Solvency Ratios..........................................................................................................................12
4.2.1 Debt/Equity ratio...............................................................................................................12
4.2.2 Total asset to Debt.............................................................................................................13
4.2.3 Proprietary Ratio................................................................................................................14
4.2.4 Interest coverage ratio.......................................................................................................15
4.3 Activity Ratios............................................................................................................................16
4.3.1 Inventory turnover Ratio....................................................................................................16
4.3.2 Trade Receivables turnover ratio (Debtors turnover ratio)................................................17
4.3.3 Trade Payable turnover ratio.............................................................................................18
4.3.4 Working Capital Turnover Ratio.........................................................................................19
4.4 Profitability Ratios.....................................................................................................................20
4.4.1 Gross profit Ratio...............................................................................................................20
4.4.2 Net Profit Ratio..................................................................................................................21
4.4.3 Operating profit Ratio........................................................................................................22
4.4.4 Operating ratio...................................................................................................................23
5 Conclusion.........................................................................................................................................24
6 References.........................................................................................................................................24
1 Introduction
1.1 History
Mahindra & Mahindra Limited (M&M) was established on October 2, 1945 when K.C. Mahindra visited
the United States of America as Chairman of the India Supply Mission. The Mahindra brothers joined
hands with Ghulam Mohammed and, Mahindra & Mohammed was set up as a franchise for assembling
jeeps from Willys, USA.

1947: Jeeps come in from Willys Overland Export Corporation, USA in CKD condition; assembly of which
commences at Mazagon, Bombay.

1948: Post-independence, Ghulam Mohammed moves to Pakistan post partition and goes on to become
the country's first Finance Minister. Mahindra & Mohammed subsequently changes its name to
Mahindra & Mahindra.

1955: On June 15, 1955, the company announces going public and in 1956, its shares are listed on the
Bombay Stock Exchange.

1961: Mahindra joins hands with the US manufacturer of agricultural machinery, construction
equipment, trucks, automobiles, and household and commercial products, for the manufacture of
tractors

1961: M&M and Ugine Kuhlmann, France, come together to form MUSCO, a Joint Venture, to
manufacture alloy steel.

1983: Mahindra becomes the largest selling tractor brand in India, and it’s holding the position for three
decades now.

1986: Mahindra enters the telecom IT services space through Mahindra British Telecom, a joint venture
with British Telecom, UK – the company that later became 'Tech Mahindra'.

1991: Maxi Motors Financial Services Limited. Name was changed to Mahindra & Mahindra Financial
Services Limited and Fresh Certificate of Incorporation was received

1996: Mahindra Holidays and Resorts India Ltd. (MHRIL) is born

1997: Anand Mahindra becomes Managing Director

2000: Mahindra Bolero and Scorpio launched

2008: Mahindra enters 2 wheeler market and aftermarket

2009: Mahindra enters Aerospace

2010: Mahindra Blues, India’s biggest blues music festival, launched. Mahindra acquires Reva Electric
Vehicles

2013: Tech Mahindra and Mahindra Satyam merge

2014: Mahindra enters FIA Formula E Championship

2015: Multiple vehicles launched

2019: Mahindra unveils the Pininfarina Battista, the world's 1st Electric Hypercar

What began as a steel-trading venture seven decades ago, steadily turned into a global brand, spanning
nations and industries. Expanding to 22 key industries with operations in 100+ countries and 150+
companies!
This is a story with an upward curve, narrating how an Indian company paved its way to become a global
powerhouse.

The Ordinary (Equity) shares of the company are listed on the National Stock Exchange of India Limited
(NSE), the BSE Limited (BSE) in India. The Global Depository Receipts (GDRs) (underlying equity shares)
of the Company are listed on the Luxembourg Stock Exchange and are also admitted for trading on
International Order Book (IOB) of the London Stock Exchange.
1.2 Board of Directors

1. Mr Anand G Mahindra – Executive Chairman

Mr Anand Mahindra is the Chairman of the US $20.7
billion Mahindra Group and the Executive Chairman of
Mahindra & Mahindra Ltd. His tenure has seen the
Group expand domestically and internationally into a
range of major industrial sectors from automobiles
and agriculture to IT and aerospace. The Group has
also grown inorganically through acquisitions such as
Swaraj Tractors, Reva Electric Car Company, Satyam
Computer Services, Peugeot Motorcycles, Gippsland
Aeronautics, Aero staff Australia, Holiday Club
Resorts, and Pininfarina S.p.A.
Mr Mahindra is an incisive business commentator and humanitarian with over 7.5
million followers on Twitter. Among his many social change initiatives is the Nanhi Kali
programme, which, for the last two decades, has provided over 330,000 under-
privileged girls access to high quality education
2. Dr Anish Shah – Managing Director & CEO, Mahindra & Mahindra
Dr. Anish Shah is the Managing Director and CEO of Mahindra &
Mahindra Ltd. He joined Mahindra Group in 2014, as Group
President (Strategy), and worked closely with all businesses on
key strategic initiatives, built capabilities such as digitization &
data sciences and enabled synergies across group companies. In
2019, he was appointed Deputy Managing Director and Group
CFO, with responsibility for the Group Corporate Office and full
oversight of all businesses other than the Auto and Farm sectors,
as a part of the transition plan to the CEO role.

Anish holds a Ph.D. from Carnegie Mellon’s Tepper School of Business where his
doctoral thesis was in the field of Corporate Governance.

3. Mr Rajesh Jejurikar – Executive Director (Auto & Farm Sectors)

Rajesh has diverse experience across Packaged Goods,
Advertising, Media, Automotive and Farm Equipment. He joined
Mahindra in 2000 as Vice President – Marketing for Automotive
Sector. In 2003, he was appointed Executive Vice President –
Sales & Marketing. In 2005, he was given additional
 responsibility as the Managing Director of Mahindra Renault. In 2008, he became Chief
of Operations of the Automotive Sector and when Automotive & Farm Equipment
Sector (AFS) was formed in 2010, he was appointed Chief Executive for the Automotive
Division and Member of the Group Executive Board.
In 2013, Rajesh joined the Farm Equipment Sector as Chief Executive – Tractor & Farm
Mechanisation and became the Sector President in 2015.
He is a Director on the Board of Mahindra & Mahindra Ltd and serves on the boards of
several Mahindra Group companies in India as well as overseas.
An MBA from S P Jain Institute of Management, Rajesh attended the Advanced
Management Program at The Wharton School, University of Pennsylvania and was
awarded the British Chevening Scholarship to study at the Manchester Business School,
UK.

4. Mr Vikram Singh Mehta – Lead Independent Director

Mr. Vikram Singh Mehta’s career began as a Member
of the Indian Administrative Service of the Government
of India in 1978.Mr. Mr. Vikram Singh Mehta was until
November, 2012 Chairman of the Shell Group of
Companies in India. Vikram Singh Mehta completed his
Bachelor’s Degree in Mathematics (Hons.) from St.
Stephens College, Delhi University.
Mr. Vikram Singh Mehta, Independent Director and
Chairman of Governance, Nomination and
Remuneration Committee has been appointed as the
Lead Independent Director with effect from 1st April,
2021. As a Lead Independent Director, Mr. Mehta has
been entrusted, inter alia, with the following roles and
responsibilities:
a) Provide leadership to the independent directors and liaise between the chairperson
of the Board and independent directors without inhibiting direct communication
between them
b) Ensure Board effectiveness to maintain high-quality governance of the Company and
the effective functioning of the Board.
c) Convene the exclusive Meeting(s) of Independent Directors, set agenda, preside
over the meetings of the independent directors and providing feedback to the
chairperson/board of directors after such meetings
d) Preside over meetings of the Board at which the Chairperson is not present

5. Mr C P Gurnani – Non Executive Non Independent Director

 A lifelong learner and a disrupter is what best describes CP. An accomplished business
leader with extensive experience in international business development, start-ups and
turnarounds, joint ventures, mergers and acquisitions, CP led Tech Mahindra's
transformation journey, and one of the biggest turnarounds of Indian Corporate History - the
acquisition and merger of Satyam.
CP strongly believes in promoting child education. He is on the Board of an active member of
the Tech Mahindra Foundation – launched in 2007 to help the underprivileged children

6. Mr T N Manoharan – Independent Director

Mr. TN Manoharan is a law graduate and a fellow member of The
Institute of Chartered Accountants of India. He also holds a Masters
degree in Commerce. He is a Non-Executive Chairman on the
Board of Canara Bank, an Independent Director on the Board of
Directors of Tech Mahindra Limited and was nominated by the
Government of India to the Board of Satyam Computer Services
Limited

7. Ms Shikha Sharma – Independent Director

Ms. Shikha Sharma holds a Post Graduate Diploma in
Management from IIM, Ahmedabad, a Post Graduate Diploma in
Software Technology from National Center for Software
Technology and a B.A. (Hons.) in Economics. Shikha was the
Managing Director & CEO of Axis Bank, India's third largest private
sector bank, from June, 2009 to December 2018. During her tenure
as Managing Director & CEO, Axis Bank witnessed immense
growth in the network, market capitalisation and in consumer
lending business, and transformed Axis Bank into a digital leader in
mobile banking and digital payments

8. Mr Haigreve Khaitan – Independent Director

Mr. Haigreve Khaitan has done his LL.B. from South Kolkata Law
College. Mr. Haigreve Khaitan is a Partner of Khaitan & Co. Haigreve
started his career in litigation and over the years has been involved in
many M&A and private equity transactions, as well as project finance
transactions. He has rich experience in all aspects of M&A due
diligence, structuring, documentation involving listed companies,
cross-border transactions, medium and small businesses etc

9. Dr Vishakha N Desai – Independent Director

Vishakha, joined the Board in May 2012. She is President and
CEO of the Asia Society, a leading global organization committed to
strengthening partnerships among the people, leaders and
institutions of Asia and the United States. Dr. Desai holds a BA in
Political Science from the University of Mumbai, and an MA and
PhD in Asian Art History from the University of Michigan
10. Mr Vijay Kumar Sharma – Independent Director
Shri Vijay Kumar Sharma superannuated as Chairman, Life
Insurance Corporation of India on 31st December, 2018. Prior to his
taking over as Chairman on 16th December 2016, he served as
Chairman (In charge) from 16th September, 2016 and Managing
Director, Life Insurance Corporation of India.

He has been an inspirational leader who utilizes negotiation skills

gained over thirty seven years of extensive experience in insurance
and financial sectors and strongly connects to the grass root levels,
believes in bottom-up approach and has the ability to see the Big Picture and translate it to
reality.

11. Ms Nisaba Godrej – Independent Director

Nisaba is the Chairperson and Managing Director of Godrej
Consumer Products. She has been a key architect of GCPL’s
strategy and transformation in the last decade.
Nisaba is passionate about identifying and developing the talent
required for the Godrej Group’s future growth. Through her
oversight of the Group HR function for Godrej Industries and
associate companies, she has made Godrej a more meritocratic
and highly performance driven organisation, while keeping the
Group’s values front and center

12. Mr Muthaiah Murugappan – Independent Director

Mr. Muthiah Murugappan (Muthu), has completed his MBA from
London Business School. He is B.Sc. Management Sciences from
University of Warwick (Warwick Business School)
For over a decade now, he has been working with startups and Micro
VC funds ( as an angel investor / LP ) in the areas of SaaS,
Ecommerce, Deep Tech & Consumer goods.
2 Data for analysis
3 Tools for financial analysis
4 Calculation of accounting ratios
Ratio analysis is a technique of Financial Statement Analysis. It is the mostly used tool to interpret
quantitative relationship between two variables of the financial statements. It helps to provide a
meaningful understanding of the performance and financial position of an enterprise.

Ratio analysis serves the purpose of various users who are interested in the financial statements.

- Simplifies, summarizes and systematize accounting data and makes is easily understandable
- Helps in accessing the operating efficiency businesses
- Useful for business planning and forecasting
- Useful in locating weak areas of business
- Useful in intra-firm and inter-firm comparison

Accounting ratios are classified into four categories – a) Liquidity ratio. B) Solvency ratio, c) Activity/
Turnover ratio, d) Profitability Ratio
4.1 Liquidity Ratio (short term solvency ratios)
Liquidity ratio are those ratios which are computed to evaluate the capability of the entity to
meet its short-term liabilities.

4.1.1 Current ratio

Objective & Significance:

The current ratio is a popular metric used across the industry to assess a company's short-term
liquidity with respect to its available assets and pending liabilities. In other words, it reflects a
company's ability to generate enough cash to pay off all its debts once they become due. It's used
globally as a way to measure the overall financial health of a company.

Formula:

Ideal Value:

While the range of acceptable current ratios varies depending on the specific industry type, a
ratio between 1.5 and 3 is generally considered healthy.

A ratio value lower than 1 may indicate liquidity problems for the company, though the company
may still not face an extreme crisis if it's able to secure other forms of financing.

A ratio over 3 may indicate that the company is not using its current assets efficiently or is not
managing its working capital properly.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Current Ratio 1.342 1.380 1.5 – 3.0

M&M has current ratio almost at the ideal level

4.1.2 Quick ratio or liquid ratio
Objective & Significance:

The Quick Ratio (or quick liquidity ratio) is the total amount of a company’s quick assets divided
by the sum of its net liabilities and reinsurance liabilities. In other words, it shows how much
easily-convertible-to-money assets, such as cash, short-term investments, equities, and corporate
and government bonds nearing maturity, an insurance company can tap into on short notice to
meet its financial obligations.

The quick ratio is also commonly referred to as the acid-test ratio

Formula:

Ideal Value:

Quick liquidity ratios are usually expressed as a percentage. The higher the percentage, the more
liquid and capable of paying off any money owed the company is.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

  2020-2021 2019-2020 Source

Current Asset 20,312.30 15,141.49 Balance Sheet
Inventories 3,955.47 3,400.91 Balance Sheet
Prepaids 0 0  

Ratio 2020-2021 2019-2020 Ideal Value

Quick Ratio 1.081 1.070
4.2 Solvency Ratios
Solvency ratios are the ratios that shows whether the enterprise will be able to meet the long
term financial obligations.

4.2.1 Debt/Equity ratio

Objective & Significance:

The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and is calculated
by dividing a company’s total liabilities by its shareholder equity.

The D/E ratio is an important metric used in corporate finance. It is a measure of the degree to
which a company is financing its operations through debt versus wholly owned funds. More
specifically, it reflects the ability of shareholder equity to cover all outstanding debts in the event
of a business downturn.

Given that the D/E ratio measures a company’s debt relative to the value of its net assets, it is
most often used to gauge the extent to which a company is taking on debt as a means of
leveraging its assets. A high D/E ratio is often associated with high risk; it means that a company
has been aggressive in financing its growth with debt.

Formula:

Ideal Value:

 Higher-leverage ratios tend to indicate a company or stock with higher risk to shareholders.
 However, the D/E ratio is difficult to compare across industry groups where ideal amounts of
debt will vary.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Debt-to-Equity Ratio 0.205 0.059

Debt Equity ratio increased to 0.22 in FY 2020-21 as against 0.09 in the previous year due to
additional borrowings taken during the year.
4.2.2 Total asset to Debt
Objective & Significance:

Total asset to Debt ratio shows the relationship between total assets and long-term debts of an
enterprise. It is expressed as a pure ratio.

It measures the safety margin available to the lenders of long-term debts. It measures the extent
to which debt is covered by the assets of an enterprise.

Formula:

Ideal Value:

A higher ratio means higher safety cover for the lenders to the business, on the other hand, a low
ratio means lower safety for lenders as business depends largely on outside loans for its
existence

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Total Asset to Debt Ratio 8.428 24.853
4.2.3 Proprietary Ratio
Objective & Significance:

Proprietary ratio establishes the relationship between the proprietor’s funds and the total assets.
It can be expressed as a pure ratio or as percentage. Objective of computing this ratio is to
measure the proportion of total assets financed by proprietor’s funds. This ratio is important for
unsecure lenders and creditors as they can ascertain shareholders’ funds invested in total assets
employed in the firm and thus safety margin available to them.

Formula:

Ideal Value:

Higher ratio means inadequate safety for unsecured lenders and creditors. A low ratio indicates
greater risk to unsecured lenders and creditors and the enterprise getting benefit of trading on
equity.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Proprietary Ratio 0.579 0.683
4.2.4 Interest coverage ratio
Objective & Significance:

Interest coverage ratio establishes the relationship between net profit before interest and tax
and interest on long term debts. Interest is the charge on profit, therefore, net profit before
interest and tax is taken to calculate the ratio.

The objective of calculating this ratio is to determine the amount of profit available to cover
interest on long term debt. The ratio is important for debenture holders and lenders of long term
funds.

Formula:

Ideal Value:

A high ratio is considered better for the lenders as it shows higher profit margin to meet interest
cost.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Interest Coverage Ratio 5.569 29.426

The interest coverage ratio declined to 9.07 in FY 2020-21 as against 25.07 in the previous year
primarily due to increase in nance cost resulting from additional borrowings during the year.
4.3 Activity Ratios or performance ratios or turnover ratios
These ratios measure the effectiveness with which the enterprise uses its available resources.

4.3.1 Inventory turnover Ratio

Objective & Significance:

Inventory ratio is an activity ratio. It establishes relationship between cost of revenue from
operations. The objective of inventory ratio is to determine whether investment in stock has
been judicious or not. It measures the efficiency of inventory management. It shows the number
of times amount invested in inventory is rotated.

Formula:

Ideal Value:

A high ratio shows that more sales are being produced by a rupee of investment in inventories. A
very high inventory turnover ratio shows overtrading, and it may result in working capital
shortage.

A low inventory turnover ratio means inefficient use of investment in inventory, over investment
in stock, accumulation of inventory, etc.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Inventory Turnover Ratio 12.245 6.319
4.3.2 Trade Receivables turnover ratio (Debtors turnover ratio)
Objective & Significance:

Trade Receivables turnover ratio is an activity ratio. It establishes the relationship between credit
revenue from operations, i.e. Net Credit Sales and Average Trade Receivables, i.e. average of
debtors and bill receivables of the year.

This ratio indicates the number of times trade receivables are turned over in a year in relation to
credit sales. It shows how quickly trade receivables are converted in Cash and Cash Equivalents
and thus, shows the efficiency in collection of amounts due against trade receivables.

Formula:

Ideal Value:

A high ratio is better since it shows that debts are collected more promptly. A lower ratio shows
inefficacy in collection or increase credit period and more investment in debtors than required

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Trade Receivables Ratio

The debtors turnover ratio improved to 26.96 in FY 2020-21 as against 14.86 in the previous
year primarily due to better collection efforts and significant improvements in the credit
management process across divisions.
4.3.3 Trade Payable turnover ratio
Objective & Significance:

Trade Payables turnover ratio is activity ratio. It means amount payable for purchase of goods
and/or services taken by the enterprise in the ordinary course of business. It includes creditors
and bills payables. It shows the relationship Net Credit Purchases and Total Payables or average
payables, whereas average payment period or creditors velocity shows the credit period availed
by the enterprise from the creditors.

The objective of this ratios is to determines the efficiency with which the Tarde Payables are
managed and paid.

Formula:

Ideal Value:

High turnover ratio or shorter payment period shows less credit period being available or early
payments being made. A higher ratio indicates that the enterprise is not availing full credit
period.

A low ratio or longer payment period indicates that creditors are aid in time or increased credit
period.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Trade Payable Ratio
4.3.4 Working Capital Turnover Ratio
Objective & Significance:

Working capital turnover ratio shows the relation between working capital and revenue from
operations. It shows the number of times a unit of rupee invested in working capital produces
sales.

The objective of this ratio is to ascertain whether or not working capital has been effectively used
in generating revenue.

Formula:

Ideal Value:

A high ratio shows efficient use of working capital, whereas low ratio shows its inefficient use

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Working Capital Turnover Ratio 8.697 10.912
4.4 Profitability Ratios
Efficiency in business is measured by profitability. Profitability ratios measures the financial
performance of the business.

4.4.1 Gross profit Ratio

Objective & Significance:

Gross profit ratio establishes the relationship of gross profit and revenue from operations, i.e.,
net sale of an enterprise. The ratio is calculated and shown in percentage.

The main objective of computing this ratio is to determine the efficiency with which production
and/or purchase operations and selling operations are carried out.

Formula:

Ideal Value:

Higher gross profit ratio is better as it leaves higher margin to met operating expense and
creation of reserves.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Gross Profit Ratio 80% 99%
4.4.2 Net Profit Ratio
Objective & Significance:

Net profit ratio establishes the relationship between net profit and revenue from operations, i.e.,
net sales. Net profit ratio is the indicator of overall efficiency of the business.

This ratio helps in determining the operation efficiency of the business. An increase in the ratio as
compared to previous period shows improvement in the operational efficiency and decline
means otherwise. A comparison with industry standard is also an indicator of the efficiency of the
business

Formula:

Ideal Value:

Higher the net profit ratio, better the business.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Net Profit Ratio 1% 3%
4.4.3 Operating profit Ratio
Objective & Significance:

Operating profit ratio measures he relationship between operating profit and revenue from
operations.

The objective of computing the ratio is to determine the operational efficiency of the business.
An increase in the ratio over previous period shows improvement in the operational efficiency of
the business enterprise.

Formula:

Ideal Value:

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Operating Profit Ratio 14% 13%
4.4.4 Operating ratio
Objective & Significance:

Operating ratio establishes the relationship between operating cost and revenue from
operations.

The objective of computing operating ratio is to access the operational efficiency of the business.
It shows the percentage of revenue from operations tat is absorbed by the cost of revenue from
operations (cost of goods sold) and operating expenses

Formula:

Ideal Value:

A lower operating ratio is better because it leaves higher profit margin to meet non-operating
expenses to pay dividend etc.. A rise in the operating ratio indicates decline in efficiency.

M&M Analysis:

(Liquidity position ii] Solvency Position iii] Efficiency iv] Profitability)

Ratio 2020-2021 2019-2020 Ideal Value

Operating Ratio 86% 87%
5 Conclusion
6 References