EIC Analysis of

Economy Analysis
GDP
Index of Industrial Production (IIP)
WPI Based Inflation
Fiscal Expenditure
India’s Balance of Trade
Foreign Direct Investments
 Union Budget Highlights
Budget 2016-17
• An additional 1% infrastructure cess to be levied on Petrol, CNG, LPG cars
while 2.5% infrastructure cess to be levied on diesel cars
• An additional 1% extra luxury cess to be put on cars priced above Rs 10
lakh
Budget 2015-16
• No decrease in the interest rates by banks and financial institutions
• Excise duty rolled back
Budget 2014-15
• Announcement of the GST Bill, for the first time; induced positive sentiments
• Measures for infrastructure development like highways, industrial corridors
Budget 2013-14
• A “neutral” budget for the auto sector; no major changes
Budget 2012-13
• Excise duty up on large cars from 22 per cent to 24 per cent
 FUTURE PROSPECTS
OF
THE INDIAN ECONOMY
Industry Analysis
1| Industry Overview
and History

Largest contributor to GDP and Advantage

Employment India

7% of India’s GDP Growing Demand

Low penetration
45% of manufacturing GDP
Favourable Demographics
Employs 19 million people Competitive pricing

Rising Investments
4.3% to India’s Exports
Cost Advantage
13% to Excise Revenues Manpower & Technological
base
Policy Support
Global Manufacturing and
R&D Hub
 Indian Automobile Industry
Evolution
 Closed Market ; 5 players
 Long waiting period & out-dated
0.4 million units (1982) Befor
models
e  Seller’s Market
1982

 Indian Government and Suzuki

formed Maruti Udyog
 Component Manufacturers entered 1983
-1992 0.6 million units (1992)
via JV

11 million units (2007) 1993 -  Sector de-licensed in 1993

2007  Major OEMs set up operations
 Imports permitted from 2001

 More than 35 Market Players

 National Automotive Board as
facilitator 2008
 GST, Automotive Mission Plan onward 24 million units (FY16)
s
 Porter’s Five Forces Analysis

Threat of New Substitute Products

Entrants (LOW) (LOW)

5
Competitive Rivalry
(HIGH)

Bargaining Power of Bargaining Power of

Customers (HIGH) Suppliers (LOW)

Passenger Utility Vehicles Vans

Cars
Maruti Suzuki (52.8%) Mahindra (36.4%) Maruti Suzuki
Hyundai (21.2%) Maruti Suzuki (81.8%)
TATA Motors
HONDA (9.3%) (14.7%)
Toyota (13.6%) (12.26%)
Mahindra (5.98%)
TATA Motors (5.6%) Hyundai (9.9%)
2| Government Policies

 Union Budget FY16-17

 Automotive Mission Plan
2026
 Boost to automotive FDI and
R&D  Make in India
 Auto Policy 2002
 Independent Department
 NATRiP
for Transport
 Dept. of Heavy Industries &
 Infrastructure development
Public Enterprises
 FAME (April 2015)
3| New Developments

 New Product  Attracting huge FDI

 CNG Distribution
Launches investment
Network
 Reduced Product  Honda Cars &
 New Financing
lifecycle General Motors
Options
 Increasing R&D  Rollout of GST
 Luxury Cars
investment gaining traction in
India
4| Future
Projections

Up to US$ 300 billion in annual

revenue by 2026, create 65 million High Performance Hybrid cars are
additional jobs and contribute over likely to gain greater popularity
12 per cent to GDP among consumers

65 million
jobs India’s
12% of GDP passenger
US$ 300 vehicle density
is set to double
billion by 2020

In the decade to 2026, 75% of the The Indian auto industry is

global incremental demand for expected to attract investments up
vehicles is expected to come from to Rs.60,000 crore over the next
BRICS and emerging economies, few years
5| Peer
Analysis
MARUTI SUZUKI TATA MOTORS
 Company Analysis
(income statement and balance sheet)
Company Analysis
(Ratio analysis)
DEBT EQUITY RATIO
• In 2012, Foreign currency loan from banks worth 1390 million was paid
off and hence the debt component reduced.
• The loan was taken from Japan Bank of International Cooperation with
interest of LIBOR +0.125.
• In 2013, the debt equity ratio increased because of the debt taken from
Foreign banks, the same Japan Bank of International Cooperation, and also
loan taken from the holding company at LIBOR+0.48 interest, Also, there
were certain loans taken by certain joint ventures of Maruti Suzuki.
• In 2014 the loans taken before were paid back and the same happened in
the year 2015.
• Loan taken in 2013 because Suzuki Japan made India responsible for
export to Africa and Middle East and hence they had to set up plants in
Gujrat. Also, Manesar plant required more investments to be put in.
 Inventory Turnover Ratio
25.00

21.61

20.00

17.73 17.88
17.27

15.81
15.00

10.00

5.00

0.00
2011 2012 2013 2014 2015
• Inventory turnover measures how fast a company is selling
inventory and is generally compared against industry averages.
A low turnover implies weak sales and, therefore, excess
inventory. A high ratio implies either strong sales and/or large
discounts.
• Higher inventory in 2015, because of the Nexa outlets and
because of Gurgaon and Manesar plant not being able to
utilise its manufacturing capacity to the full.
• Also 2015-16 is supposed to see new model launches of
Maruti Suzuki because of which greater inventory.
In 2015, deposits matured and less cash in hand for the
company, less trade receivables, also less investment in debt
funds of mutual funds, because of greater investments in R&D,
product launches and because of recalls.
These are, however, lesser as compared to M&M.
a major competitor of Maruti Suzuki
Increase in capital work in progress
to export
By-
Sanchi Agarwal 14143
Sanya Juneja 14144
Sarthak Kalra 14145
Satpreet Singh 14146