Summer Internship Project on

‘FUNDAMENTAL ANALYSIS WITH

REFERENCE TO TATA MOTORS LTD
AND MAHINDRA & MAHINDRA LTD’
Submitted in partial fulfilment for the award
of the degree of
Master of Management Studies (MMS)
(Under University of Mumbai)
Submitted By
ABHISHEK RAMESH GHANEKAR
(Roll No. F-315)
Under the Guidance of
CA RAJUL MURUDKAR

PARLE TILAK VIDYALAYA

ASSOCIATION’S
PTVA’S INSTITUTE OF MANAGEMENT
VILE PARLE (E), MUMBAI – 400 057.
2019-20
1
i
 CERTIFICATE

I CA Rajul Murudkar hereby certify that Mr. Abhishek Ghanekar, MMS

student of Parle Tilak Vidyalaya Association’s PTVA’s Institute of
Management, has completed a project titled ‘Fundamental analysis with
reference to Tata Motors Ltd and Mahindra & Mahindra Ltd’ in the
Academic Year 2019-2020. The work of the student is original and the
information included in the project is true to the best of my knowledge.

CA Rajul Murudkar Dr, Harishkumar purohit

Professor Director

ii
 DECLARATION

I, Abhishek Ramesh Ghanekar, the Student of Parle Tilak Vidyalaya

Association’s PTVA’s Institute of Management, hereby declare that I have
completed the project titled ‘Fundamental analysis with reference to Tata
Motors Ltd and Mahindra & Mahindra Ltd’ during the academic year 2019-
20.
The report work is original and the information /data and the references included
in the report are true to the best of my knowledge. Due credit is extended on the
work of literature by endorsing it in the bibliography as per the prescribed format.

Mr. Abhishek Ramesh Ghanekar

MMS – Finance

F- 315

iii
 ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report on

‘Fundamental analysis with reference to Tata Motors Ltd and Mahindra &
Mahindra Ltd’. I take this opportunity to owe my thanks to all those involved in
training, Firstly, I would like to thank Zicom for giving me this opportunity to
complete my internship in their organization. I extremely grateful to my mentor
and project guide CA Rajul Murudkar, Professor at Parle Tilak Vidyalaya
Association’s PTVA’s Institute of Management for her guidance, discussion on
critical assessment of the project.

iv
 EXECUTIVE SUMMARY

The study is based on secondary data. Data has been collected from various
newspaper articles, informative websites and annual reports of the selected
companies under study. The study of fundamental analysis was undertaken with
special reference to Tata Motors ltd and Mahindra & Mahindra ltd.

Fundamental analysis is an important technique to find the value of stock as it

considers all past information about country, industry and company. The present
study reveals that Mahindra and Mahindra is good option to invest having good
potentials Whereas Tata Motors is currently facing problems from factors present
in external environment, this negativity about the company already brought down
the share prices of shares to the bottom line. By considering strong backup
available to Tata motors of Tata group we can say that company will sustain in
any type of negative environment and bounce back once the external factors
becomes favorable to the company. In this case the in long run the gains will be
higher than that of Mahindra and Mahindra.

v
 ABBREVIATIONS

GDP – Gross domestic product

CV – Commercial vehicle

PV – Passenger vehicle

SWOT – Strengths, weakness, opportunities, threats

Q4 – Quarter 4

FY – Fiscal year

MPC – Monetary policy committee

GST – Goods and services tax

SME – Small medium enterprises

RBI – Reserve bank of India

NBFC – Non-banking financial company

CAGR – compounded annual growth rate

FDI – Foreign direct investment

FAME – Faster adoption and manufacturing of electric vehicles

EV – Electric vehicle

SIAM – Society of Indian automobile manufacturers

NATRiP – National automotive testing and R&D infrastructure project

EBITDA – Earnings before interest tax depreciation and amortization

CAGR – compounded annual growth rate

vi
LIST OF FIGURES / CHARTS / TABLES / STATEMENTS

Sr no Title Page no
1.1 General election results- 2014 & 2019 10
1.2 GDP growth over 5 years 11
2.1 Top four commercial vehicle makers 20
2.2 Top four passenger vehicle makers 21
2.3 Top four two wheeler makers 21
8.1 Tata Motors Income statement 25
Tata Motors income statement year-on-year %
8.2 change 26
8.3 Tata Motors Income statement analysis 26
8.4 Tata Motors ratio analysis 27
8.5 Basic chart - Tata Motors 28
8.6 Mahindra & Mahindra Income statement 29
Mahindra and Mahindra income statement year-
8.7 on-year % change 30
8.8 Mahindra & Mahindra Income statement analysis 30
8.9 Mahindra & Mahindra ratio analysis 31
8.10 Basic chart - Mahindra & Mahindra 32

vii
 INDEX

CHAPTER NO TITLE PAGE NO

1 INTRODUCTION 1

2 LITERATURE REVIEW 2-4

3 COMPANY OVERVIEW 5-7

4 OBJECTIVE AND NEED FOR STUDY 8

5 RESEARCH METHODOLOGY 9

6 ECONOMY 10-17

7 AUTOMOBILE INDUSTRY 18-24

8 COMPANY 25-32

9 CONCLUSION 33-34

BIBLIOGRAPHY 35-36

viii
1. INTRODUCTION
I worked at Zicom’s command center as client service executive. They assigned
me ICICI Bank account who is one of the key client of the organization whose
pan India ATMs are monitored by Zicom with the help of systems installed at site
and team deployed dedicated to smoothen operations. My job was to attend
requirement request raised by ICICI Bank team, procuring data from system, if
not possible to do so then arranging engineer visit at site and resolving problem.

As name suggest Fundamental analysis with reference to Tata Motors Ltd and
Mahindra & Mahindra Ltd; detailed study of Economy, Automobile industry,
analysis of Tata Motors Ltd and Mahindra & Mahindra Ltd are done. The scope
of economy & industry analysis is limited to India only. Analysis of two
companies is done on the basis of their last five years income statement and
balance sheets and other information obtained.

The project was undertaken to study current happenings of Indian economy,

automobile industry, performance analysis of Tata Motors Ltd and Mahindra &
Mahindra Ltd.

The analysis was done on the basis of information obtained from secondary
sources such as newspaper articles, company websites and other online
publishers.

Fundamental analysis is an important technique to find the value of stock as it

considers all past information about country, industry and company. The present
study reveals that Mahindra and Mahindra Ltd is good option to invest having
good potentials Whereas Tata Motors Ltd is currently facing problems from
factors present in external environment, this negativity about the company already
brought down the share prices of shares to the bottom line. By considering strong
backup available to Tata motors Ltd of Tata group we can say that company will
sustain in any type of negative environment and bounce back once the external
factors becomes favorable to the company. In this case, in long run, the gains will
be higher than that of Mahindra and Mahindra Ltd.

1
2. LITERATURE REVIEW

“Impact of Macroeconomic Factors on Automobile Demand in India” January-

June 2017

Tophan Patra and Manohar Rao J.

The examination demonstrated that the higher GDP or pay prompts more
popularity for both business and traveler vehicles deals. Higher fuel cost, and
loaning rate have a negative association with car request and lead to bring down
volume of car sales. Pay increment has positive effect on deals while fuel value
causes vehicle request to diminish. The interest additionally diminishes because
of higher loan costs. Car generation has been expanding because of the high
development of Indian economy. Be that as it may, the negative connection
between oil cost and car generation as higher oil costs cause fuel costs to rise,
which, thus, prompts car request and creation decrease. Taking a gander at the
India's car request, the outcomes find that the cost of fuel alongside loaning rate
are likewise another significant factor in both PVs just as in CVs in India. The
different components that influence deals/request incorporates pay level of
shoppers, cost of product, raw petroleum value, extract obligation, bank loan fee,
new dispatches and so on. In spite of the fact that there are number of elements
that can influence request of vehicles however GDP is the most persuasive factor
among them. Subsequently, the administration in India must give cautious
consideration to keep away from issues like car overproduction, air
contamination, fuel deficiencies, traffic blockage, clamor contamination and
deficient parking spot.

“A Study on Fundamental Analysis of Indian Automobile Industry with

Reference to the Selected Companies” April 2014

Ms. Apurva A. Chauhan

Crucial examination is a significant procedure to discover the estimation of stock

as it thinks about all past data about nation, industry. The present examination

2
uncovers that despite the fact that the GDP of India is declining still the
automobile sector is sparkling as there is nonstop increment in the generation of
complete number of vehicles in the Industry. SWOT examination exhibits that
significant quality of Indian car industry is huge residential market and
accessibility of modest work and raising interest from semi urban zones of India
is going about as the open door in development of the market. Maruti Suzuki
India's performance is superior to Tata Motors Ltd regarding acquiring per share,
return on capital utilized and current proportion. Crucial investigation is useful
when the contributing sum is tremendous and speculation is to be made for long
time.

“A critical evaluation of the economics of Indian automobile industry” February

2019

Girish Jakhotiya

Indian automobile companies, their foreign counterparts in India and their

business associates can prove to be (i) growth engines for Indian economy (ii)
global hub for automobile research and experimentation (iii) providers of
indicators of the growth in various sectors of the economy and (iv) change makers
in technology, human performance and the overall ecosystem.

“GST Implication on sales of automobile industry with reference to Tata motors”

1st January 2019

Charumathi S

Dr. Rampilla Mahesh

Dr. Ranjith Kumar S

At the start, the exploration featured the effect of the New duty system as of late
presented for the sake of GST which straightforwardly impact the center
enterprises especially Automobile segment. There is an immense constant interest
in car items. High rate competency between specialist co-ops in the Automobile

3
items legitimately is being impacted the clients of the item. GST decidedly bolster
the associations in low extent, however there is an exceptional uncommon
development in Automobile industry. Be that as it may, vehicle items are
inescapable in the life of people and associations' standard life. Because of
ceaseless interest of the items, the segment has not been radically influenced.
Disregarding this worth contention, there is a risk from world market due to LPG
strategy. Sooner or later, there would be extent negative impact effect will
increment. In this way, the state specialists need to take genuine strategy choices
to outline the conceivable GST decrease in the current rate to help the
organizations. Such, radical changes in the framework will support the segment
just as entertainers like TATA engines to confront the assessment suggestions in
the development of organization.

4
3. COMPANY OVERVIEW
Zicom Electronic Security Systems Limited is engaged in the marketing and
selling of electronic security systems and equipment. The Company offers
security products, safety products and services. The Company's solutions that use
cloud technology include closed-circuit television (CCTV), surveillance system,
access control system, fire alarm system, multi-apartment video door phones,
video door phones, intruder alarm system, fingerprint locks, and remote managed
services (RAM). The Company offers biometric access control system, and
proximity access control system. It offers Baby Watch (XENIA), Baby Watch
(Quanta), and Baby Watch (Qube). Its CCTV systems include Box Cameras,
Digital Video Recorders, Dome Cameras, Internet protocol (IP) Box Cameras, IP
Infrared (IR) Bullet Cameras, High Definition Transport Video Interface (HD
TVI), IR Bullet Cameras, IR Dome Cameras, Network Video Recorders and
Speed Dome Cameras. Its fire alarm systems include main panels, detectors and
accessories.

Zicom has been the first Indian Electronic Security Systems company to:

 Be listed on the Indian Bourses in 1996.

 Pioneered the category of Electronic Security in India.
 24 x 7 Zicom Command Centre (ZCC) launched in 1995.
 Introduced wireless security equipment’s in the home and retail segment
in 1998.
 Established Security Services called e-SaaS (Electronic Security as a
Service) in 2011.

Chairman of Zicom – Mr. Manohar Bidaye

Managing Director of Zicom – Mr. Pramod Rao

Regional Offices of Zicom are in Mumbai, Delhi, Kerala (Kochi), Bangalore,

Ahmedabad and Kolkata. Goregaon (Mumbai) is the head office of Zicom. There

5
is also another office in Mumbai i.e. in Chandivali. Warehouse and Service
Centre of Zicom is in Vasai.

Presence of Zicom is in the states of Hyderabad, Kerala, Bhopal, Madhya

Pradesh, Guwahati, Kolkata, Delhi, Haryana, Gujarat, Maharashtra and Bihar.

Zicom group of companies:

 Zicom SaaS (Security as a Service)

 Unisafe
 ASTM skills Pvt. Ltd.

Zicom SaaS

In 2013 Zicom pioneered a unique concept called SaaS (Security as a Service)

offering a host of Internet of things (IOT) enabled security services which offers
return on investment. It improves cash flows with customers not having to invest
in any capital investment nor hassle on managing their security systems.

Zicom Saas

Enterprise MYCS Ziman

Co-operative
Societies
Retails BFSI

6
Zicom SaaS is divided into two parts

▪ Enterprise – includes customers like Companies and BFSI. Enterprise

deals in one to many i.e. zicom takes order from one company but gives
services to different sites of the company.
▪ MYCS (Make Your City Safe) – includes customers like Co-operative
Housing Societies, Schools, Hospitals & Companies. MYCS deals in one
to one i.e. zicom takes order from one customer and gives service to that
one customer (one site).
Ziman – Ziman is India’s most powerful Personal Safety Service App. Once
triggered on your mobile phone, Ziman will inform upto 3 registered mobile
numbers of families and friends through SMS and the Ziman Safety officer
facilities rescue operation in no time.

7
4. OBJECTIVES & NEED FOR THE STUDY

 To study recent happenings of Indian economy

 To study developments taking place in Indian automobile industry
 To study the performance of economy
 To study the performance of automobile industry
 To study performance of selected companies i.e. Tata motors ltd and
Mahindra & Mahindra ltd on the basis of data published in annual
statements.

8
5. RESEARCH METHODOLOGY

Source of data

The study is based on secondary data. Data has been collected from various
newspaper articles, informative websites and annual reports of the selected
companies under study.

Sample size

To perform fundamental analysis only Indian economy is taken into consideration

and the same is applicable to automobile industry too. Two companies have
selected for the purpose of comparative analysis.

9
6. ECOMONY

Political stability has come at a time when growth is slowing. The new
government’s budget has set the tone for its policy response, with the focus on
investment, jobs, and infrastructure.

May 2019 turned out to be a power-packed month for India, with the much-
awaited—and unexpected—general elections 2019 results and rather
disappointing Q4 GDP and unemployment data being announced back to back.

The Bharatiya Janata Party (BJP), led by the current Prime Minister Narendra
Modi, emerged the single-largest party and got a majority in Lok Sabha for the
second consecutive term. Interestingly, the electoral mandate this time is even
bigger than in 2014 (Figure 1), with BJP and allies winning 353 seats of the 542
seats contested; 272 seats are needed to form a government. BJP alone won 302
seats, 21 seats more than in 2014—a performance that none of the surveys or
market participants had predicted. The results are a resounding endorsement of
Modi’s popularity, his government’s achievements in the past five years, and his
campaign that centered on national security, nationalism, and development.

Figure 1- General election results- 2014 & 2019

10
What is remarkable about this election is that this is the first time since 1971 that
an incumbent prime minister has secured an absolute majority for their party for a
second successive term by winning even more seats than before. Not just the
election outcome this year, but the general election too broke several electoral
records. Voter turnout was 67.11 percent, the highest ever for any general election
in India. It surpassed the 66.4 percent voter turnout in the 2014 elections, which
will now be the second highest.

The other major events of the month were the data release of GDP for Q4 FY2019
and the unemployment rate for the July 2017–June 2018 period on the last day of
the month. GDP data came in lower than expected, printing a five-year low of 5.8
percent year over year (Figure 1.2). Annual growth for FY2019 was 6.8 percent
year over year in Q4 FY2019 compared to 7.2 percent year over year in FY2018.
Private domestic demand performed even poorly at 6.4 percent year over year,
indicating government spending helped boost growth last year.

Figure 1.2- GDP growth over 5 years

11
Private final consumption expenditure, which has been the sole engine of growth,
declined. One of the primary reasons for the drop was rural distress and tightening
lending conditions, which were, in turn, a result of ailing health of the financial
institutions, specifically the nonbank financial companies. At the same time,
growth in gross fixed capital formation dipped to 3.6 percent in Q4 FY2019
because of political uncertainty.

On the industry side, construction and manufacturing registered better growth

than in FY2018, but growth in agriculture and allied activities as well as in
mining declined significantly, resulting in poor rural income. Services, the biggest
contributor to GDP, grew by 7.5 percent, half a percentage point slower than last
year.

According to the data released by the Ministry of Labour and Employment, the
unemployment rate was 6.1 percent in 2017–18, with the youth unemployment
rates in urban and rural India being 7.8 percent and 5.3 percent, respectively.
While it is being claimed as the highest joblessness rate in 45 years, it is worth
noting that there has been a change in the measurement design and matrix this
year. Therefore, comparison with previous years is difficult.

what is the policy response?

In its June meeting, the monetary policy committee (MPC) of the Reserve Bank
of India cut policy rates for the third straight time by 25 bps and changed its
stance from “neutral” to “accommodative.” With the headline inflation trajectory
remaining below MPC’s target, there is a scope to pencil in further monetary
policy easing in the future to “accommodate growth concerns by supporting
efforts to boost aggregate demand, and in particular, reinvigorate private
investment activity, while remaining consistent with its flexible inflation-targeting
mandate.” In second week of August REPO rate was further reduced by 35 basis
points to 5.4%.

Fiscal policy and budget

12
The government has acknowledged the challenges and already started taking
actions. Within a week of swearing-in, the Prime Minister’s Office directed all the
government departments to submit by mid-June their action plans for the first 100
days and for the full five years with clearly defined measurable outcomes. The
Goods and Services Tax (GST) Council met in June to decide on crucial matters
on taxation, such as ease registrations and return filings, to simplify GST and
improve compliance. All these measures indicate that the emphasis is now on
delivering on promises and building an accountable system in the administration.
In addition, the government wants to tackle the challenge of economic growth and
jobs sooner than later—it set up the two new cabinet committees on investment
and employment just days after the GDP data release.

More importantly, all eyes were on the mid-term budget presented on July 5—the
first budget of the Modi government’s second term—by India’s first woman full-
time finance minister, Nirmala Sitharaman. It was a tightrope walk balancing the
need to boost growth, create jobs, and offer tax breaks without straining
expenditure. In the backdrop of the finance minister’s mantra of reform, perform,
and transform, the budget packed competing goals and a strong commitment to
fiscal prudence. The finance minister announced a forward-looking budget that
addressed all the pressing issues, be it reviving private and foreign investments
and jobs, building infrastructure, fixing farm policies, or promoting ease of living
and doing business. All this while setting a fiscal deficit target of 3.3 percent for
FY2020, 0.1 percentage point lower than what was targeted in the budget
presented in February.

Over the past five years, the government took myriad steps and implemented
several groundbreaking reforms, such as implementing the landmark tax reform,
allowing foreign investment in restricted sectors, and reforming the bankruptcy
law. By presenting a visionary budget with mid- to long-term benefits, the finance
minister committed to continuity of previous policies. However, the budget lacked
details on implementation, and all eyes will now be on the specific steps the
government takes to execute its proposals.

13
The union budget for FY2020:

The budget focused on reviving investments and the rural economy as well as
improving the financial structure to spur credit and spending growth.

• To boost investment, the finance minister proposed reducing the corporate tax
rate to 25 percent for companies with an annual turnover up to INR 400 crore (or
INR 4 billion; accounting for 99.3 percent of total companies). Earlier, companies
with annual turnover up to INR 250 crore were entitled to a lower rate of 25
percent; for the others, it was a higher variable rate. Some of the measures to
attract foreign capital into the domestic market include increasing the foreign
direct investment (FDI) limit in insurance intermediaries to 100 percent; easing
local sourcing norms for FDI in the single-brand retail sector; increasing statutory
investment limits for foreign portfolio investment; and providing nonresident
Indians a seamless access to Indian equities. Thrust to affordable housing and
concessions to boost production of electric vehicles were the other moves to help
investment in the housing sector and green technology.

• In a bid to strengthen the rural economy and jobs, the budget proposed several
measures. These include expanding financial support to and a new pension
scheme for farmers, providing relief for small taxpayers (tax rate cut from 10
percent to 5 percent for individuals with an annual income of INR 250,000 to
500,000), developing skills in agro-rural industries, and expanding solid waste
management efforts.

• To revamp the financial and banking sector, the budget proposed INR 70,000
crore (INR 700 billion) for bank recapitalization. It also recommended greater
regulatory authority to the RBI over the housing financial sector and nonbank
financial companies (NBFCs), which are the biggest sources for credit creation in
rural India. In addition to the government giving partial credit guarantees to
public sector banks, the budget offers certain measures specifically for the NBFCs
to ensure they get funding from banks and mutual funds.

14
Sitharaman addressed concerns related to job creation by giving small and
medium enterprises (SMEs)—the biggest source of employment generation and
grappling with a lack of access to funds and thereby growth—access to social
security, quick loans, and an efficient payment platform to avoid payment delays.
Taking up labor reform, the finance minister announced the government’s plan to
streamline multiple labor laws into a set of four labor codes, which are expected
to boost investment in and job creation by SMEs.

To promote self-employment and skills, the finance minister emphasized

women’s participation in the economy and offered concessions to startups to
encourage entrepreneurship. For job creation on a sustainable basis, she stressed
on improving education (through introducing a new education policy,
transforming higher education, and creating funds to promote research), skills
among the youth (through encouraging the youth to undertake programs on
artificial intelligence, big data, robotics, etc.), and popularizing sports.

In the making of New India, infrastructure development was given top priority.
The finance minister announced an investment of INR 100 lakh crore (INR 100
trillion) over the next five years, with the focus on improving the railway,
building local infrastructure for water sustainability, and bridging critical
infrastructure gaps in the agriculture sector, among others. At the same time,
Sitharaman committed to restricting the fiscal deficit through improved revenue
generation. Although it sounds ambitious, the finance minister announced a
higher disinvestment target to finance spending. No changes were proposed in
personal income tax rates, but additional surcharges were levied on the superrich.

Focus was also on improving the “ease of living” for the middle class, through
announcements such as cheaper digital payments, ATM-like One Nation One
Card for pan-India travel, new model rental laws, deductions on interest payments
for purchase of affordable houses and electric vehicles, and pensions for workers
in the informal sector.

15
However, the market seemed apprehensive about the proposal to increase
minimum public shareholding to 35 percent from 25 percent. Investors fear that, if
implemented, it might reduce liquidity from the stock market due to increased
private capital outflow and lead multinational corporations with high promoter
stakes to consider delisting. Consequently, the stock market reacted negatively.

Impact of Saudi oil attacks on India and global oil supplies

An extended period of high oil prices is likely to hurt India’s economic growth.
Saudi is our second-biggest oil supplier after Iraq. It sold 40.33 million tonnes of
crude oil to India in 2018-19 fiscal, when the country had imported 207.3 million
tonnes of oil.

A $10 rise in Brent will lift India’s annualised import bill by $15 billion, the
Jeffries report said. Investment bankers reckon a 10 per cent rise in oil prices
widens India’s current account deficit by 0.4-0.5 per cent of GDP (gross domestic
product). In 2018-19, India imported 207.3 million tonnes of oil.

The rise in crude prices may hit hard as the Indian economy is already facing a
slowdown and also trying to cover up for the loss of oil supply from Iran after the
United States imposed sanctions. The economy expanded 5 per cent in the three
months through June from a year earlier, the slowest pace since March 2013.

The Centre doesn’t directly import oil but costlier crude still impacts government
maths. The current account deficit (CAD) widens as the rupee weakens due to
higher demand for dollar. The subsidy bill and inflation, which has a bearing on
interest rates, also rise. All of these end up squeezing the government’s ability to
spend on social sector schemes or sops to revive the economy.

High oil prices, if not tamed, will over a period of time suppress demand and raise
input cost for farmers and industry.

16
The attack cut 5.7 million barrels per day (bpd) of Saudi crude output, over 5 per
cent of the world's supply. But, the attack also constrained Saudi Arabia's ability
to use the more than 2 million bpd of spare oil production capacity it held for
emergencies.
Before the attack, the Opec global supply cushion was just over 3.21 million
barrels per day (bpd), according to the International Energy Agency (IEA).
Saudi Arabia - the defacto leader of Opec - had 2.27 million bpd of that capacity.
That leaves around 940,000 bpd of spare capacity, mostly held by Kuwait and the
United Arab Emirates. Iraq and Angola also have some spare capacity. They may
now bring that production online to help plug some of the gap left by Saudi
Arabia - but it won't be enough.

Implications of GST on automobiles

The implications of GST on auto sector have been both positive and negative.
They vary from segment to segment and even within sub segments. At the outset,
the research highlighted the impact of the new tax regime recently introduced in
the name of GST which directly influence the core industries particularly
Automobile sector. There is a huge continuous demand in automobile products.
High rate competency between service providers in the Automobile products
directly is being influenced the users of the product. GST positively support the
organisations in low proportion, but there is a drastic drastic growth in
Automobile industry. But, automobile products are inevitable in the life of
individuals and organisations’ routine life. Due to continuous demand of the
products, the sector has not been drastically affected. In spite of this value
argument, there is a threat from world market due to LPG policy. After a while,
there would be proportion negative effect impact will increase. Therefore, the
state authorities want to take serious policy decisions to map with the possible
GST reduction in the existing rate to support the companies. Such, radical
changes in the system will boost the sector as well as performers like TATA
motors to face the tax implications in the growth of company.

17
7. AUTOMOBILE INDUSTRY

The automobile industry in India is world’s fourth largest, with the country
currently being the world's 4th largest manufacturer of cars and 7th largest
manufacturer of commercial vehicles in 2018. Indian automotive industry
(including component manufacturing) is expected to reach Rs 16.16-18.18 trillion
(US$ 251.4-282.8 billion) by 2026. Two-wheelers dominate the industry and
made up 81 per cent share in the domestic automobile sales in FY19. Overall,
Domestic automobiles sales increased at 6.71 per cent CAGR between FY13-18
with 26.27 million vehicles being sold in FY19. Indian automobile industry has
received Foreign Direct Investment (FDI) worth US$ 21.38 billion between April
2000 and March 2019.

Investments
In order to keep up with the growing demand, several auto makers have started
investing heavily in various segments of the industry during the last few months.
The industry has attracted Foreign Direct Investment worth US$ 21.38 billion
during the period April 2000 to March 2019, according to data released by
Department for Promotion of Industry and Internal Trade.
Some of the recent/planned investments and developments in the automobile
sector in India are as follows:

 Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$

155.20 million) to launch 20-25 new models across various commercial
vehicle categories in 2018-19.
 Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC Motor
has also announced to invest US$ 310 million in India.
 Mercedes Benz has increased the manufacturing capacity of its Chakan
Plant to 20,000 units per year, highest for any luxury car manufacturing in
India.

18
  As of October 2018, Honda Motors Company is planning to set up its third
factory in India for launching hybrid and electric vehicles with the cost of
Rs 9,200 crore (US$ 1.31 billion), its largest investment in India so far.
 In November 2018, Mahindra Electric Mobility opened its electric
technology manufacturing hub in Bangalore with an investment of Rs 100
crore (US$ 14.25 million) which will increase its annual manufacturing
capacity to 25,000 units.

Government Initiatives
The Government of India encourages foreign investment in the automobile sector
and allows 100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -

 The government aims to develop India as a global manufacturing centre

and an R&D hub.
 Under NATRiP, the Government of India is planning to set up R&D
centres at a total cost of US$ 388.5 million to enable the industry to be on
par with global standards
 The Ministry of Heavy Industries, Government of India has shortlisted 11
cities in the country for introduction of electric vehicles (EVs) in their
public transport systems under the FAME (Faster Adoption and
Manufacturing of (Hybrid) and Electric Vehicles in India) scheme. The
government will also set up incubation centre for start-ups working in
electric vehicles space.
 In February 2019, the Government of India approved the FAME-II
scheme with a fund requirement of Rs 10,000 crore (US$ 1.39 billion) for
FY20-22.

Achievements
Following are the achievements of the government in the past four years:

19
  Number of vehicles supported under FAME scheme increased from 5,197
in June 2015 to 192,451 in March 2018. During 2017-18, 47,912 two-
wheelers, 2,202 three-wheelers, 185 four-wheelers and 10 light
commercial vehicles were supported under FAME scheme.
 Under National Automotive Testing And R&D Infrastructure Project
(NATRIP), following testing and research centres have been established in
the country since 2015
o International Centre for Automotive Technology, Manesar
o National Institute for Automotive Inspection, Maintenance &
Training, Silchar
o National Automotive Testing Tracks, Indore
o Automotive Research Association of India, Pune
o Global Automotive Research Centre, Chennai
 SAMARTH Udyog – Industry 4.0 centres: ‘Demo cum experience’
centres are being set up in the country for promoting smart and advanced
manufacturing helping SMEs to implement Industry 4.0 (automation and
data exchange in manufacturing technology).

Top four manufacturers

Top four commercial vehicle makers

Company FY 2018 Market FY 2019 Market Change

share in % share in %
Tata Motors 43.93 44.41 +0.48
Mahindra & 25.30 24.68 -062
Mahindra
Ashok Leyland 18.51 18.37 -0.14
VECV-Eicher 6.52 6.13 -0.39
Table 2.1

From above table showing market share of commercial vehicle segment it is clear
that Tata motors is leader in India followed by Mahindra & Mahindra, Ashok

20
Leyland and VECV-Eicher. No significant change in market share has been seen
in this segment.

Top four passenger vehicle makers

Company FY 2018 Market FY 2019 Market Change

share in % share in %
Maruti Suzuki 49.98 51.22 +1.24
Hyundai Motor India 16.31 16.14 -0.17
Mahindra & 7.57 7.53 -0.04
Mahindra
Tata Motors 6.39 6.85 +0.46
Table 2.2

From above table showing market share of commercial vehicle segment it is clear
that Maruti Suzuki is leader in India followed by Hyundai, Mahindra & Mahindra
and Tata Motors. No significant change in market share has been seen in this
segment.

Top four two wheeler makers

Company FY 2018 Market FY 2019 Market Change

share in % share in %
Hero MotoCorp 36.60 35.90 -0.70
HMSI 28.60 26.10 -2.50
TVS Motor 14.20 14.80 +0.60
Company
Bajaj Auto 9.80 12.00 +2.20
Table 2.2

From above table showing market share of two wheeler segment it is clear that
Hero MotoCorp is leader in India followed by HMSI, TVS Motor Company and
Bajaj Auto. No significant change in market share has been seen in this segment.

21
SLOWDOWN

The Indian automobile industry has failed to shake off the slowdown that has
been plaguing it for months now. Auto sales across all segments continued the
downtrend in June as manufacturers cut production to keep inventory in check
amid weak retail sales and subdued consumer sentiment.

During the month, domestic sales across passenger vehicles (PVs), commercial
vehicles (CVs) as well as two- and three-wheelers fell 12 per cent year-on-year,
industry body Society of Indian Automobile Manufacturer (Siam) said. The
combined sales of all automobiles fell to 1.9 million units in June against 2. 2
million units a year ago.

So, how does this slowdown then compare to the ones the automobile industry
faced in the past? How swift will the recovery be? Edelweiss Securities, in its
report dated July 10, has compared the current slowdown with the past 20 years'
demand cycles and concluded that this time, it's different.

The difference can be seen on five counts, They are:

Domestic factors driven

Slowing income growth and Non-banking financial companies (NBFC) crisis are
primary reasons for the current slowdown compared to earlier cycles which had
been triggered by global events like Asian crisis, Dotcom bubble, global financial
crisis, etc.

The recent NBFC crisis had a twin effect on demand. It curtailed financing to new
vehicles, and NBFC were financing customers who were not preferred for
financing by banks. Hence, revival of lending by NBFC is critical for demand
revival.

22
Sharp regulatory cost pressure

Over FY19-21, vehicle prices are estimated to jump 13-30 per cent (1-2 per cent
per annum over previous decade) due to safety, insurance and emission related
compliance costs. Come April 2020, India will upgrade to BS-VI from BS-IV
emission standard Given that general price hike over the previous decade was 1-2
per cent per annum, a sharp increase in vehicle prices over FY19-21 can restrict
the recovery.

Stiff competition from growing organized pre-owned vehicle market

Over the past five years, the size of pre-owned market has expanded significantly,
with higher share of organized players. For instance, in passenger vehicle, a
significantly higher growth in pre-owned cars over the past two years is a
reflection of rising consumer interest in this segment. This may impact new
vehicle demand, especially in case of sharp price hikes.

Changing preference towards cab aggregators

High ownership cost, parking problems, heavy traffic and poor condition of roads
and nowadays easier availability of cabs form cab aggregators all this factors
influencing people to use cab rather than owning a car.

Significant margin pressure

Increased input costs, higher margins to dealers and heavy discounts to customers
adopted by most of the companies to clear huge stock leading towards the decline
in gross and earnings before interest, depreciation, and amortization (EBITDA)
for automobile manufacturers.

Hence, says the report, the recent slowdown is much sharper than the previous
cycle on the margin front.

23
This seems to be a result of a combination of huge inventory reduction exercise as
well genuine demand softness. These factors raise doubts on the industry’s ability
to pass on the regulatory cost pressure without compromising on margin.

Road Ahead
The automobile industry is supported by various factors such as availability of
skilled labour at low cost, robust R&D centres and low cost steel production. The
industry also provides great opportunities for investment and direct and indirect
employment to skilled and unskilled labour.
Indian automotive industry (including component manufacturing) is expected to
reach Rs 16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers
are expected to grow 9 per cent in 2018.

The Indian government has also set up an ambitious target of having only electric
vehicles being sold in the country. Indian auto industry is expected to see 8-12 per
cent increase in its hiring during FY19. The Ministry of Heavy Industries,
Government of India has shortlisted 11 cities in the country for introduction of
electric vehicles (EVs) in their public transport systems under the FAME (Faster
Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme.
The first phase of the scheme has been extended to March 2019 while In February
2019, the Government of India approved the FAME-II scheme with a fund
requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20-22. Number of
vehicles supported under FAME scheme has increased to 192,451 units in March
2018 from 5,197 units in June 2015.
Automobile exports grew 14.50 per cent in FY19. It is expected to grow at a
CAGR of 3.05 per cent during 2016-2026. Domestic two wheeler industry is
expected to grow at 8-10 per cent during FY19. Also, Luxury car market in India
is expected to grow at a 25 per cent CAGR till 2020. The Government of India
expects automobile sector to attract US$ 8-10 billion in local and foreign
investments by 2023.

24
8. COMPANY

TATA MOTORS LTD

Type Public limited company

Industry Automobiles

Area served Worldwide

Key people N Chandrasekaran ( Chairman )

Guenter Butschek ( CEO )

Products Passenger vehicles, commercial vehicles, military vehicles,

automotive parts

Parent Tata group

Key subsidiaries Jaguar Land Rover, Tata Daewoo, Tata Motorfinance

Table 8.1- Tata Motors income statement (Rupees in crores)

March March March March March

2015 2016 2017 2018 2019
Total Income 39061.86 44237.73 45549.54 59546.96 71945.68
Total
Expenditure 38821.68 40383.61 43296.68 55647.56 64654.54
PBDIT 240.18 3854.12 2252.86 3899.4 7291.14
Depreciation 2603.22 2329.22 3037.12 3101.89 3098.64
Interest 1611.68 1592 1569.01 1744.43 1793.57
Tax 764.23 -4.8 76.33 87.93 378.33
Net Profit -4738.95 -62.3 -2429.6 -1034.85 2020.6

25
 Table 8.2- Tata Motors income statement year-on-year % change

March March March March March

2015 2016 2017 2018 2019
Total Income 0% 13% 3% 31% 21%
Total
Expenditure 0% 4% 7% 29% 16%
PBDIT 0% 1505% -42% 73% 87%
Depreciation 0% -11% 30% 2% 0%
Interest 0% -1% -1% 11% 3%
Tax 0% -101% 1690% 15% 330%
Net Profit 0% 99% -3800% 57% 295%
Form the above table we can see that total income is increasing every year the
lowest increase in total income was in the year 2016-17 and highest was in year
2017-18. By reporting losses for continuous period of four years company
reported profit for the year 2017-2018

Figure 8.3- Tata Motors income statement analysis

Income statement analysis of Tata Motors

80000

70000

60000

50000

40000

30000

20000

10000

0
March 2015 March 2016 March 2017 March 2018 March 2019
-10000

Total Income Total Expenditure PBDIT Depreciation Interest Tax Net Profit

26
 Table 8.4 - Ratio analysis of Tata Motors

March March March March March

2015 2016 2017 2018 2019

Profitability Ratios

Gross profit margin ( % ) -10.58 1.44 -3.21 0.35 2.66

Net profit margin ( % ) -13.05 -0.14 -5.48 -1.75 2.91

Return on net worth ( % ) -31.93 -0.26 -11.48 -5.13 9.11

Liquidity and Solvency

Ratios

Current ratio 0.42 0.63 0.59 0.62 0.58

Debt equity ratio 1.35 0.61 0.89 0.81 0.79

Interest coverage ratio -1.22 1.27 -0.28 1.01 2.45

Management efficiency
ratio

Inventory turnover ratio 8.23 9.26 8.83 10.52 14.84

Debtors turnover ratio 31.14 27.12 21.24 20.98 20.56

Fixed assets turnover ratio 1.48 1.36 1.3 1.65 3.78

From the above table we can see the key ratios of Tata motors over the period of
five years. Improvement in profitability ratios is seen and they became positive
from negative in earlier years.

There is marginal difference in current ratios. Debt equity ratio improved over the
five years period which shows increased dependency on equity than borrowed
funds. Also increase in interest coverage ratio is seen which signifies ability to
pay interest improved.

Inventory turnover ratio is increased which signifies that company controlling its
inventory efficiently. Reduced debtors turnover ratio indicates less control over its

27
debtors. Increased fixed assets turnover ratio indicates company generating more
sales with available assets.

Figure 8.5 - Analysis of basic chart showing share price - Tata Motors Ltd

Form above basic chart showing share price of Tata Motors ltd we can see that
the share price is falling continuously over the period of two years. In this two
year period the highest price was Rs 468/- on 6th November 2016 and the lowest
was Rs 106/- on 4th September 2019. As we see as on 25th September 2019 the
share was traded for Rs 123.05/- which is below the two year high by 74%.

The price to book value ratio of Tata Motors ltd is 0.59x which is below 1.
Therefore we can say that the share is undervalued.

28
MAHINDRA AND MAHINDRA LTD

Type Public limited company

Industry Automobiles

Area served Worldwide

Key people Anand Mahindra ( Chairman )

Pawan Kumar Goenka ( CEO )

Products Passenger vehicles, Tractors, commercial vehicles,

automotive parts, two - wheelers

Parent Mahindra Group

Key subsidiaries Ford India pvt ltd, Peugeot motorcycles, Mahindra Reva,
Ssangyong Motors, Mahindra 2 wheeler, Pininfarnia

Table 8.6- Mahindra and Mahindra income statement (Rupees in crores)

March March March March March

2015 2016 2017 2018 2019

Total Income 39305.86 42051.71 46111.55 49960.65 56851.45

Total
Expenditure 33947.77 36513.1 39702.97 42266.66 48552.65

PBDIT 5358.09 5538.61 6408.58 7693.99 8298.8

Depreciation 974.9 1068.1 1526.38 1479.42 1860.4

Interest 214.3 186.05 159.59 112.2 113.39

Tax 847.78 1079.89 1079.22 1746.36 1528.97

Net Profit 3321.11 3204.57 3643.39 4356.01 4796.04

29
Table 8.7 – Mahindra and Mahindra income statement year-on-year % change

March March March March March

2015 2016 2017 2018 2019
Total Income 0% 7% 10% 8% 14%
Total Expenditure 0% 8% 9% 6% 15%
PBDIT 0% 3% 16% 20% 8%
Depreciation 0% 10% 43% -3% 26%
Interest 0% -13% -14% -30% 1%
Tax 0% 27% 0% 62% -12%
Net Profit 0% -4% 14% 20% 10%

Form the above table we can see that total income is increasing every year the
highest increase in total income was in the year 2018-19. Increase in net profit is
seen except for year 2015-16.

Figure 8.8 - Mahindra and Mahindra income statement analysis

Income statement analysis of Mahindra and Mahindra

60000

50000

40000

30000

20000

10000

0
March 2015 March 2016 March 2017 March 2018 March 2019

Total Income Total Expenditure PBDIT Depreciation Interest Tax Net Profit

30
Table 8.9- Ratio analysis of Mahindra and Mahindra

March March March March March

2015 2016 2017 2018 2019

Profitability Ratios

Gross profit margin ( % ) 8.21 8.68 6.78 9.74 8.91

Net profit margin ( % ) 8.52 7.83 8.27 8.94 8.94

Return on net worth ( % ) 17.25 14.29 13.6 14.37 14.01

Liquidity and Solvency
Ratios

Current ratio 1.05 1.1 1.12 1.06 1.08

Debt equity ratio 0.14 0.08 0.1 0.09 0.07

Interest coverage ratio 18.89 23.66 27.16 51.52 57.04

Management efficiency
ratio

Inventory turnover ratio 16.87 16.24 17.18 18.3 13.96

Debtors turnover ratio 15.37 16.13 16.17 15.93 15.06

Fixed assets turnover ratio 3.55 3.35 3.32 3.44 3.34

From the above table we can see the key ratios of Mahindra & Mahindra over the
period of five years. Profitability ratios remains less volatile except return on net
worth which was volatile for entire period.

There is marginal difference in current ratio. Debt equity ratio improved over the
five years period which shows increased dependency on equity than borrowed
funds. Also increase in interest coverage ratio is seen which signifies ability to
pay interest improved.

Inventory turnover ratio and debtors turnover ratio showing mixed trend for
period of five years whereas fixed assets turnover ratio remains stable.

31
Figure 8.10- Analysis of basic chart showing share price - Mahindra and
Mahindra Ltd

Form above basic chart showing share price of Mahindra and mahindra ltd we
can see that the share price is increasing till it reaches its two years high of Rs
993/- on 29th August 2018, thereafter the prices starts falling continuously and
reached to lowest Rs 502.55/- on 14th August 2019. As we see as on 25th
September 2019 the share was traded for Rs 535/- which is below the two year
high by 46%.

The price to book value ratio of Mahindra and Mahindra ltd is 1.37x which is
above 1. Therefore we can say that the share of Mahindra and Mahindra ltd is
ovrvalued, By analysing above chart we can see that the current price is still lower
than average price.

32
9. CONCLUSION

To tackle current slowdown in Indian economy, The stable government taking

bold and positive steps for revival of economy. Announcements made by our
Finance Minister Nirmala Sitharaman such as infusing capital in public sector
banks to solve liquidity problem, plan to spend Rs 100 lacs crores on
infrastructure which results in improved infrastructure facilities and spending by
government going to ultimately increase money supply into the economy. To take
advantage of US-China trade war and divert outgoing investments from china to
India corporate tax reduced to 22% form 30% and for newly incorporated
manufacturing units it was further reduced to 15% form earlier 25%. Restrictions
on FDI and FPI are removed to some extent. RBI’s MPC too changed its stance
from neutral to accommodative by constantly reducing its policy rates.

In India automobile sector is dominated by top two companies in terms of market

share. In each segment the top two companies in terms of market share together
controls more than 60% of the market. In CV segment Tata Motors and Mahindra
& Mahindra controls about 69% market share, in PV segment Maruti Suzuki and
Hyundai controls 67% of market whereas in two wheeler segment 62% of market
is controlled by Hero Motocrop and HMSI together. Automobile industry in India
has grown in recent years due to strong support from domestic market. This high
dependence on domestic market is one of the reason for current automobile crisis
in India.

Tata motors reported losses for four consecutive and profit for year ending March
2019. The ratios too showing improvements for Tata Motors. Performance of Tata
Motors largely affected by uncertainties at global level which includes US-China
trade war, Bexit and global slowdown since majority of revenue was generated by
Jaguar Land Rover. On the other hand Mahindra & Mahindra shows continuous
growth in profits and revenue on the basis of strong demand in domestic market.
Though the share of both the companies are trading at attractive valuations still it
is expensive to buy shares of Mahindra & Mahindra than Tata Motors if we
compare price to book value ratio. By considering past record of dividend
33
payments it is fair to pay that much for Mahindra & Mahindra shares which pays
dividend every year than paying for Tata Motors share who did not paid the same
since year ending March 2016.

Fundamental analysis is an important technique to find the value of stock as it

considers all past information about country, industry and company. The present
study reveals that Mahindra and Mahindra is good option to invest having good
potentials Whereas Tata Motors is currently facing problems from factors present
in external environment, this negativity about the company already brought down
the share prices of shares to the bottom line. By considering strong backup
available to Tata motors of Tata group we can say that company will sustain in
any type of negative environment and bounce back once the external factors
becomes favorable to the company. In this case in long run the gains will be
higher than that of Mahindra and Mahindra.

34
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