Financial Analysis

of Eicher Motors
FRA Group Assignment

Saurav Raj
Rashesh Madiraju
(EPGP2023-24, IIM, Indore)
Table of Contents
Foreword...............................................................................................................................................3
Acknowledgement................................................................................................................................4
Chapter- 1..............................................................................................................................................5
1.1 About Eicher Motors............................................................................................................6
Chapter- 2..............................................................................................................................................8
2.1 Common Size Income Statements..............................................................................................9
2.2 Balance Sheet of Eicher Motors................................................................................................10
2.3 Common Size Balance sheet of Eicher Motors.....................................................................12
2.3.1 Interpretation: Common Size Balance Sheet.....................................................................14
2.4 Common Size Income Statement of Eicher Motors......................................................................23
2.4.1 Interpretation: Common Size Income Statement..................................................................24
DuPont Analysis...................................................................................................................................29
3.1 DuPont Analysis of Eicher Motors Limited...............................................................................30
Chapter-04...........................................................................................................................................32
Ratio Analysis.......................................................................................................................................32
4.1 Liquidity Analysis of Eicher Motors:.........................................................................................33
4.1.1 Current Ratio:.....................................................................................................................34
4.1.2 Quick Ratio:........................................................................................................................35
4.1.3 Super Quick Ratio:..............................................................................................................36
4.2 Solvency Analysis of Eicher Motors..........................................................................................37
4.2.1 Debt-Equity Ratio:..............................................................................................................38
4.2.2 Interest Coverage Ratio:.....................................................................................................39
4.2.3 Fixed Assets Ratio:.............................................................................................................40
4.3 Profitability Position Analysis:..................................................................................................41
4.3.1 Sales Gross Margin.............................................................................................................42
4.3.2 Return on Equity (ROE)......................................................................................................44
4.3.3 ROCE (Return on Capital employed)..................................................................................45
4.4 Market Efficiency Analysis........................................................................................................46
4.4.1 Fixed Asset Turnover Ratio:...............................................................................................47
4.4.2 Inventory Turnover:...........................................................................................................48
4.4.3 Account Receivable Turnover:...........................................................................................49
4.4.4 Account Payable Turnover:................................................................................................50
4.5 Economic Value Added:................................................................................................................50
4.6 Market Value Added:................................................................................................................53

pg. 1
4.6 Debt investor perspective analysis (Leverage Ratios)..................................................................55
4.7 Equity Investor Perspective Analysis........................................................................................57
5.0 Comments as CEO/CFO of the company.......................................................................................61
Peer Comparison.................................................................................................................................62
References:..........................................................................................................................................63

pg. 2
Foreword

The Assignment “Financial Analysis of Eicher Motors ” has been submitted in fulfilment of
the course “Financial Reporting and Analysis”, Term – I, EPGP IIM – INDORE, by the
following participants:

Name Roll Number

Saurav Raj 2023EPGP030

Radhesh Madiraju 2023EPGP024

pg. 3
Acknowledgement

Dear Professor Vijay Gupta sir,

We wish to take a moment to express our gratitude for the assignment you gave us on
Financial Reporting and Analysis. It was a thought-provoking and valuable
exercise that allowed us to apply the concepts and ideas we learned in your lectures.
Your assignments consistently challenge and push us to expand our understanding
of the subject. Thank you for your guidance and dedication to our learning.
Regards,
Saurav Raj
Radhesh Madiraju

pg. 4
 Chapter- 1

Introduction on Eicher
Motors

pg. 5
1.1 About Eicher Motors

Eicher motors limited is a multinational automotive company which was founded in 1948.
Eicher motors is headquartered in Gurgaon, Haryana, India. Eicher Motors Limited (EML) is
globally acclaimed for consistently raising the bar in fusing world-class engineering with
simplicity of design to produce category defining motorcycles and commercial vehicles.
Through the course of an unpredictable 2021-22, the Company continued to maintain razor-
sharp focus on its long-term goals and strategic business objectives, as it unveiled several
new products, while keeping its sight firmly fixed on creating value for all its stakeholders.
The world’s oldest motorcycle brand in continuous production, Royal Enfield has made
distinctive motorcycles since 1901. Royal Enfield has pioneered the mid-size motorcycle
market in India, and since EML took over the company in the mid-1990s, Royal Enfield has
manufactured and grown the market for upgraders with a focused range of modern classic
motorcycles across its wide premium distribution network globally. Over the years, Royal
Enfield has registered meteoric growth and is a global leader in the mid-size motorcycle
segment with presence in over 60 countries across the world. With modern design and
technical centres in the UK and India, Royal Enfield designs its motorcycles in the UK and
rolls them out of its two, ultra-modern manufacturing facilities in India, supported by
adjunct facilities and a global supplier base. Eicher brand of trucks and buses came to life in
1985 as a challenger to a duopoly in the Indian market. Eicher made huge progress in the
Indian CV market which was further bolstered when Volvo came in as an equity partner in
2008. VE Commercial Vehicles Limited (VECV) is a joint venture between EML and Sweden’s
AB Volvo. It is majority-owned by EML and equally managed by both partners. With access
to global technology and processes, VECV is now at the forefront of driving modernisation in
the CV market in India and other developing countries. The Eicher brand is now the second
largest in the light and medium duty CV market, and is third and gaining in the HD market.

A Few Highlights about Eicher Motors Ltd:

 Eicher motors has more than 2100 retail outlets in India.

 3 State of the art modern manufacturing facilities.
 Completely Knocked Down(CKD) assembly lines in Argentina, Colombia and Thailand.
 2 technical canters in the UK and in India.
 840+ retail across 60+ countries.

pg. 6
Financial Performance
Eicher Motors Ltd. has shown significant growth from its inception. The consistent strong
performance in the financial results and a significant market capitalization has made Eicher
motors limited a leading automotive company across the globe.

Key highlights about the Market share:

 29.3% market share in India’s light and medium duty CV segment.

 57,077 commercial vehicles sold in FY 21-22.
 5,95,474 motorcycles sold in FY 21-22.
 90% of the market share in India's mid size motorcycle segment.

Key highlights based on financial statements:

 ₹21,172 crores EBITDA in the financial year 2022, up by 22%.

 ₹1677 crores profit after tax in the financial year 2022, up by 24.5%.
 Net revenue from operations rose from ₹8720 crores FY’ 21 to 10,298 crores FY’ 22.
 Royal Enfield announced ₹20 crores for India's fight against COVID-19.
 Operating margins before share of profit of joint ventures for FY’ 22 is 16.7%
compared to FY’ 21 15.3%.
 Revenue from operations for FY’22 is 10,298 crores.
 Dividends of Eicher motors continues to remain promising to its shareholders.
 Other Income declined by 2.7% YoY.
 Net profit margins during the year grew from 15.1% in FY’ 21 to 15.7% in FY’ 22.
 Total assets grew from 12,624 crores to 14,284 crores (YoY).
 Decline in the current Ratio YoY-3.6(’21) to 1.9(’22)

pg. 7
 Chapter- 2

Common Size
Financial Statements

pg. 8
2.1 Common Size Income Statements

A common size financial statement displays items as a percentage of a common base figure,
total sales revenue, for example. This type of financial statements allows for easy analysis
between companies, or between periods, for the same company.

 A common size financial statement displays entries as a percentage of a common

base figure rather than as absolute numerical figures.

 Common size statements let analysts compare companies of different sizes, in

different industries, or across time in an apples-to-apples way.

 Common size financial statements commonly include the income statement, balance
sheet, and cash flow statement.

Common size financial statements reduce all figures to a comparable figure, such as a
percentage of sales or assets. Each financial statement uses a slightly different convention in
standardizing figures.

pg. 9
2.2 Balance Sheet of Eicher Motors

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Shareholder's
Funds
Share Capital 27.34 27.33 27.3 27.28 27.26 27.21 27.16 27.1 27.04 27
  Ordinary
Capital 27.34 27.33 27.3 27.28 27.26 27.21 27.16 27.1 27.04 27
  Ordinary A /
DVR Capital 0 0 0 0 0 0 0 0 0 0
  Preference
Capital - I 0 0 0 0 0 0 0 0 0 0
  Preference
Capital - II 0 0 0 0 0 0 0 0 0 0
  Preference
Capital - III 0 0 0 0 0 0 0 0 0 0
  Unclassified
Capital 0 0 0 0 0 0 0 0 0 0
 Reserves and 10,767.2 7,099.1 5,344.9 3,895.3 2,309.2 1,206.5
Surplus 3 9,677.67 8,248.04 7 7 8 5 6 794.30 602.05
Money received
against Share
Warrants 0 0 0 0 0 0 0 0 0 0
Other
Equity/Employe
e Stock Option 0 0 0 0 0 0 0 0 0 0
Total
Shareholder's 10,794.5 7,126.4 5,372.2 3,922.5 2,336.4 1,233.6
Fund 7 9,705.00 8,275.34 5 3 9 1 6 821.34 629.05
Share
Application
Money pending
Allotment 0 0 0 0 0 0 0 0 0 0
Non-Current
Liabilities
 Long-Term
Borrowings 0 0 0 0 0 0 0 0 0 0
Deferred Tax
Liabilities (Net) 222.86 221.13 252.04 276.49 142.97 79.22 40.82 20.07 12.63 6.26
Deferred Tax
Liability 277.98 249.49 271.46 297.31 163.33 90.77 50.49 26.82 18.53 10.94
Deferred Tax
Assets 55.12 28.36 19.42 20.82 20.36 11.55 9.67 6.75 5.9 4.68
 Other Long
Term Liabilities 315.11 201.54 99.07 73.23 55.72 30.36 15.42 4.52 3.78 3.23
 Long-Term
Provisions 38.5 22.56 21.2 23 29.12 26.13 29.67 13.82 10.48 9.26
Total Non
Current
Liabilities 611.11 491.2 448.54 372.72 227.81 135.71 85.91 38.41 26.89 18.75
Current
Liabilities
 Short-Term
Borrowings 5.98 0 0 76.38 85.98 67.44 22.57 0.00 4 4
1,231.1 1,170.4
 Trade Payables 1,764.46 1,494.79 1,000.93 0 7 764.49 721.3 490.24 321.42 177.5
 Other Current
Liabilities 714.36 699.08 666.03 471.64 782.96 569.78 431.25 296.56 211.49 132.82
 Short-Term
Provisions 381.73 220.61 163.74 199.12 155.22 80.25 26.47 170.02 98.04 62.12
Total Current 1,978.2 2,194.6 1,481.9 1,201.5
Liabilities 2,878.87 2,428.71 1,855.13 4 3 6 9 956.82 634.95 376.44

pg. 10
Other Equity &
Liabilities 0 0 0 0 0 0 0 0 0 0
TOTAL EQUITY 14,284.5 12,624.9 10,579.0 9,477.4 7,794.6 5,540.2 3,623.9 2,228.8 1,483.1 1,024.2
AND LIABILITIES 5 1 1 1 7 6 1 9 8 4
ASSETS
Non-Current
Assets
2,317.0 1,826.6 1,239.6
Fixed Assets 2,904.81 2,733.52 2,677.76 4 3 1 882.98 559.92 313.17 198.03
1,688.3 1,454.7
  Tangible Assets 1,891.49 1,888.30 1,996.60 2 6 832.43 759.46 488.65 287.97 133.83
  Intangible
Assets 327.34 338.89 184.83 178.98 38.66 33.41 29.04 11.93 11.28 3.87
  Capital Work-
in-Progress 133.38 59.78 26.75 272.14 141.89 265.01 33.31 42.67 8.47 59.37
Intangible
assets under
development 370.8 250.38 285.42 177.6 191.32 108.76 61.17 16.67 5.45 0.96
 Non-Current 2,581.2 3,236.4 2,662.3 1,490.7
Investments 5,525.26 968.71 1,416.24 3 5 3 1 271.49 30.94 10.94
Deferred Tax
Assets (net) 0 0 0 0 0 0 0 0 0 0
Deferred Tax
Assets 55.12 28.36 19.42 20.82 20.36 11.55 9.67 6.75 5.9 4.68
Deferred Tax
Liability 277.98 249.49 271.46 297.31 163.33 90.77 50.49 26.82 18.53 10.94
 Long-Term
Loans and
Advances 271.57 150.1 148.41 105.1 117.03 187.41 66.09 139 82.72 61.3
 Other Non-
Current Assets 85.11 27.39 0 89.61 90.14 90.55 134.69 29.83 7.09 6.18
Total Non 5,092.9 5,270.2 4,179.9 2,574.4 1,000.2
Current Assets 8,786.75 3,879.72 4,242.41 8 5 0 7 4 433.92 276.45
Current Assets
 Current
Investments 424.70 1,076.08 2,512.50 468.81 633.40 883.61 582.9 917.09 825.41 638.45
 Inventories 898.37 769.13 518.05 605.34 379.23 322.45 300.36 205.13 143.84 75.41
 Trade
Receivables 492.87 256.18 133.97 106.61 78.02 48.94 46.13 10.70 12.13 6.20
 Cash and Cash 2,940.0 1,208.8
Equivalents 2,698.56 5,798.91 2,926.38 7 2 20.61 44.52 20.89 18.71 3.5
 Short-Term
Loans and
Advances 868.53 607.49 124.55 164.1 172.79 60.19 67.19 73.91 48.74 23.94
 Other Current
Assets 114.77 237.4 121.15 99.5 52.16 24.56 8.34 0.93 0.43 0.29
Total Current 4,384.4 2,524.4 1,360.3 1,049.4 1,228.6 1,049.2
Assets 5,497.80 8,745.19 6,336.60 3 2 6 4 5 6 747.79
Other Assets 0 0 0 0 0 0 0 0 0 0
14,284.5 12,624.9 10,579.0 9,477.4 7,794.6 5,540.2 3,623.9 2,228.8 1,483.1 1,024.2
TOTAL ASSETS 5 1 1 1 7 6 1 9 8 4
CAPITAL 11,405.6 10,196.2 7,499.1 5,600.0 4,058.3 2,422.3 1,272.0
EMPLOYED 8 0 8,723.88 7 4 0 2 7 848.23 647.80
2,406.1
Working Capital 2,618.93 6,316.48 4,481.47 9 329.79 -121.60 -152.15 271.83 414.31 371.35

pg. 11
2.3 Common Size Balance sheet of Eicher Motors

20220 20180 20131

Year 202103 202003 201903 201703 201603 201412 201212
3 3 2
Shareholder's Funds
Share Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64
  Ordinary Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64
  Ordinary A / DVR Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
  Preference Capital - I 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
  Preference Capital - II 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
  Preference Capital - III 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
  Unclassified Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
 Reserves and Surplus 75.38 76.66 77.97 74.91 68.57 70.31 63.72 54.13 53.55 58.78
Money received against
Share Warrants 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Equity/Employee
Stock Option 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total Shareholder's Fund 75.57 76.87 78.22 75.19 68.92 70.80 64.47 55.35 55.38 61.42
Share Application Money
pending Allotment
Non-Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
 Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Deferred Tax Liabilities (Net) 1.56 1.75 2.38 2.92 1.83 1.43 1.13 0.90 0.85 0.61
Deferred Tax Liability 1.95 1.98 2.57 3.14 2.10 1.64 1.39 1.20 1.25 1.07
Deferred Tax Assets 0.39 0.22 0.18 0.22 0.26 0.21 0.27 0.30 0.40 0.46
 Other Long Term Liabilities 2.21 1.60 0.94 0.77 0.71 0.55 0.43 0.20 0.25 0.32
 Long-Term Provisions 0.27 0.18 0.20 0.24 0.37 0.47 0.82 0.62 0.71 0.90
Total Non Current Liabilities 4.28 3.89 4.24 3.93 2.92 2.45 2.37 1.72 1.81 1.83
Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
 Short-Term Borrowings 0.04 0.00 0.00 0.81 1.10 1.22 0.62 0.00 0.27 0.39
 Trade Payables 12.35 11.84 9.46 12.99 15.02 13.80 19.90 21.99 21.67 17.33
 Other Current Liabilities 5.00 5.54 6.30 4.98 10.04 10.28 11.90 13.31 14.26 12.97
 Short-Term Provisions 2.67 1.75 1.55 2.10 1.99 1.45 0.73 7.63 6.61 6.06
Total Current Liabilities 20.15 19.24 17.54 20.87 28.16 26.75 33.16 42.93 42.81 36.75
Other Equity & Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL EQUITY AND
LIABILITIES 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
ASSETS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Non-Current Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Assets 20.34 21.65 25.31 24.45 23.43 22.37 24.37 25.12 21.11 19.33
  Tangible Assets 13.24 14.96 18.87 17.81 18.66 15.03 20.96 21.92 19.42 13.07
  Intangible Assets 2.29 2.68 1.75 1.89 0.50 0.60 0.80 0.54 0.76 0.38
  Capital Work-in-Progress 0.93 0.47 0.25 2.87 1.82 4.78 0.92 1.91 0.57 5.80
Intangible assets under
development 2.60 1.98 2.70 1.87 2.45 1.96 1.69 0.75 0.37 0.09
 Non-Current Investments 38.68 7.67 13.39 27.24 41.52 48.05 41.14 12.18 2.09 1.07
Deferred Tax Assets (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Deferred Tax Assets 0.39 0.22 0.18 0.22 0.26 0.21 0.27 0.30 0.40 0.46
Deferred Tax Liability 1.95 1.98 2.57 3.14 2.10 1.64 1.39 1.20 1.25 1.07
 Long-Term Loans and
Advances 1.90 1.19 1.40 1.11 1.50 3.38 1.82 6.24 5.58 5.98

pg. 12
  Other Non-Current Assets 0.60 0.22 0.00 0.95 1.16 1.63 3.72 1.34 0.48 0.60
Total Non Current Assets 61.51 30.73 40.10 53.74 67.61 75.45 71.04 44.88 29.26 26.99
Current Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
 Current Investments 2.97 8.52 23.75 4.95 8.13 15.95 16.08 41.15 55.65 62.33
 Inventories 6.29 6.09 4.90 6.39 4.87 5.82 8.29 9.20 9.70 7.36
 Trade Receivables 3.45 2.03 1.27 1.12 1.00 0.88 1.27 0.48 0.82 0.61
 Cash and Cash Equivalents 18.89 45.93 27.66 31.02 15.51 0.37 1.23 0.94 1.26 0.34
 Short-Term Loans and
Advances 6.08 4.81 1.18 1.73 2.22 1.09 1.85 3.32 3.29 2.34
 Other Current Assets 0.80 1.88 1.15 1.05 0.67 0.44 0.23 0.04 0.03 0.03
Total Current Assets 38.49 69.27 59.90 46.26 32.39 24.55 28.96 55.12 70.74 73.01
Other Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL ASSETS 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
CAPITAL EMPLOYED 79.85 80.76 82.46 79.13 71.84 73.25 66.84 57.07 57.19 63.25
Working Capital 18.33 50.03 42.36 25.39 4.23 -2.19 -4.20 12.20 27.93 36.26

2.3.1 Interpretation: Common Size Balance Sheet

 Share Capital:

20220 20180 20131

Year 202103 202003 201903 201703 201603 201412 201212
3 3 2

pg. 13
 Share Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64

Interpretation:

 For the analysis of Share Capital, we have taken total liabilities as 100%.
 The Share capital of EML has remained constant over the last 10 years. If we see the
above graph, the portion of share capital again the total liabilities has been
decreasing over the last 10 years. Over the last 4 years, the share capital is hovering
in the range of 0.19% to 0.35%.

Reserve and Surplus:

20220 20180 20131

Year 202103 202003 201903 201703 201603 201412 201212
3 3 2
 Reserves and Surplus 75.38 76.66 77.97 74.91 68.57 70.31 63.72 54.13 53.55 58.78

pg. 14
Interpretation:

 Reserves and surplus are all the cumulative amounts of retained earnings recorded
as a part of the Shareholder's Equity.
 Reserves are the funds earmarked for a definite reason or purpose that the business
plans to use in the future and surplus is the profit of a business.
 In the last 10 years, there has been a slight increase in the reserve and surplus funds
as a potion of total liabilities of the company. But, it has remained stable and has
been hovering in the range of 68% to 76% against its total liabilities.

 Total Non- Current Liabilities:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Total Non Current
Liabilities 4.28 3.89 4.24 3.93 2.92 2.45 2.37 1.72 1.81 1.83

pg. 15
Interpretation:

 A non-current liability refers to the financial obligations of a company that are not

expected to be settled within one year. Examples of non-current liabilities include
long-term leases, bonds payable, and deferred tax liabilities.
 The absolute non-current liabilities of the company is increasing year on year. If we
see it in the terms of percentage of total liabilities, a positive trend can be observed,
i.e., the non-current liabilities are on a rise as a proportion of total liabilities YoY.
 While non-current liabilities should not be looked in isolation, it forms a very small
portion of the total liabilities of EML.

 Total Current Liabilities:

20220 20180 20131

Year 202103 202003 201903 201703 201603 201412 201212
3 3 2
Total Current Liabilities 20.15 19.24 17.54 20.87 28.16 26.75 33.16 42.93 42.81 36.75

pg. 16
Interpretation:

 Current liabilities are a company's short-term financial obligations that are due within
one year or within a normal operating cycle.
 The current liabilities of the liabilities of EML have decreased significantly over the
last 10 years from 36% to a mere 20% (as a portion of total liabilities).
 The decrease in current liabilities points towards efforts of the EML of being virtually
debt-free.

 Total Liabilities:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
TOTAL 14,284.5 12,624.9 10,579.0 9,477.4 7,794.6 5,540.26 3,623.9 2,228.8 1,483.18 1,024.2

pg. 17
 EQUITY AND
LIABILITIES 5 1 1 1 7 1 9 4

Interpretation:

 Total liabilities are the aggregate debt and financial obligations owed by a business to
individuals and organizations at any specific period of time.
 The total liabilities of EML have been increasing almost linearly for the last 10 years
(a 14X increase can be seen).
 We can’t judge the health of a company by seeing liabilities in isolation. It must be
compared with other parameters such as profit and equity to predict the true health
of the company.

 Fixed Assets:

20220 20180 20131

Year 202103 202003 201903 201703 201603 201412 201212
3 3 2

pg. 18
 Fixed Assets 20.34 21.65 25.31 24.45 23.43 22.37 24.37 25.12 21.11 19.33

Interpretation:

  Fixed asset refers to a long-term tangible piece of property or equipment that a firm
owns and uses in its operations to generate income.
 Over the past 10 years, the fixed assets of EML have remained constant as a
proportion of total assets.
 If we see in absolute terms, there has been a 15X increase in the value of fixed
assets, which indicates towards good health of the company.

Capital Work-in-Progress:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

pg. 19
   Capital Work-in-
Progress 0.93 0.47 0.25 2.87 1.82 4.78 0.92 1.91 0.57 5.80

Interpretation:

 Capital Works-in-Progress (CWIP) is the expenditure on fixed assets that are in the
process of construction or completion i.e. not ready for intended use at the time of
incurring of expenditure.
 It includes building under construction, machinery under assembly etc., at the time
of preparation of balance sheet.
 The total proportion of Capital work-in-progress has been low for EML (the last one
being less than 1% of the total assets in FY2022) which indicated there is a little spill-
over of building assets and works are being completed during the current financial
year only.

Total Non-Current Assets:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

pg. 20
 Total Non Current Assets 61.51 30.73 40.10 53.74 67.61 75.45 71.04 44.88 29.26 26.99

Interpretation:

 Non-current assets are assets and property owned by a business that are not easily
converted to cash within a year.
 Non-current assets seem to follow a cyclic order in EML. Their proportion rose from
2012 till 2017 and then halved between 2017 to 2021. It again rose significantly in
2022 (almost doubled).
 The rise in non-current assets point towards a positive health of the company,
though we would need other parameters also to gauge the effectiveness of non-
current asset numbers.

Total Current Assets:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

pg. 21
 Total Current Assets 38.49 69.27 59.90 46.26 32.39 24.55 28.96 55.12 70.74 73.01

Interpretation:

 Current asset is a short-term asset that a company expects to use up, convert into
cash, or sell within one fiscal year or operating cycle.
 The graph of Current assets, more or less is a mirror image non-current assets. It also
follow a cyclic order, their proportion fell from 2012 till 2017 and then more than
doubled between 2017 to 2021. It again fell significantly in 2022 (almost halved).
 Current assets consists a considerable proportion of the total assets of EML. This
signifies that a significant portion of their assets are being are used in the current
operating cycle which is good for the company.

2.4 Common Size Income Statement of Eicher Motors

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

pg. 22
REVENUE
 Revenue From
Operations(Gross) 100.0 100.0 100.0 100.0 102.8 112.9 112.9 109.5 112.6 112.4
Less: Excise Duty 0.0 0.0 0.0 0.0 2.8 12.9 12.9 9.5 12.6 12.4
Revenue From
Operations(Net) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
 Other Income 4.5 5.2 6.8 5.2 3.7 3.2 4.6 3.8 4.7 4.4
Total Revenue 104.5 105.2 106.8 105.2 103.7 103.2 104.6 103.8 104.7 104.4
EXPENSES:
 Cost of Materials Consumed 56.9 58.6 51.3 51.6 50.4 51.4 55.3 60.0 63.4 66.5
 Internally Manufactured
Intermediates or
Components Consumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Purchases of Stock-in-Trade 2.2 2.4 2.4 2.1 1.7 1.5 1.2 1.0 0.7 0.0
 Changes in Inventories of
Finished Goods, Work-in-
Progress and Stock-in-Trade -0.2 -1.8 1.2 -2.0 -0.4 -0.2 -0.9 -1.4 -1.9 -2.0
 Employee Benefits
Expenses 7.7 9.3 8.4 6.9 6.1 5.8 5.5 5.3 6.5 7.5
 Finance Costs /Interest 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.0
 Depreciation and
Amortization Expenses 4.4 5.2 4.2 3.1 2.5 2.2 2.2 1.7 1.8 1.6
 Other Expenses 12.6 10.7 12.4 11.3 10.2 10.2 11.2 10.9 12.8 14.2
Total Expenses 83.6 84.6 80.0 73.0 70.7 70.9 74.6 77.5 83.4 87.8
EBIDT 25.4 26.0 31.1 35.2 35.6 34.6 32.2 28.0 23.1 18.2
EBIT 21.0 20.8 26.9 32.2 33.1 32.4 30.0 26.4 21.3 16.6
EBT 20.9 20.7 26.8 32.2 33.0 32.4 30.0 26.3 21.3 16.6
Profit before Exceptional
and Extraordinary Items and
Tax 20.9 20.7 26.8 32.2 33.0 32.4 30.0 26.3 21.3 16.6
 Exceptional Items 0.0 0.0 0.0 -0.2 -3.5 0.0 0.0 0.0 0.0 0.0
Profit before Extraordinary
Items and Tax 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6
 Extraordinary Items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Profit before Tax 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6
Tax Expenses 5.2 5.3 5.8 11.0 10.4 10.2 8.8 7.9 5.0 2.8
Current Tax 5.1 5.7 6.0 9.6 9.8 9.6 8.5 7.6 4.6 2.8
Deferred Tax 0.0 -0.5 -0.2 1.4 0.6 0.5 0.3 0.2 0.4 0.2
Other Tax Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2
Prior Year Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Minimum Alternate Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2
Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profit/(Loss) for the period

from Continuing Operations 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8
Profit/(Loss) from
Discontinuing Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Tax expense of
Discontinuing Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Profit/(Loss) from
Discontinuing Operations
(After Tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Profit/(Loss) for the period 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8
Basic EPS 0.6 0.6 0.8 7.7 7.0 8.2 7.8 6.8 6.1 5.1
Diluted EPS 0.6 0.6 0.8 7.7 7.0 8.1 7.8 6.8 6.0 5.1
Book Value 3.9 4.1 33.4 26.7 22.0 20.5 13.9 15.0 17.8 22.2

pg. 23
  Contingent Liabilities &
Commitments 7.7 8.4 4.3 3.2 5.1 7.0 2.2 2.3 8.0 10.7

2.4.1 Interpretation: Common Size Income Statement

Total Revenue:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Total
Revenue 10,577.14 9,071.07 9,692.81 10,302.52 9,289.94 7,265.28 6,469.68 3,147.52 1,782.57 1,095.04

Interpretation:

 The total revenue generated by EML has been constantly increasing over the last 10
years.
 It saw a 10.5X growth in revenue during the last 10 years.
 The constant growth in revenue can’t be used to interpret financial health of the
company. We need to account expenses and other parameters to come to the
conclusion.

Depreciation and Amortisation Expenses:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
 Depreciation and
Amortization Expenses 4.4 5.2 4.2 3.1 2.5 2.2 2.2 1.7 1.8 1.6

pg. 24
Interpretation:

 Depreciation and amortization forms an important part of the Profit and loss
statement.
 The depreciation and amortization expenses as a proportion of Net revenue is
increasing YoY.
 During the last 10 years, this expense has more than doubled which makes sense.
The accumulated depreciation will keep on increasing with each passing year.

EBIDT (Earnings before Interest, Depreciation and Tax):

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
EBIDT 25.4 26.0 31.1 35.2 35.6 34.6 32.2 28.0 23.1 18.2

pg. 25
Interpretation:

 During the last 10 years, EBIDT of EML saw a constant rise from 2012 till 2019. It
started dipping from 2019.
 The EBIDT of EML has seen a negligible change during the last 2 years.

EBT (Earnings before Tax)/ PBT (Profit before Tax):

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Profit before Tax/
EBT 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6

pg. 26
Interpretation:

 EBT/PBT shows a similar pattern as EBIDT.

 During the last 10 years, EBT of EML saw a constant rise from 2012 till 2019. It
started dipping from 2019.
 The EBT of EML has seen a negligible change during the last 2 years.

Profit/ Loss for the period:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Proft/
(Loss)
for the
period 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8

pg. 27
Interpretation:

 EML has remained profitable for the last 10 years.

 The consistent profitability of EML shows very highly of its financial health.
 The profitability pattern of EML follows closely EBIDT and EBT.
 During the last 10 years, PAT of EML saw a constant rise from 2012 till 2019 (with a
single dip in 2018). It started dipping from 2020
 The PAT of EML has seen a negligible change during the last 2 years.

pg. 28
 Chapter- 03

DuPont Analysis

3.1 DuPont Analysis of Eicher Motors Limited

DuPont Analysis
 DuPont analysis is a framework for analysing fundamental performance originally
popularized by the DuPont Corporation, now widely used to compare the operational
efficiency of two similar firms.

pg. 29
• DuPont analysis is a useful technique used to decompose the different drivers of return on
equity (ROE).

 The final Ratio obtained at the end of DuPont analysis is called ROE
(Return on Equity).
 The DuPont analysis dissects the various factors that drive Return on
Equity (ROE). The DuPont analysis may be used to compare two similar
firms' operational efficiency, as well as define a company's strengths or
weaknesses.
DuPont Model: Eicher Motors
20220 20210 20200 20190 20180 20170 20160 20141 20131 20121
Year
3 3 3 3 3 3 3 2 2 2
PBIDT/
Sales(%) 25.37 25.97 31.06 35.07 31.2 30.63 28.52 25.6 20.54 16.21
Sales/Net
Assets 0.9 0.86 1.07 1.34 1.66 1.96 2.91 2.65 2.28 1.83
PBDIT/Net
Assets 0.23 0.22 0.33 0.47 0.52 0.6 0.83 0.68 0.47 0.3
PAT/PBIDT(%) 61.77 59.4 67.53 59.81 59.61 64.12 65.73 65.77 70.75 75.71
Net
Assets/Net
Worth 1.04 1.03 1.03 1.02 1.03 1.03 1.03 1.01 1.02 1.03
PAT/SALES 0.16 0.15 0.21 0.21 0.19 0.22 0.21 0.18 0.16 0.14
ROE(%) 14.67 13.67 23.11 28.67 32.70 44.75 63.43 49.35 38.06 26.00

ROE Analysis for EML

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
ROE(%) 14.67 13.67 23.11 28.67 32.70 44.75 63.43 49.35 38.06 26.00

pg. 30
Interpretations:

 ROE of EML has decreased significantly from 2016 onwards.

 There has been a slight increase of 1% in ROE in FY 2022 as compared to FY2021.

pg. 31
 Chapter-04

Ratio Analysis

4.1 Liquidity Analysis of Eicher Motors:

Liquidity refers to the ability of an individual, business, or entity to convert its assets into
cash quickly and easily without incurring significant losses. It is a measure of how easily an
asset can be bought or sold in the market, allowing for the settlement of financial obligations.

Maintaining adequate liquidity is crucial for the smooth functioning of businesses and
personal finances. It enables individuals and companies to meet their short-term financial
obligations, such as paying bills, salaries, and suppliers, without disruptions.

pg. 32
The liquidity position of a company can be assessed by using these key financial ratios:

 Current Ratio
 Quick Ratio
 Super Quick Ratio

4.1.1 Current Ratio:

=Current Assets/ Current Liabilities

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

CURRENT
1.91 3.60 3.42 2.22 1.15 0.92 0.87 1.28 1.65 1.99
RATIO

pg. 33
Interpretation:

Current ratio for FY 2021 is 3.60 and the current ratio for FY 22 is 1.91. This deterioration of
the current ratio of the company causes difficulty in the company’s ability to pay short term
and long-term obligations. Current ratio is an important measure of liquidity. Current assets
like cash, cash equivalents and market securities are under decline.

4.1.2 Quick Ratio:

=Current Assets – Inventory/Current Liability

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

LIQUIDITY RATIO                    

CURRENT RATIO 1.91 3.60 3.42 2.22 1.15 0.92 0.87 1.28 1.65 1.99
ACID TEST/QUICK ASSET
1.60 3.28 3.14 1.91 0.98 0.70 0.62 1.07 1.43 1.79
RATIO

pg. 34
Interpretation:

The company’s quick ratio for FY 22 is 1.60 compared to FY 21 3.21 this reduction of 1.61
gives us a picture about the working capital management which is needed for the company.
Working capital = Current assets - Current liabilities
(5497.80-2878.87).

4.1.3 Super Quick Ratio:

=(Current Assets-Inventory-Account Receivable)/Current Liabilities

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

SUPER QUICK
1.43 3.18 3.06 1.86 0.94 0.67 0.59 1.06 1.41 1.77
RATIO

pg. 35
Interpretation:
The trend of the Super quick ratio which was high in FY 2020, 2021 is coming down in
FY2022. The FY 2022 super quick ratio is 1.43.

4.2 Solvency Analysis of Eicher Motors

Solvency is the enterprise’s ability to meet its long-term debt obligations and is used often
by prospective business lenders.
A solvency ratio is one of many metrics used to determine whether a company can stay
solvent in the long term. A solvency ratio is a comprehensive measure of solvency, as it
measures a firm's actual cash flow, rather than net income, by adding back depreciation and
other non-cash expenses to assess a company’s capacity to stay afloat.

pg. 36
It measures this cash flow capacity versus all liabilities, rather than only short-term debt.
This way, a solvency ratio assesses a company's long-term health by evaluating its repayment
ability for its long-term debt and the interest on that debt.

The notable ratios used to measure solvency of a company are:

 Interest Coverage Ratio

 Debt-Equity Ratio
 Fixed-Asset Ratio

4.2.1 Debt-Equity Ratio:

=(Long term debt+short term Debt+ fixed payments)/Shareholder equity

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

DEBT
EQUITY 0.32 0.30 0.28 0.33 0.45 0.41 0.55 0.81 0.81 0.63
RATIO

pg. 37
Interpretation:
The debt-equity ratio has been constantly going down for EML and stands at a mere 0.3. The
company is virtually debt-free.

4.2.2 Interest Coverage Ratio:

=Earnings Before Interest and Tax (EBIT) / Interest Expense

20220 20210 20200 20180 20170 20160 20141 20121

Year 201903 201312
3 3 3 3 3 3 2 2
SOLVENCY
                   
RATIO
INTEREST
1054.6 1346.0
COVERAG 207.06 194.84 224.79 974.77 817.13 875.06 478.86 669.46
8 0
E RATIO

pg. 38
 INTEREST COVERAGE RATIO
1600.00

1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
From the above data it is clear that from FY’ 2020 there is no significant change in the
interest coverage ratio . This ratio gives a picture about the firms ability to afford the interest
on debt. Interest coverage ratio as shown positive signs about the company’s ability to serve
interests to the lenders. This makes the company raise funds at later stages easily.

4.2.3 Fixed Assets Ratio:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

SOLVENCY
                   
RATIO
INTEREST
1054.6
COVERAG 207.06 194.84 224.79 974.77 817.13 875.06 478.86 1346.00 669.46
8
E RATIO
DEBT
EQUITY 0.32 0.30 0.28 0.33 0.45 0.41 0.55 0.81 0.81 0.63
RATIO

pg. 39
 FIXED
ASSET 0.83 0.94 1.16 0.99 0.75 0.77 0.69 0.56 0.47 0.50
RATIO

FIXED ASSET RATIO

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
Fixed asset ratios at the initial stages of company has shown a significant growth however
from FY 2020 there is a drop in the Fixed asset ratio. This measure gives us an understanding
of company’s ability to generate sales from its existing fixed assets.

4.3 Profitability Position Analysis:

Profitability refers to the profits or gains a business makes in relation to its expenses.
Therefore, profitability analysis refers to the process of calculating or analysing the profits of
a business. It helps businesses identify their revenue streams and where they can reduce
their expenses to generate maximum gains. 
The profitability ratios assist analysts and investors in assessing the company's profitability.
The ratios show how effectively the business is doing at making money. The competitiveness
of a company's management and operation is also indicated by its profitability. A company's
profitability is a key factor for the shareholders since profits are required for business
development and to pay dividends to its shareholders.

Key profitability analysis are :

pg. 40
1. Return on Equity
2. Gross Margin ratio
3. Return on Equity
4. ROCE
5. Working Capital Efficacy Margin
6. Operating Margin

4.3.1 Sales Gross Margin

=EBIDT/Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBIDT/SALES 0.24 0.26 0.31 0.35 0.36 0.35 0.32 0.28 0.23 0.18

pg. 41
(Ratio on Sales): EBT/Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBT/SALES 0.20 0.20 0.25 0.31 0.32 0.31 0.29 0.25 0.20 0.16

EBT/SALES
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Ratio on Sales: EAT (Earnings after Tax)/ Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EAT/SALES 0.15 0.15 0.20 0.20 0.18 0.21 0.20 0.18 0.16 0.13

pg. 42
 EAT/SALES
0.25

0.20

0.15

0.10

0.05

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation :
From the above data of the profitability ratios it is evident that from the last 4 years the ratio
i.e. Gross margin is declining. These ratios gives us a picture about business efficiency with
respect to sales. There is stagnancy in comparison to FY’ 21 in FY’ 22.

4.3.2 Return on Equity (ROE)

=PAT/Shareholder Capital

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

PAT/SHARE
0.15 0.14 0.23 0.29 0.32 0.40 0.56 0.45 0.34 0.23
CAPITAL

pg. 43
 PAT/SHARE CAPITAL
0.60

0.50

0.40

0.30

0.20

0.10

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
PAT/Share Capital : profit after tax per share is in a declining trend. The company has not
shown any upward movement from FY 2016. However, the company is maintaining stagnant
profit after tax per share ratio in comparison with FY 21 in FY 22.

4.3.3 ROCE (Return on Capital employed)

=EBIT/ Working Capital

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBIT/
WORKING 0.81 0.28 0.54 1.31 8.99 -18.75 -12.19 2.94 0.88 0.47
CAPITAL

pg. 44
 EBIT/WORKING CAPITAL
15.00

10.00

5.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203
-5.00

-10.00

-15.00

-20.00

-25.00

Interpretation:
EBIT/Working Capital : earnings before interest and taxation with respect to working capital
had a drastic dip from FY 2014 FY 2017, it picked up on the later on stages and showing
consistency in the past few years.

4.4 Market Efficiency Analysis

An efficiency ratio evaluates how effectively a company utilizes its assets to generate
income. Market efficiency is calculated based on the turnover and associated operating
ratios and activity ratios.

The key ratios that assess efficiency are:

 Fixed Asset Turnover

pg. 45
  Inventory Turnover
 Account receivable turnover
 Account Payable Turnover

4.4.1 Fixed Asset Turnover Ratio:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

MARKET
EFFCIENCY                    
RATIOS
Fixed
asset 3.48 3.15 3.39 4.23 4.90 5.68 7.01 5.41 5.44 5.30
turnover
Ac 26.07 45.63 73.00 121.67 121.67 182.50 365.00 365.00 182.50 182.50

pg. 46
 Payable
turnover

Fixed asset turnover

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
Since there is a decline in the fixed asset turnover ratio in the last few years and a slight
pickup in FY 22 in comparison with FY 21. It can be interpreted that the companies sales
with respect to fixed assets is not up to the mark.

4.4.2 Inventory Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Inventory
9.42 9.48 14.02 11.81 16.69 15.47 15.37 11.45 9.87 12.22
Turnover

pg. 47
 Inventory Turnover
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
Inventory turnover ratio is an important efficiency ratio based on inventory management.
For FY 22 the inventory coverage ratio is 9.42,there is a slight decrease from FY’21.

4.4.3 Account Receivable Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

AC
receivable 23.58 24.68 14.77 11.10 8.86 7.32 6.22 6.71 9.50 17.75
turnover

pg. 48
 AC receivable turnover
30.00

25.00

20.00

15.00

10.00

5.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
Account receivables turnover ratio: The account receivables turnover ratio is increasing from
past few years. The more the account receivables the better it is for the company. This
metric has dropped a little in comparison to FY 21. 23.58 is the account receivables turnover
ratio for the year FY 22.

4.4.4 Account Payable Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Ac
Payable 26.07 45.63 73.00 121.67 121.67 182.50 365.00 365.00 182.50 182.50
turnover

Ac Payable turnover
400.00

350.00
pg. 49
300.00

250.00
 200.00

150.00

100.00

50.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation:
This ratio gives a picture about how many times a company pays off its accounts payable
during a period. This ratio is showing a decreasing trend. There is a drastic decrease from
45.63 FY 21 to 26.07 FY 22.

4.5 Economic Value Added:

Economic value added is a key financial performance indicator Which gives a picture about
the capital and the cost of capital. It is a useful metric to gauge shareholder value
perspective and gives an idea about the direction of the company. Value creation, Strategic
decisions, Shareholders confidence etc. are some of the general understandings based on
the economic value added.

Key Ratios for EVA for Eicher Motors:

20131 20121
Year 202203 202103 202003 201903 201803 201703 201603 201412
2 2
Cost of
Capital
Employed
Average
Cost of 11405.6 10196.2 8723.8 7499.1 5600.0 4058.3 2422.3 1272.0
848.23 647.80
Capital 8 0 8 7 4 0 2 7
Employed

pg. 50
Cost of
0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Equity%
COCE 1140.57 1019.62 872.39 749.92 560.00 405.83 242.23 127.21 84.82 64.78
Economic
Value
Added
Net
Operatin 1903.8 2054.4 1712.9 1560.0 1309.2
1586.22 1329.70 558.92 278.62 144.76
g Profit 2 4 1 2 2
after Tax
Economic
1031.4 1304.5 1152.9 1154.1 1066.9
Value 445.65 310.08 431.71 193.80 79.98
3 2 1 9 9
Added

Average Cost of Capital Employed

12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

pg. 51
 Net Operating Profit after Tax
2500.00

2000.00

1500.00

1000.00

500.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Economic value added is primarily dependent on the cost of capital from the net operating
profit after tax. A positive economic value added implies the cost of capital is lesser than
companies returns. From the above data though the cost of capital is increasing the net
operating profit after tax has dropped after a certain point i.e. FY 2019 until FY 2021. From
FY2022 the company is showing a slight pickup in the direction needed.

Economic Value Added

1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

pg. 52
It is a significant part of the annual report where EML puts forward its intentions Of Fair
distribution. The economic value added to the stakeholders of the business namely
returning profits to the investors, paying the government taxes, community development,
employee benefits etc. The economic value generated and distributed is a column in the
annual report where the standards of ethical business model and regulatory compliances are
mentioned in detail.

4.6 Market Value Added:

Market value added (MVA) represents the value generated by a company for its
stakeholders. Essentially, it signifies the disparity between the present market value of a
company's stock and the initial capital invested by the company.

 Market capitalisation=Market Price∗No of Shares

 Market Value Added ( MVA )=Market Value−Book Value

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Market Value
Added
Book value of
394.79 355.06 3030.75 2614.67 1971.06 1441.59 860.24 455.23 303.75 232.98
Share
Market Value
of Share in
Rs. 2,991.29 2,644.50 1,966.82 1,985.39 2,721.67 2,807.19 2,052.23 869.71 344.08 210.47
Face Value of
Share
Total No of 27342885 27333592 2730547 2725621 2721024 2716118 2700898 2699848
Shares 2 2 3 27283473 5 9 3 27054783 3 3
Market
Capitalization 81790.50 72283.68 5370.50 5416.83 7418.24 7638.43 5574.10 2352.98 929.33 568.24
(in Rs. crores)
Booked
Value of
10794.70 9705.07 8275.61 7133.73 5372.36 3922.60 2336.51 1231.61 820.40 629.01
Shares ( in
Rs. Crores)
Market Value
70995.80 62578.62 -2905.11 -1716.89 2045.88 3715.83 3237.59 1121.37 108.93 -60.77
Added

pg. 53
 Market Capitalization
90000.00

80000.00

70000.00

60000.00

50000.00

40000.00

30000.00

20000.00

10000.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation of Market Value Added:

The market capitalization took a significant up growth in the year 2020 and it continues on
its upward journey. Today EML is in top 50 companies of the stock market in India. In the
automobile sector EML is a significant player with a continuous growth in market value of
shares on a long term basis. Though there is a downfall for a certain period of time, at an
overall level market value of shares is positioned at a high level.
FY 13 to 18 can be considered as a crucial phase for EML. With around 31.6 percent CAGR
the company has grown significantly. However due to economic slowdown and rising

pg. 54
competition from FY 18 to 22 the company has a declined growth path. Sales CAGR 14.1%. is
observed during this period. With the global motorcycle market share of Royal Enfield, the
company is looking forward for rapid post pandemic growth. The expansion in the global
market has significantly improved and export share in the total sales is taking place.

4.6 Debt investor perspective analysis (Leverage Ratios)

A leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a
business entity against several other accounts in its balance sheet, income statement, or
cash flow statement.
There are mainly 3 leverage ratios:

 Operating Leverage
 Interest Leverage
 Combined Leverage

20220 20210 20200 20180 20170 20160 20141 20121

Year 201903 201312
3 3 3 3 3 3 2 2
LEVERAGE
                   
RATIOS
OPERATIN
G 5.76 5.02 7.46 11.55 14.33 15.87 14.59 16.94 12.95 11.15
LEVERAGE
INTEREST 1,054.6 1,346.0
LEVERAGE 207.06 194.84 224.79 8 974.77 817.13 875.06 478.86 0 669.46
COMBINE
D 5.63 4.92 7.25 11.43 14.13 15.58 14.36 16.40 12.84 10.98
LEVERAGE

Operating Leverage Interest Leverage

16.00 1,500.00
12.00
1,000.00
8.00
4.00 500.00

0.00 0.00
12 03 03 03 03 12 03 03 03 03
013 016 018 020 022 013 016 018 020 022
2 2 2 2 2 2 2 2 2 2

pg. 55
 Combined Leverage
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Interpretation of Leverage ratios:

The main factor of leverage ratio calculation is the debt of the company. It is useful for
assessing the ratio of debt vs. equity. Debts and the interest burden on the debt with respect
company’s operations gives us a picture about company’ approach towards debts. From the
above data it is evident that Combined leverage falling is a suitable factor for the company
and important for the stakeholders for analysing the direction of the company. Though there
is a slight upturn in comparison with FY’21 the direction of the company can be broadly
assessed.

pg. 56
4.7 Equity Investor Perspective Analysis

These ratios are commonly employed by shareholders or investors to evaluate the valuation
of a company's stocks. They compare the stock price of the company with either its
profitability or overall value, providing insights into whether the stock is trading at a relatively
high or low price. These ratios assist in analysing the perceived value of the company's
current share price.

In simpler terms, valuation ratios compare the cost of owning a security with the benefits
associated with owning the stock. The following ratios are considered:

 EPS Growth %
 Diluted EPS Growth %
 Dividend %
 Dividend Yield%
 PE Ratio
 Price to Book Value
 Pay-out Ratio

20220 20210 20200 20190 20180 20170 20160 20141 20131 20121
Year
3 3 3 3 3 3 3 2 2 2
EPS 58.01 48.65 697.23 753.00 628.45 573.32 482.02 206.59 103.16 53.62
P/E 51.56 54.36 2.82 2.64 4.33 4.90 4.26 4.21 3.34 3.93
PAYOUT
0.36 0.35 0.18 0.17 0.18 0.17 0.21 0.24 0.29 0.37
RATIO
DPS 21.00 17.00 124.97 124.98 110.02 100.00 100.00 50.08 30.03 20.00
DIVIDEN
0.70 0.64 6.36 6.30 4.04 3.56 4.87 5.75 8.72 9.50
D YIELD
DIVIDEN
D PER
SHARE 21 17 125 125 110 100 100 50 30 20
DIVIDEN
D PAID
OUT 574.14 464.61 341.25 341 299.86 272.1 271.6 135.5 81.12 54

pg. 57
1. EPS (Earnings per Share):

Earnings per share (EPS) is a measure of a company's profitability, calculated by dividing
quarterly or annual income (minus dividends) by the number of outstanding stock shares.
The higher a company's EPS, the greater the profit and value perceived by investors.

2. P/E Ratio (Price to Earnings Ratio):

Price to Earnings Ratio or Price to Earnings Multiple is the ratio of share price of a stock to its
earnings per share (EPS). PE ratio is one of the most popular valuation metric of stocks. It
provides indication whether a stock at its current market price is expensive or cheap.

pg. 58
3. Payout Ratio:

Pay-out Ratio refers to the percentage of a company's earnings that is distributed to

shareholders as dividends.

4. Dividend Per Share:

Dividend Per Share (DPS) is the total amount of dividends attributed to each individual share
of a company's outstanding stock.

pg. 59
5. Dividend Yield
The dividend yield ratio is the ratio between the current dividend of the company and the
company's current share price – this represents the risk inherently involved in investing in
the company.

pg. 60
5.0 Comments as CEO/CFO of the company

FY’22 FY’21

Net Revenue From Operations 10,122.86 8,619.04

Profit before depreciation and interest 2,113.56 1,786.51

Profit before other income and tax 1,657.79 1,331.28

Profit before tax 2,112.07 1,783.31

Net profit after tax 1,586.22 1,329.70

Due to the COVID-19 pandemic there was a downturn in the financial performance of the
company. However in the road to recovery post COVID-19 EML has shown improvement in
the net revenue from operations of 10,122.86 crores FY 22. A growth of 17.5% is observed
YoY. Net profit after tax has shown a growth of 19.2% in comparison with FY 21 in the year
FY 22 of 1586.22 crores.
The financial health of the company is in the track of recovery. Despite volatile market,
competition from the peers, uncertainty of the future EML continued to retain its market
share. The areas of scope of development which has a bright prospectus is international
market and rapid growth in commercial vehicle segment. Royal Enfield being a major
product of Eicher motors limited and varieties of bikes being launched on a timely basis
makes the company retain its market share significantly. Heavy duty trucks, buses and other
commercial vehicles are showing a substantial rise. With improving upon the global
manufacturing capacities EML is looking forward to entering new markets. Hero MotoCorp,
Ashok Leyland are the main competitors in the Automobile sector in India. The following
graphs gives us insights about the market scenario and Eicher Motor’s Limited Financial
performance.

pg. 61
Peer Comparison

Comparison based on revenues of peers Tata Motors and Mahindra and Mahindra.

pg. 62
References:

 Statistics: https://www.statista.com/
 Capitoline website https://awsone.capitaline.com/externalaccess.html
 Money Control website - https://www.moneycontrol.com
 Screener Website - https://www.screener.in/
 Value Research Online – www.valueresearchonline.com

pg. 63