Maruti Suzuki India Ltd Financial Statement Analysis

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Maruti Suzuki India Ltd Financial Statement Analysis

We have considered Tata Motors in whole as its competitor but it is advised to take the related segments for better results.

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Maruti Suzuki India Ltd Financial Statement Analysis

  1. 1. FINANCIAL STATEMENT ANALYSIS PROJECT PRESENTATION ON Presented by Santosh Koppada Maruthi Nataraj K Ayan Das Pankaj Kumar Singh PRAXIS BUSINESS SCHOOL, KOLKATA
  2. 2. AGENDA  About the company  Stock Analysis  Announcement Effects  Major Accounting Policies  Director’s report and MD & A  Balance Sheet  P & L Statement  Ratio Analysis  Cash Flow Analysis
  3. 3. ABOUT THE COMPANY  Automobile manufacturer in India(1981-MUL 2007-MSIL) - Subsidiary of Japanese automobile and motorcycle manufacturer Suzuki.  The company's headquarters are on Nelson Mandela Road, New Delhi.  Originally, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The BJP-led government held an initial public offering of 25% of the company in June 2003. (56.21% by Suzuki – 30 June’13)  Key people : RC Bharagava (Chairman), Kenichi Ayukawa (CEO & MD)  It had a 40% share of the Indian passenger car market as of July 2013.
  4. 4. ABOUT THE COMPANY  Manufacturing facilities - Gurgaon - Manesar (Both manufacturing facilities have a combined production capacity of 14,50,000 vehicles annually.)  Other services - Maruti Insurance - Maruti Finance - Maruti TrueValue - Maruti Driving School etc
  5. 5. STOCK ANALYSIS Annual Return Stock Index Gold Based on 15-02-13 to 14-08-2013 -7.32% -3.67% -6.76%
  6. 6. ANNOUNCEMENT EFFECTS Date % Change in Stock News 08-Aug-2013 +4.07% The Reserve Bank of India today lifted restrictions placed on foreign institutional investors or FIIs buying shares in Maruti Suzuki India Limited after their holdings fell below the prescribed limit. 24-Jul-2013 -2.25% The company has threatened to shut its key Manesar plant in Haryana. 16-Jul-2013 -2.44% Workers at Maruti Suzuki are planning a hunger strike and a sit-in demonstration in Manesar, India, on 18 July. The aim is to free 147 jailed workers. 11-Jul-2013 -2.46% Macquarie has downgraded Maruti Suzuki India Ltd to "neutral" from "outperform citing continued weakness in passenger vehicle demand and discounts on models.
  7. 7. ANNOUNCEMENT EFFECTS Date % Change News in Stock 26-Apr-2013 +5.17% India's largest passenger cars maker announced a surge of 79.8% year-on-year basis in net profit for the quarter ended Mar. 31, 2013 to Rs 11.48 billion. 16-Apr-2013 +4.16% Maruti Suzuki is expected to report a 13.1 per cent increase in net profit for the fiscal fourth quarter ended March 31, 2013, at Rs. 722.75 crore from Rs. 639 crore in the year-ago period (Q3 results). 05-Apr-2013 +7.26% Shares in Maruti Suzuki rose tracking the continued weakness in the Japanese yen, which slid to a 3-1/2 year low against the dollar. A weaker yen would improve Maruti's margins by reducing the costs of importing auto parts from Japan. 28-Feb-2013 -3.85% Country's largest car maker Maruti Suzuki India shares will be removed from MSCI (Morgan Stanley Capital International) India index as of the close of trade on February 28.
  8. 8. MAJOR ACCOUNTING POLICIES
  9. 9. MAJOR ACCOUNTING POLICIES
  10. 10. MAJOR ACCOUNTING POLICIES
  11. 11. DIRECTOR’S REPORT AND MD & A Major developments that may boost future cash flow of Maruti Suzuki India Ltd  CRISIL RATINGS MSIL was awarded the highest financial credit rating of AAA/stable (long term) and A1 (short term) on its bank facilities.  AMALGAMATION Suzuki Power train India Ltd (SPIL), the diesel engine and transmission firm was merged into Maruti Suzuki India Ltd by entering into a stock swap transaction with MSIL’s Japanese parent Suzuki Motor..  INVESTMENT MSIL announced Rs.1700 crore investments for a new diesel engine plant at its Gurgaon plant that would have a cumulative capacity of 3 lakh units by 2014.
  12. 12. DIRECTOR’S REPORT AND MD & A Major developments that may boost future cash flow of Maruti Suzuki India Ltd  EXPANSION OF NETWORK MSIL expanded its network into smaller towns via smaller formal outlets. The company’s initiatives include a dedicated sales force and innovative marketing methods which is enabling it to increase rural sales.  USAGE OF GPS MSIL is using a GPS tracking system to manage its logistics fleet movement. During the year the company saved 34 million rupees through route rationalisation.  PARTS AND ACCESSORIES MSIL expanded the range of genuine accessories by adding 350 new products which led to 30% increase in accessory sales, besides expanding the retail network for genuine parts.
  13. 13. DIRECTOR’S REPORT AND MD & A Major developments that may boost future cash flow of Maruti Suzuki India Ltd  INNOVATIONS In house automation projects will lead to a saving of 260 million rupees in new projects. Design innovations and best practices have led to a cost benefit of 25% over imported dies. Introduction of new light weight and fuel efficient K-10, K-14B engines. Refreshed versions of models like Wagon R, Ritz, SX4 etc.  TREASURY OPERATIONS MSIL invested its surplus funds in debt schemes of mutual funds and bank fixed deposits. This will enable the company to earn reasonable and stable returns.
  14. 14. Source – Money Control BALANCE SHEET
  15. 15. Source – Money Control P & L STATEMENT
  16. 16. RATIO ANALYSIS
  17. 17. RATIO ANALYSIS  Current ratio below 1 shows critical liquidity problems. This is mainly due to the reason that cash has reduced from 2012 to 2013 which might have been utilized for procurement of fixed assets as there is gradual increase in the same from 2012 to 2013.  The reduction in the cash levels from 2012 to 2013 has also impact on the firm’s ability in meeting its daily expenses.
  18. 18. Might have taken Might have taken substantial substantial debt/wisely trading debt/wisely trading on equity on equity RATIO ANALYSIS (Remain in market Days to sell)  ·A high Debtor’s turnover ratio of Maruti when compared to competitors implies either that a company operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient and comparative lower ratio of its peers implies they should re-assess its credit policies in order to ensure the timely collection of imparted credit that is not earning interest for the firm.  High inventory turnover ratio of Maruti implies either strong sales or ineffective buying whereas lower turnover ratio of its competitors implies poor sales and, therefore, excess inventory.
  19. 19. RATIO ANALYSIS % Increase in ROE good sign. Additional cash – borrowings/ issue of shares %  ·When compared to the competitors, Maruti was able to use its assets effectively in generating the sales revenue.  Higher equity multiplier of Maruti in 2013 indicates higher financial leverage, which means the company is relying more on debt to finance its assets and when compared to its peers, Tata Motors has the highest EM followed by Mahindra & Mahindra.
  20. 20. RATIO ANALYSIS
  21. 21. Source – Money Control CASH FLOW ANALYSIS 2011(Cr) 2012(Cr) 2013(Cr) Net Profit Before Tax 3108.8 2146.2 2991 Net Cash From Operating Activities 2819.4 2229.4 4384.2 Net Cash (used in)/from Investing Activities 343 -2918.3 -3574.1 Net Cash (used in)/from Financing Activities -752.1 616.5 -966.3 Net (decrease)/increase In Cash and Cash Equivalents 2410.3 -72.4 -156.2 Opening Cash & Cash Equivalents 281.2 2508.5 98.2 Closing Cash & Cash Equivalents 125 2436.1 2508.5 2012 to 2013 2012 to 2013 Purchase of Fixed Purchase of Fixed Assets and Assets and Investment Investment (securities) (securities) 2012 to 2013 2012 to 2013 Repayment of Repayment of short and long short and long term borrowings term borrowings and also interest and also interest
  22. 22. CASH FLOW ANALYSIS CASH FLOW ANALYSIS Cash Realisation ratio Cash from Operations / Net Income Credit Worthiness Ratio Cash Generated by Operations / [Short Term and Long Term Debt External Financing Ratio Cash from Financing / Cash from Operations Operating Cash Margin Cash from Operations / Sales 2012 1.36   0.31   0.28   6.14%   2013 1.83   0.54   -0.22   10.05%    It can be inferred form above that the company is in better position in realizing its net income in cash in 2013.  Creditworthiness ratio of less than one here indicates there is scope for improvement in financial position (meet its financial obligations through the cash generated by operating activities).  Lower external financing ratio in 2013 indicates that the company has lessened its dependence on outside sources for its business.  Higher operating cash margin in 2013 reflects relatively better performance based on cash generating ability(cash management) and also credit granting policy and receivable collections.

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