The document is a summer internship project report submitted by Ishan Kalra to Religare Securities Limited analyzing the financial performance of Mahindra and Mahindra. It includes an introduction to the auto sector and M&M in India. It performs a SWOT analysis of M&M and analyzes various financial ratios such as operating margin, profit margin, return on assets, asset turnover and return on equity for M&M over the years 2012-2016. It also compares M&M's performance to its peers and uses the Altman Z-score model to analyze the financial health and bankruptcy risk of auto companies.

1. Summer Internship Project
on
FINANCIAL ANALYSIS OF MAHINDRA AND MAHINDRA
At
Religare Securities Limited
Submitted in partial fulfillment of the requirements of
Post Graduate Diploma in Management – Finance
by
ISHAN KALRA
Roll No. 225/2015
Lal Bahadur Shastri Institute of Management, Delhi
June 2016

2. 1
ACKNOWLEDGEMENT
My debts are many and I acknowledge them with much pride and delight. I would like to
thank my institute and Religare Securities Ltd., which has provided me with the infrastructure
and opportunity for doing this project work.
I would like to express my sincere gratitude to Mr. Saurabh Kharbanda for mentoring me and
taking active interest throughout the project and for sharing his insights on the topics and for
being a constant source of inspiration and courage during the entire project work.
I would also like to express my sincere gratitude to Mr. Sarvesh Kumar as he helped me a lot
for clearing various queries relating to the project. I am indeed thankful to him for his
valuable guidance.
Finally, I want to express my warmest thanks to Dr. Shivani Bali, Lal Bahadur Shastri
Institute of Management, Dwarka, New Delhi for continuously guiding me throughout the
project.
Also, without the support, assistance and co-operation of the dedicated staff of the company
this project work could not have been completed.
In fact it is very difficult to acknowledge all the names and nature of help and encouragement
provided by them. I would never forget the help and support extended directly or indirectly to
me by all.

3. 2
Table of Contents
ACKNOWLEDGEMENT............................................................................................................. 1
ABOUT RELIGARE SECURITIES LTD. ..................................................................................... 4
Philosophy & Values ................................................................................................................ 4
Our Values............................................................................................................................... 5
Passion .................................................................................................................................5
Innovation ............................................................................................................................ 5
Ambition .............................................................................................................................. 5
Diligence .............................................................................................................................. 5
Team Work........................................................................................................................... 5
OBJECTIVE................................................................................................................................ 6
LITERATURE REVIEW.............................................................................................................. 7
INTRODUCTION........................................................................................................................ 7
Auto Sector.............................................................................................................................. 8
Market Size .............................................................................................................................. 8
Government Initiatives.............................................................................................................. 8
Road Ahead.............................................................................................................................. 9
MAHINDRA & MAHINDRA..................................................................................................... 10
SWOT ANALYSIS................................................................................................................ 10
STRENGTH ....................................................................................................................... 10
WEAKNESS...................................................................................................................... 10
OPPORTUNITY................................................................................................................. 11
THREAT............................................................................................................................ 11
Ratios .................................................................................................................................... 12
Operating Margin................................................................................................................ 12
Profit Margin ...................................................................................................................... 12
Return on asset.................................................................................................................... 13
Asset Turnover.................................................................................................................... 13
Return on Equity ................................................................................................................. 14
Debt to equity ..................................................................................................................... 14
Recommendation.................................................................................................................... 15
Maruti Suzuki............................................................................................................................. 16
Tata Motors................................................................................................................................ 17
Eicher Motors............................................................................................................................. 18

4. 3
Peer Comparison ........................................................................................................................ 19
P/E ratio..................................................................................................................................... 21
Altman Z score........................................................................................................................... 22
REFERENCES........................................................................................................................... 24
ANNEXURE............................................................................................................................. 25
ANNEXURE 1....................................................................................................................... 25
ANNEXURE 2....................................................................................................................... 26
ANNEXURE 3....................................................................................................................... 27
ANNEXURE 4....................................................................................................................... 28

5. 4
ABOUT RELIGARE SECURITIES LTD.
Religare Securities Ltd. (RSL) is a wholly owned subsidiary of Religare Enterprises Limited
(REL) and is one of the market leading securities firms in India serving over 8 lakh clients
across both Offline and Online platforms. Through its extensive footprint extending to over
500 cities, the company offers broking services in Equity, Currency and Commodity (through
its subsidiary Religare Commodities Limited) as well as depository participant services.
RSL is a member of the NSE, BSE, MCXSX, USE and a depository participant with NSDL
and CDSL. RSL also offers TIN facilitation & PAN facility at select branches - a unique
service to help an individual with PAN, TAN and TDS/TCS returns related requirements. In
addition, RSL is an NSDL-appointed enrolment agency for Aadhaar UID (Unique
Identification Number) and an AMFI-registered mutual fund distributor.
The platform has been endorsed by various awards. RSL was awarded the "Best Investor
Education & Category Enhancement – Currency Broker" and the "Best Commodity Broker"
at the Bloomberg UTV Financial Leadership Awards in 2012. RSL was also ranked among
the top three retail equity brokerage houses in India and adjudged "Best Broking House with
a Global Presence" by Dun & Bradstreet.
Philosophy& Values
Religare is a Latin word that means to bind together. We chose this name to reflect the
integrated nature of our services. Our name is paired with the symbol of a four-leaf clover.
Traditionally, it is considered good fortune to find a four-leaf clover as there is only one four-
leaf clover for every 10,000 three-leaf clovers found.
Each leaf of the Religare clover has a special meaning. It is a symbol of Hope, Trust, Care
and Good Fortune.
The first leaf of the clover represents Hope
The aspirations to succeed. The dream of becoming. Of new possibilities. It is the beginning
of every step and the foundation on which a person reaches for the stars.

6. 5
The second leaf of the clover represents Trust
The ability to place one’s own faith in another. To have a relationship as partners in a team.
To accomplish a given goal with the balance that brings satisfaction to all, not in the binding,
but in the bond that is built.
The third leaf of the clover represents Care
The secret ingredient that is the cement in every relationship. The truth of feeling that
underlines sincerity and the triumph of diligence in every aspect. From it springs true warmth
of service and the ability to adapt to evolving environments with consideration to all.
The fourth and final leaf of the clover represents Good Fortune
Signifying that rare ability to meld opportunity and planning with circumstance to generate
those often looked for remunerative moments of success.
Our Values
Passion - To demonstrate tremendous energy and enthusiasm at all times and act
entrepreneurially to achieve organizational objective.
Innovation - To constantly challenge the status quo and to look beyond mundane ways of
working and think out of the box.
Ambition – To think big: Aspire to achieve seemingly impossible and to set highest standards
of performance.
Diligence – To make constant and earnest efforts to accomplish whatever is undertaken and to
adhere to defined processes and systems.
Team Work – To build relationships to ensure collaboration and integration across business
groups / boundaries and to act to build a positive spirit, morale and co-operation within and
across teams, take action to resolve team conflict.

7. 6
OBJECTIVE
• To know about the auto sector
• To perform fundamental analysis on Mahindra and Mahindra
• To compare M&M with its peers
• To analyse financial condition of auto sector companies using Altmans Z score

8. 7
LITERATURE REVIEW
Jonah Aiyabei (2002) examined the financial performance of small business firms based in
Kenya using Z score model. Ben McClure (2004) had confirmed the Z score model through
his research study .and he concluded that investors should consider checking their companies'
Zscore on a regular basis. Gupta (1999) attempted a refinement of Beaver's method with the
objective of predicting the business failure. Mansur A. Mulla (2002) made a study in textile
mill with the help of Z score model for evaluating the financial health with five weighted
financial ratios. Chang(2008) studied the corporate governance characteristics of financially
distressed firms in Taiwan. Hui and Jhao(2008) explored the dynamics of financial distress of
193 companies which have experienced financial distress in China during 2000-2006.
Zulkarnian (2006) analyzed the corporate financial distress among Malaysian listed firms
during Asian financial crisis.
Ugurlu and Hakan(2006) conducted a research to predict corporate financial distress for the
manufacturing companies listed in Istanbul stock exchange for the period 1996-2003.
Chiung-Ying Lee and Chia-Hua Chang (2010) analyzed the financial health of public
companies listed in Taiwanese stock exchange using Logistic Regression model of early
warning prediction. Beneda (2006) investigated returns, bankruptcies and firm distress for
new US public companies that issued IPOs from 1995 through 2002. Beneda found that the
average first year returns for IPO companies underperformed the market and that Ohlson's
model was effective in identifying companies that had a higher probability of bankruptcy and
financial distress and earned lower than average returns. Almilia (2006) studied three
financial ratios -- profit margin, financial leverage and liquidity ratio (current assets to current
liabilities) -- which affected corporate financial distress in Jakarta Stock Exchange during
1998-2001, where many companies got into financial difficulties following Asian Financial
Crisis in 1997-1998. Sukana (2006) studied financial ratios of manufacturing companies in
Indonesia Stock Exchange (IDX) to predict bankruptcy.
There are also a number of careful research studies using data from United States firms that
provide various methods to identify failing firms. But in a developing country like India, the
research in this context is very limited.

9. 8
INTRODUCTION
Auto Sector
• The Indian auto industry is one of the largest in the world. The industry accounts for
7.1 per cent of the country's Gross Domestic Product (GDP).
• The growing interest of the companies in exploring the rural markets further aided the
growth of the sector. The overall Passenger Vehicle (PV) segment has 13 per cent
market share.
• India is also a prominent auto exporter and has strong export growth expectations for
the near future. In April-January 2016, exports of Commercial Vehicles registered a
growth of 18.36 per cent over April-January 2015.
Market Size
• The auto industry produced a total 19.84 million vehicles in April-January 2016,
including passenger vehicles, commercial vehicles, three wheelers and two wheelers,
as against 19.64 million in April-January 2015.
• Domestic sales of Passenger Vehicles grew by 8.13 per cent in April-January 2016
over the same period last year.
• The domestic sales of Commercial Vehicles increased by 9.43 per cent in April-
January 2016 over the same period last year.
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 major initiatives taken by the Government of India are:
– Mr Nitin Gadkari, Minister of Road Transport, Highways & Shipping has
announced plans to set up a separate independent Department for Transport,
comprising of experts from the automobile sector to resolve issues such as
those related to fuel technology, motor body specifications and fuel emissions,
apart from exports.
– Government of India aims to make automobiles manufacturing the main driver
of ‘Make in India’ initiative, as it expects passenger vehicles market to triple
to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP)
2016-26.

10. 9
– In the Union budget of 2015-16, the Government has announced to provide
credit of Rs 850,000 crore (US$ 124.71 billion) to farmers, which is expected
to boost the tractors segment sales.
– The Government plans to promote eco-friendly cars in the country i.e. CNG
based vehicle, hybrid vehicle, and electric vehicle and also made mandatory of
5 per cent ethanol blending in petrol.
– The government has formulated a Scheme for Faster Adoption and
Manufacturing of Electric and Hybrid Vehicles in India, under the National
Electric Mobility Mission 2020 to encourage the progressive induction of
reliable, affordable and efficient electric and hybrid vehicles in the country.
– The Automobile Mission Plan (AMP) for the period 2006–2016, designed by
the government is aimed at accelerating and sustaining growth in this sector.
Also, the well-established Regulatory Framework under the Ministry of
Shipping, Road Transport and Highways, plays a part in providing a boost to
this sector.
Road Ahead
• India’s automotive industry is one of the most competitive in the world. It does not
cover 100 per cent of technology or components required to make a car but it is giving
a good 97 per cent, as highlighted by Mr Vicent Cobee, Corporate Vice-President,
Nissan Motor’s Datsun.
• Leading auto maker Maruti Suzuki expects Indian passenger car market to reach four
million units by 2020, up from 1.97 million units in 2014-15.
• The Indian automotive sector has the potential to generate up to US$ 300 billion in
annual revenue by 2026, create 65 million additional jobs and contribute over 12 per
cent to India’s Gross Domestic Product, as per the Automotive Mission Plan 2016-26
prepared jointly by the SIAM and government.

11. 10
MAHINDRA & MAHINDRA
Mahindra & Mahindra Limited (M&M) or (Mahindra) is the flagship company of the
Mahindra Group, which consists of 137 companies with diverse business interests across the
globe and aggregate revenues of around US $ 16.9 billion. Currently the Indian automotive
industry is comprised of a number of players; with presence in different segments and M&M
itself deals in multiple segments.
SWOT ANALYSIS
STRENGTH
• Mahindra is one of the oldest and strongest brand in automotive industry in India
competing with Tata Motors and Maruti Suzuki in various segments.
• Mahindra is known for its low service costs.
• The governance body of Mahindra consists of industrial experts like Mr. Deepak
Parekh, Mr. Nadir Godrej, Dr. Pawan Goenka and Mr. Anand Mahindra.
• Mahindra is an industrial leader in the UV segment of passenger vehicles, including
the new KUV 100 set to launch at Rs. 4-5 lakhs, which would capture the market in
the same way Tata did using Nano.
• The FPI have reduced their exposure to NIFTY stocks in 30 companies but are still
bullish on M&M, which topped the FPI buys.
WEAKNESS
• Mahindra’s partnership with Renault was not very successful. The cars launched
under the Mahindra-Renault joint venture failed to capture the market and compete
similar cars from Maruti Suzuki and Hyundai.
• The two wheeler segment of Mahindra lacks in variety and fails to compete with Bajaj
and Hero Moto Corp.

12. 11
• Major segment comprises of diesel vehicles.
• Lack of small sector vehicles.
OPPORTUNITY
• Mahindra were first to launch their electric car – Reva; in India. The shift in consumer
choices and environment awareness presents a very lucrative latent market with
immense opportunities.
• In 2015, M&M signed a MOU with Google for Android Auto Technology which can
help integrate the auto drive technology of Google in Mahindra cars.
THREAT
• With deregulation of fuel prices, the differential between petrol and diesel prices has
reduced and consumers and now moving towards petrol and CNG as fuel, especially
in cars and van segments. This presents M&M with challenges, since most passenger
cars offered by Mahindra use diesel as the primary fuel.
• The Indian Government is set to leapfrog to BSVI standards from BSIV, it will lead to
increased expenditure to make the vehicles compliant under these emission norms.
• With declining commodity prices; especially metals; and continuous decline of
NIFTY AUTO index shows high downward pressure on the automobile industry as a
whole and since auto manufacturers buy the raw materials in forward contracts,
declining spot prices mean losses for the company.
• Decision of banning of diesel vehicles older than 10 years.

13. 12
Ratios
Operating Margin
It is a measurement of what proportion of a company's revenue is left over after paying for
variable costs of production such as wages, raw materials, etc.
Profit Margin
It shows how much of each dollar earned by the company is translated into profits.
10.24
11.29
11.94
15.29
14.74
0
2
4
6
8
10
12
14
16
18
2012 2013 2014 2015 2016
operating margin
5.72
6.54
6.97
4.95
4.6
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
profit margin

14. 13
Return on asset
how profitable a company is relative to its total assets. ROA gives an idea as to how efficient
management is at using its assets to generate earnings
AssetTurnover
It values company’s sales or revenues generated relative to the value of its assets. The Asset
Turnover ratio can often be used as an indicator of the efficiency with which a company is
deploying its assets in generating revenue.
5.46
5.85
5.67
3.43
3.16
0
1
2
3
4
5
6
7
2012 2013 2014 2015 2016
roa
0.96
0.85
0.81
0.69 0.69
0
0.2
0.4
0.6
0.8
1
1.2
2012 2013 2014 2015 2016
asset turnover

15. 14
Return on Equity
It is the amount of net income returned as a percentage of shareholders equity. It measures a
corporation's profitability by revealing how much profit a company generates with the money
shareholders have invested.
Debt to equity
It indicates how much debt a company is using to finance its assets relative to the amount of
value represented in shareholders’ equity.
19.9
20.68
22.04
11.98 11.63
0
5
10
15
20
25
2012 2013 2014 2015 2016
roe
83.86
88.17
92.65
98.09
102.39
0
20
40
60
80
100
120
2012 2013 2014 2015 2016
debt to equity

16. 15
Recommendation
• M&M shows great future prospects and presents a unique opportunity for investors to
add a value stock in their portfolio.
• The management follows robust risk framework and ensure proper hedging and
protection against market risks.
• The final call is to BUY or HOLD if currently invested.

17. 16
Maruti Suzuki
• Maruti Suzuki India Ltd (formerly Maruti Udyog Ltd) is India's largest passenger car
company, accounting for over 50 per cent of the domestic car market. The company
offers full range of cars from entry level to stylish hatchback and sedans and Sports
Utility vehicle.
• The company is engaged in the business of manufacturing, purchase and sale of motor
vehicles and spare parts (automobiles). The other activities of the company include
facilitation of pre-owned car sales, fleet management and car financing.
• Planning to expand and invest in new plants to increase their production capacity.
• Market cap of Rs. 125602 crore
• Shareholding pattern in percentage.

18. 17
Tata Motors
• Tata Motors Ltd is India's largest automobile company. The company is the leader in
commercial vehicles in each segment, and among the top three in passenger vehicles
with winning products in the compact, midsize car and utility vehicle segments. They
are the world's fourth largest truck manufacturer, and the world's second largest bus
manufacturer.
• The company is engaged in the development, designing, manufacturing, assembling
and sale of vehicles, including financing thereof, as well as sale of related parts and
accessories. They manufacture commercial vehicle, three passenger vehicle, truck and
bus. They have a portfolio of automotive products, ranging from sub-1 ton to 49 ton
gross vehicle weight (GVW), trucks (including pickup trucks) and from small,
medium, and large buses and coaches to passenger cars, including the car, the Tata
Nano.
• They are involved in various mergers and partnerships.
• Market cap of Rs, 140029 crore
• Shareholding pattern in percentage

19. 18
Eicher Motors
• Eicher Motors Ltd is one of the leading manufacturers of commercial vehicles in
India. Their principal activity is manufacturing and selling of commercial vehicles,
two wheelers and gears.
• The company in technical collaboration agreement with Mitsubishi Motor
Corporation of Japan produced the Light Commercial Vehicle in India.
• They are involved in various mergers and acquisitions.
• Market cap of Rs. 50872 crore
• Shareholding pattern in percentage

20. 19
Peer Comparison
• In the LCV goods, which account for 50% of the total commercial vehicles industry,
M&M stands at No.1 after 10 years, with a market share of 47%.
• Mahindra stands 3rd in the passenger vehicles segment after Maruti Suzuki and
Toyota.
• M&M also has a market share 41.7% in the Utility Vehicles segment.
• In the LCV goods, which account for 50% of the total commercial vehicles industry,
M&M stands at No.1 after 10 years, with a market share of 47%.
• Mahindra stands 3rd in the passenger vehicles segment after Maruti Suzuki and
Toyota.
• M&M also has a market share 41.7% in the Utility Vehicles segment
• As compared to the peers M&M has second highest Operational Profit Margin. Eicher
Motors deals dedicatedly in commercial vehicles and compared to Mahindra it has
better OPM. When compared to the industry average of 10.45, Mahindra still
consistently maintains it over and above.
• The Pretax Margin is less compared to its peers, which means that the company is less
profitable compared to its peers and the industry as a whole.
• M&M has increasing debt over the years, which means that out of the income
generated, a substantial part goes to debt repayment, therefore, the ROA compared to

21. 20
its peers is less. This also shows that the total assets of M&M are considerably more
compared to its peers, since it deals in both commercial and passenger vehicle
segment.
• As compared to its peers, M&M has low ROE, this can be justified by the low net
income due to high debt.
• Financial Leverage (avg. assets/avg. equity) compared to its peers shows that M&M is
over leveraged.
2016 Companies m&m maruti suzuki tata motors eicher motors
Ratios industry average
operating margin 11.69 14.74 10.96 7.24 13.82
profit margin 6.28 4.6 8.23 4.04 8.23
Roa 7.91 3.16 12.57 5.41 10.48
asset turnover 1.26 0.69 1.53 1.34 1.49
Roe 18.42 11.63 18.05 17.09 26.92
Eicher motors are best company to invest by looking at their ratio comparison
followed by maruti while M&M and tata motors are least favoured.

22. 21
P/E ratio
Mahindra & Mahindra : 22.32
Maruti Suzuki: 23.89
Tata Motors: 11.86
Eicher Motors : 48.09
• The P/E ratio of 22.32 shows that M&M has high growth opportunities in the future
but is undervalued compared to the industry average P/E ratio of 26.54.
• This corresponds to the view that FPI hold of M&M (as stated earlier) and still
continue holding the shares of M&M in their portfolio.
• The company shows immense growth potential and investors can ride the wave to
profits if investing now.

23. 22
Altman Z score
The Altman Z-score is the output of a credit-strength test that gauges a publicly traded
manufacturing company's likelihood of bankruptcy. The Altman Z-score, is based on five
financial ratios that can be calculated from data found on a company's annual 10K report. The
Altman Z-score is calculated as follows:
Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
Where:
A = Working Capital/Total Assets
B = Retained Earnings/Total Assets
C = Earnings Before Interest & Tax/Total Assets
D = Market Value of Equity/Total Liabilities
E = Sales/Total Assets
A score below 1.8 means the company is probably headed for bankruptcy, while companies
with scores above 3.0 are not likely to go bankrupt. The lower/higher the score, the
higher/lower the likelihood of bankruptcy.
NYU Stern Finance Professor, Edward Altman, developed the Altman Z-score formula in
1967. In 2012, he released an updated version called the Altman Z-score Plus, that can be
used to evaluate both public and private companies, both manufacturing and
nonmanufacturing companies and both U.S. and non-U.S. companies. Investors can use
Altman Z-scores to help determine whether they should buy or sell a particular stock if
they're concerned about the underlying company's financial strength. The Altman Z-score
Plus can be used to evaluate corporate credit risk.

24. 23
 M&M are showing trend towards bankruptcy
 Peers are in grey area with eicher being one of the strongest among them

25. 24
REFERENCES
• www.nseindia.com
• www.religare.com
• www.ibef.org
• www.siamindia.com
• www.mahindra.com
• www.marutisuzuki.com
• www.tatamotors.com
• www.eicher.in
• www.investopedia.com
• M. Gowri GRGSMS, Coimbatore & Sekar M. CBM College, Coimbatore, Assessing
the Financial Health of Select Automobile Companies in India: A Quantitative
approach Using the Z-Score Multi-discriminant Financial Analysis Model;
http://www.greatlakes.edu.in/herald/2014/pdfs/article-3.pdf (Vol. 8, No. 1, March
2014)

26. 25
ANNEXURE
ANNEXURE 1
Balance Sheet of Mahindra and Mahindra
Income Statement of Mahindra and Mahindra
Cash Flow Statement of Mahindra and Mahindra

27. 26
ANNEXURE 2
Balance Sheet of Maruti Suzuki
Income Statement of Maruti Suzuki

28. 27
Cash Flow Statement of Maruti Suzuki
ANNEXURE 3
Balance Sheet of Tata Motors
Income Statement of Tata Motors

29. 28
Cash Flow Statement of Tata Motors
ANNEXURE 4
Balance Sheet of Eicher Motors

30. 29
Income Statement of Eicher Motors
Cash Flow Statement of Eicher Motors