A Study Of Financial Performance Analysis Of Mahindra Mahindra And Tata Motors

CASIRJ Volume 9 Issue 5 [Year - 2018] ISSN 2319 – 9202
International Research Journal of Commerce Arts and Science
http://www.casirj.com Page 28
A Study of Financial Performance Analysis of Mahindra & Mahindra and
Tata Motors
Nidhi Shankar Singh Dr. Mini Amit Arrawatia
(PhD Scholar) (Research Guide)
Jayoti Vidyapeeth Women’s University
Email: nss.iipm2010@gmail.com
ABSTRACT
The automobile sector of India is one of the
largest sectors in the world with a GNP
(Gross National Product) of 23.96 million in
FY (Financial Year) 2015-2016. India as
country is also a prominent exporter country
in the field of automobile. The Indian market
is trying to make India leader of two wheeler
(2W) and four wheeler (4W) vehicles till the
year 2020.
The first car was run on Indian road in year
1897 when India was in condition to import
cars and that also in a very lesser amount or
number. Around year 1991 the opening up
of 100% FDI was automated for the
automobile sectors of Indian market. The
automobile industry has grown up in past
few years.
Profit plays the role of blood for the
companies therefore there should be enough
profit for the firm to make the firm move on
smoothly and efficiently lifelong.
Keywords;
Tata Motors, Mahindra & Mahindra,
Profitability, ratio.
INTRODUCTION
Finance means management of large amount
of money. The life-blood of business is
finance. It is generally termed as the science
of money. Finance is very essential
instrument for smooth running of the
business. Finance is to usually control the
policies, activities and decision of every
business. Financial management is that
managerial activity which is concerned with
the planning and controlling of a firm`s
financial resources. Financial analysis is the
process of identifying the financial strengths
and weaknesses of the firm. Financial
analysis can be undertaken by management
of the firm or by parties' outside the firm.
The objective of financial analysis is the
process of the critical examination of the
financial information contained in the
financial statements in order to understand
and make decisions regarding the operations
of the firm. Financial analysis is as the final
step of accounting that result in the
presentation of final and the exact data that
helps business managers, investors and
creditors to take proper and accurate
decisions. The objective of the financial
analysis is to assess the present profitability
and operating efficiency of the firm as a

whole as a well as for its different
departments. A company’s financial
performance is normally judged by series of
ratios which are used to evaluate financial
performance, such as, current ratio, debt
equity ratio, Long term solvency ratio, Short
term solvency ratio, Profitability ratio etc.
Objectives of the study
 To study financial performance
analysis of both the companies.
 To read the financial changes for over
the period of two years.
 To study the financial statement of
both the companies using the financial
tools.
 To evaluate the financial position of
the companies.
Research Methodology
In this study the focus has been made on to
compare, measure and evaluates the financial
performance of both the companies Mahindra &
Mahindra Ltd and Tata Motors. This study is
based on data collected from primary and
secondary sources. The study covers the data of
last 5Years. Certain tool ratios have been
applied in this study to compare between both
the companies i.e. Mahindra & Mahindra and
Tata Motors.
A. Types of Research
The research methodology is used for
this study is ANALYTICAL
RESEARCH. The researcher has to use
facts or information already available,
and analyze these to make a critical
evaluation of the material
.
B. Sources of Data
The study is mostly based on the
secondary data, obtained from the
annual report and analysis of other
supported financial statements of TATA
MOTORS and MAHINDRA AND
MAHINDRA.
C. Period of study
The analysis of financial performance
was done for a period of five years from
2011-2015.
D. Tools and Techniques used
The following are the Tools and
Techniques used for the analysis:
i) Financial Tools (Ratio
Analysis)
 Current Ratio
 Quick ratio
 Profitability Ratio
 Earning per share
 Dividend payout ratio
 Activity Ratio
 Asset Turnover ratio
 Total Asset Turnover
ratio
ii) Statistical Tools
 Correlation Analysis
 Regression Analysis
 Chi-square test
Limitations of the Study
Due to limited time and resource this study has
been suffered through certain drawbacks. They
are as under;

1. People are feeling scared in sharing the
information of their companies on
financial basis.
2. Secondary data which has been
collected through company’s annual
report could be somewhere artificially
dressed up.
3. The study is mainly based on annual
report of the studies.
Review of literature
A) Idhayajothi R., Latasri O.T.V., Manjula
N., Banu Meharaj, Malini (2014), main
motive is to find out the financial position,
liquidity & profitability position and
financial strength & weakness of the
company (Ashok Leyland). Researcher
discussed various classifications of ratios
such as liquidity ratio, leverage ratio, debt
equity ratio, proprietary ratio, activity ratio,
total asset turnover ratio, profitability ratio,
etc. The findings of researcher tell that the
profit ratio of the company has increased
which can help the company to enjoy credit
worthiness. The company was able to meet
its requirement for capital expenditure. The
findings were done with the help of the
financial statements analysis such as
balance sheet and income statement of the
companies.
B) Patra Amresh (2015) did the case study on
Tata Motors by using the financial
performance analysis of the company. The
aim of this study is to gather the
information to find out the financial
performance, liquidity position, profit
earning capacity and investment
opportunity of the company. The focus of
financial analysis is on key features of the
financial statements of the company and the
relationship which exists between them.
C) Tehrani Reza, Mehragan Mohammad
Reza, Golkani Mohammad Reza, (2012)
suggested that in this contemporary world
the rapid growth of the commercial
activities have made necessary the
performance evaluation of the organisations
which is possible only by the usage of the
financial performance analysis of the
companies. The main motive of the
researcher is to develop the Data
Envelopment Analysis (DEA) practical
model for evaluating company’s
performance.
D) Data Envelopment Analysis (DEA) is a
non parametric method in research and
economics. It is used to measure the
productive efficiency of the companies. It is
referred to as the “balanced benchmarking”
by Sherman and Zhu (2013).
E) Daniel Moses Joshuva A. (2013) aims to
find out the areas where the company Tata

Motors can improve. The scope of the study
involves the factors that affect the financial
condition of the company; the information
regarding it is collected through the balance
sheet and income statement of the company.
The objective of the study was to compare
and analyse financial statement of past 5
years and to provide the suggestions for
improvement of the company status. Check
out the profitability ratio of the company
was also one of the objective of the
researcher so as to do the comparison well
among the past five years of the company
performance.
F) Srivastava Anubhav. (2013) aims to
evaluate and analyse the growth and trends
of the automobile sectors. The researcher is
searching for the trend in values of the stock
prices and the financial condition of the
companies with the help of the financial
statement such as the balance sheet and the
income statement of the companies. The
trend of the companies is also being
compared with the industry as a whole.
G) Long back, EF Donaldson(1957)referred
to all important aspects of the finance like
organisation structure, production,
securities, income expansion, etc. United
States believe in the corporate world
regarding the sale and purchase as the
utmost importance. The researcher referred
to the importance of the financial reporting
to the shareholders, investors, lenders, etc.
The researcher highlighted that the
economy depends on the business
organisation indulged in goods and services.
H) Chander Subhash, Bedi Anjana. (2004)
studied the performance of the 500 Indian
companies. The researcher observed the
maximisation of the sales, investment
returns and operating profit of the
companies. Factor analyses have shown that
the return on investments is most significant
for the companies of India.
COMPANY PROFILE
TATA MOTORS
Tata Motors Ltd. (formerly TELCO, short
of Tata Engineering and Locomotive
Company) is an Indian multinational
automotive manufacturing company. Its
headquarter is in Mumbai, India. Tata
Motors is a part of Tata Groups.
Tata Motors
Type Public
Industry Automotive
Founded 1945
Headquarter Mumbai, India
Parent Tata Group

Area Served Worldwide
Chairman Nataranjan
Chandrasekaran
CEO Guenter Butschek
Products Automobiles
Sport cars
Commercial Vehicles
Coaches
Buses
Military Vehicles
Automotive parts
Number of
Employees
60,000
Revenue Rs. 42,369Crores
Profit Rs. 3,391Crores
Total Assets Rs. 2.619 trillion
Total equity Rs. 763.5 billion
Tata Motors, an India’s largest
commercial vehicle manufacturers. Tata
Motors is a second largest passenger
vehicle producer.
Tata Motors in 1954 entered in
commercial vehicle field with Daimler-
Benz of Germany, in passenger vehicle
market in 1991. The first passenger
vehicle of Tata Motors was Tata Sierra. In
1998 Tata Motors launched Indica which
was fully local Indian passenger car.
Indica was one of the best selling cars in
the history.
Tata Motors acquired Daewoo’s South
Korea truck manufacturing unit in year
2004 and it later on renamed as Tata
Daewoo.
Tata acquired 21% control on Spanish bus
in 2005. In 2006 Tata Motors formed a
joint venture with Brazil based Marco
polo.
In 2008 Tata Motors manufactured Jaguar
Land Rover. Tata Motors acquired a full
control on Spanish bus in 2009.
The Lucknow plant on Tata Motors
achieved Rajiv Gandhi National Quality
Award. In 2016 Tata Motors selected
Bollywood actor Akshay Kumar as brand
ambassador for commercial vehicle.
On 9 March 2017 Tata Motors signed a
Memorandum of Understanding with
Volkswagen.
Mahindra & Mahindra Ltd.
Mahindra & Mahindra Ltd. (M&M) is a
multinational automobile company whose
head office is situated in Mumbai,
Maharashtra, India. It is one of the largest
producers of tractors in the whole world.
In 2011 Mahindra & Mahindra was
ranked as 21st
top most companies by
Fortune India 500.
Mahindra & Mahindra Ltd.
Type Public
Industry Automobile
Founded 1945
Head Quarter Mumbai,
Maharashtra, India
Founder J.C. Mahindra
K.C. Mahindra

Area served Worldwide
MD Anand Mahindra
Products Automobiles
Commercial Vehicles
Two Wheelers
Revenue 83,773 Crores
Operating Income 8,793 Crores
Net Income 2.592 Crores
Total Assets 61,239 Crores
Number of
Employees
39,276
Parent Mahindra Group
Mahindra & Mahindra Ltd was set up in
1945 in form of steel trading company in
Ludhiana as Mahindra & Mohammed by
K.C. Mahindra, J.C. Mahindra and Malik
Gulam Mohammed.
The moment when India gained
independence and formed Pakistan
Mohammed shifted to Pakistan and it
renamed as Mahindra & Mahindra in
1948. Currently Mahindra & Mahindra
Ltd is a key player in utility vehicles.
Data Analysis and Findings
The Growth table of Mahindra & Mahindra
and Tata Motors in terms of share capital,
reserves & surplus, profit before tax,
investments, net worth, etc. are being
mentioned in table 1. From the table it can
be easily observed that the net growth of
Mahindra & Mahindra reserves & surplus is
14.73%, investments is -3.83% and of Tata
Motors reserves & surplus is 251.19%,
investments is 3.66% respectively.
To check out the financial performance of
both the companies i.e., Mahindra &
Mahindra and Tata Motors certain ratios has
been analysed as under:
Current Ratio;
Current ratio is used to know that what is the
liquidity status of both the companies i.e.,
Mahindra & Mahindra and Tata Motors
which helps to know that whether the
companies have sufficient resources to meet
out their short term obligations.
From table 2 it is being observed that neither
Mahindra & Mahindra nor Tata Motors is
fulfilling the standard norms of current ratio
as of 2:1 throughout the study time period.
So, it is suggested that the management
should make related strategies and should
also take remedial steps to recover itself
from the situation.
Quick Ratio/ Acid Test Ratio;
In financial field the quick ratio is generally
used to measure the company’s ability to use
its near cash to meet their current liabilities
immediately. The standard norm of quick
ratio is 1:1.
As per the figures mentioned in table 2 it
can be easily analyse that the financial
condition of Mahindra & Mahindra is
improving year by year as the ratio have
been increased from year 2013 to year 2014.

As per the figures mentioned in table 2 the
financial condition of Tata Motors is not
good as the ratio is falling down from year
2013 to year 2014.
Profitability Ratio;
Profitability ratio is used to assess the
earnings of the company compared to their
expenses. Profitability ratio is overall used
to measure the performance of the company.
To measure the capacity of the company to
make profit we use certain ratios, such as,
EPS, dividend payout ratio, etc.
EPS (Earning per share);
EPS is used to consider the share price of
any of the company. EPS serve as the
profitability indicator of any of the company
From table 1 it is being observed that there
is little growth in profit after tax of
Mahindra & Mahindra but Tata Motors have
shown an excellent growth in profit after
tax. So, the overall performance of Tata
Motors is good as compared to Mahindra &
Mahindra. As per record of EPS from table
1 the EPS of Mahindra & Mahindra has
decreased by 0.84 Crores and Tata Motors
has increased by 0.83 Crores.
Dividend Payout Ratio;
Dividend payout ratios are a part of earnings
of any company which is being paid to the
shareholders in form of a dividend. As the
ratio goes on increasing it reflects that
company is paying more dividend to the
shareholders.
From table 2 the range of Mahindra &
Mahindra dividend payout ratio is
decreasing on a yearly basis. The dividend
payout ratio of Mahindra & Mahindra has
been decreased from 23.80 in year 2013 to
22.94 in year 2014.
From table 2 the range of Tata Motors
dividend payout ratio is decreased by
11.43% from year 2013 to 2014.
Hence, the dividend payout ratio of both the
companies have decreased but the
percentage decrease of Tata Motors is more
than Mahindra & Mahindra.
Activity ratio;
Activity ratio is one of the financial tools
which is being used to measure the ability of
the company to convert its assets, liabilities
and capital into cash or sales. As soon as
company gets it converted into cash the
more efficiently that company moves on in
the future. To judge the activity ratio of the
company certain ratios are being used. Such
as, asset turnover ratio, total asset turnover
ratio, etc.
Asset Turnover Ratio;
Asset turnover ratio is used to measure the
ability of a company to generate sales from
its assets. As higher the asset turnover ratio
is the better the company is to create its
revenue.
As per table 2 during the study the asset
turnover ratio I found that the ratio of both
the companies is decreasing. Mahindra &
Mahindra is decreasing by 12.11% and Tata
Motors is decreasing by 27.14%.

Total Asset Turnover Ratio;
Total asset turnover ratio is used to measure
ability of the company to make sales
revenue from assets (fixed and current).
From table 2 it can be observed that the total
asset turnover ratio of both the companies
have decreased from year 2013 to year 2014
which results a negative impact about both
the companies.
Findings & Suggestions;
After doing in depth study on Mahindra &
Mahindra and Tata Motors financial
statements, I came to find out that;
1. Current ratio of neither of the company
is on standard norm i.e., 2:1.
2. Earnings per share of Mahindra and
Mahindra has been declined in 2014
in comparison with year 2013.
3. Both the companies should have a look
on their asset turnover ratio as their
asset turnover ratio has been declined
in 2014 as compared with 2013, which
means that the asset of the company is
not being used optimally.
TABLES
Table 1. Growth of Mahindra& Mahindra and Tata Motors (Rs. in Crores)
Years 2013 2014
Mahindra &
Mahindra
Tata Motors Mahindra &
Mahindra
Tata Motors
Total Assets 25,492.42 52,184.77 31,665.72 2,19,998.32
Equity Share
Capital
112.60 638.07 112.71 643.78
Reserves &
Surplus
4,341.97 18,496.77 4,981.51 64,959.67
Profit and Loss
before Tax
1,279.20 174.93 1,345.80 18,868.97
Tax 433.50
(37.00)
(126.88) 535.40
(76.80)
4,764.79
Profit and loss
after Tax
882.70 301.81 887.20 14,104.18
Earnings per Share 16.59 6.64 15.75 7.47
Investments 11,833.46 17,708.16 11,379.85 18,357.57
Net Worth 4,454.58 18,134.84 5,094.22 65,603.45

Table 2. Various Ratios of Mahindra & Mahindra and Tata Motors
Mahindra & Mahindra Tata Motors
Years 2013 2014 2013 2014
Current Ratio 1.10 1.29 0.48 0.36
Quick Ratio 0.80 0.97 0.27 0.25
Asset Turnover
Ratio
147.30 129.46 1.40 1.02
Total Asset
Turnover Ratio
2.29 1.99 1.48 1.12
Investment
Turnover Ratio
17.94 15.38 11.07 9.78
Dividend Payout
Ratio
23.80 22.94 30.44 26.96
Table 3. Profit and Loss Account of Mahindra & Mahindra and Tata Motors
(Rs. in Crores)
March’2014 March’2013 March’2014 March’2013
Income
Revenue 42,575.04 42,874.61 37,376.86 48,927.05
Excise Duty (2,611.68) (2,971.49) (3,469.89) (4,554.01)
Other Income 717.99 549.17 3,833.03 2,088.20
Total Income 40,681.35 40,452.29 37,740.00 46,461.24
Expenses
Cost of Material
Consumed
21,630.08 20,749.87 20,492.87 27,244.28
Purchases 8,076.92 9,752.68 5,049.82 5,864.45

Changes in
Inventory
(274.67) (87.31) 371.72 (143.60)
Employee Cost 2,163.72 1,866.45 2,877.69 2,837.00
Finance Cost 259.22 191.19 1,337.52 1,387.76
Depreciation 863.34 710.81 2,070.30 1,817.62
Other Expenses 4,294.28 3,533.29 6,987.53 7,783.32
Total Expenses 37,012.89 3,735.31 39,187.45 46,790.83
Profit before
exceptional items
3,668.46 4,356.47 (1,447.45) (329.59)
Others 52.79 90.62 539.86 416.20
Profit before Tax 3,721.25 3,825.93 (907.59) (86.61)
Tax 611.08 1,094.27 (1,360.32) (126.88)
Profit after Tax 3,110.17 2,731.66 (452.73) (40.27)
Table 4. Balance Sheet of Mahindra & Mahindra and Tata Motors
(Rs. in Crores)
2012-2013 2013-2014 2012-2013 2013-2014
Non-current assets
Fixed Assets 5,821.34 7,105.39 20,208.54 21,595.64
Non-current
investments
10,571.50 9,787.73 18,171.71 18,357.57
Long term loans and
advances
2,087.47 3,018.12 3,575.24 2,918.30
Other non-current
assets
29.85 88.49 94.32 123.85
Current Assets 8,943.43 11,288.92 10,134.96 6,739.06

Total Assets 27,453.59 31,288.65 52,184.77 49,734.42
Non-Current
Liabilities
Long term
borrowings
3,172.44 3,744.42 8,051.78 9,746.45
Deferred Tax
Liabilities
614.85 889.65 1,963.91 43.11
Other long term
liabilities
415.40 586.27 1,238.44 1,155.48
Long term provisions 441.59 510.33 691.19 815.20
Net Worth
Share Capital 295.16 295.16 638.07 643.78
Reserves & Surplus 14,352.92 16,485.24 18,473.46 18,510.00
Current Liabilities 8,150.39 8,766.79 21,104.61 18,797.53
Total Liabilities 27,442.75 31,277.86 52,161.46 49,711.55
GRAPHS

Bibliography
1. http://www.mahindrafinance.com/pdf/annual_report_2012_13.pdf
2. http://www.mahindrafinance.com/pdf/annual_report_2013_14.pdf
3. http://www.moneycontrol.com/financials/tatamotors/ratiosVI/TM03#TM03
4. file:///C:/Users/abc/Downloads/ar-12-13.pdf
5. file:///C:/Users/abc/Downloads/ar-13-14.pdf

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