Acknowledgement A successful project is a combined effort of the teacher for guidance and inspiration and the project team. We wish to extend our sincere gratitude to Dr. Hamendra Kumar Porwal , for imparting in depth knowledge of Finance Fi nance and providing us an opportunity to do a project work on Capital Structure of the Indian Automobile Industry . The support thus , helped us to develop a meaningful report. Also, we would like to convey our thanks to all the people who have been an integral part during the entire course of project completion and have extended a helping hand for the same.
2
Contents Sl. No
Topic
1
Overview of the Indian Automobile Industry
2
Scope of the Study
3
What is meant by Capital Capit al Structure?
4
Factors affecting Capital Structure?
Analysis 5
Maruti Suzuki
6
Tata Motors
7
Mahindra & Mahindra
8
Hero Honda
9
Bajaj Auto
10
Conclusion
11
Bibliography
3
³ Domestic car sales up 24.4% in March M arch PTI
April 8, 2011
Mahindra sales up 22% in Jan PTI
February 1, 2011
Maruti sells 1mn cars in 10 months PTI
January 27, 2011
Bajaj PTI
Auto net up 40% to Rs 667 cr
January 19, 2011
Tata
Motors net jumps 102-fold
Mail Today Bureau
´
November Novem ber 10, 2010
The Indian automobile industry is riding high, like never before. They say that history has an eerie habit of repeating itself. As far as the automobile industry is concerned, the monumental returns and the off-the-charts growth rates reported in India recently bear testimony to this adage. The events that unfolded in Detroit years ago seem to be repeating themselves today, in India. For the automobile industry, future in India seems like an evergreen pasture!
Overview
of the Indian Automobile Industry
Starting its journey from the day when the first car rolled on the streets of Mumbai in 1898 , the Indian automobile industry has demonstrated a phenomenal growth to this day. Today , the Indian automobile industry presents a galaxy of varieties and models meeting all possible expectations and globally established industry standards. Some of the leading names echoing in the Indian automobile industry include Maruti Suzuki, Tata Motors, Mahindra and Mahindra, Hyundai Motors, Hero Honda and Hindustan Motors in addition to a number of others. During the early stages of its development , Indian automobile industry heavily depended on foreign technologies. However, over the years, the manufacturers in India have started using their own technology evolved in the native soil. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights. Following a temporary setback on account of the global economic recession , the Indian automobile market has
4
once again picked up a remarkable momentum witnessing a buoyant sale for the first time in its history in the month of September 2009. After the economic downturn and difficult market conditions in the automotive sector globally in 2008-09, during the year , economies across the world (with a few exceptions) showed signs of recovery and growth. gro wth. The Indian economy bounced ba ck quickly and a nd strongly growing at 7.2% in 2009-10. The automotive sector in India started the year steadily , gathered momentum in different segments in the second half of the year and ended the year with a record growth and performance. The automobile sector of India is the seventh largest in the world. In a year , the country manufactures about 2.6 million cars making up an identifiable chunk in the worlds annual production of about 73 million cars in a year. The country is the largest manufacturer of motorcycles and the fifth largest producer of commercial vehicles. Industry experts have visualized an unbelievably huge increase in these figures over the immediate future. The figures published by the Asia Economic Institute indicate that the Indian automobile sector is set to emerge as the global leader by 2012. In the year 2009 , India rose to be the fourth largest exporter of automobiles following Japan, South Korea and Thailand. Experts state that in the year 2050 , India will top the car volumes of all the nations of the world with about 611 million cars running on its roads.
Scope of this study Through this project we are attempting to study the capital structure of 5 of the highly profitable Indian automotive companies. They are:
Maruti
Suzuki India Limited
Tata Motors
Mahindra
Hero Honda Limited
Bajaj
Limited
& Mahindra Limited
Auto Limited
We have analysed data including the long term and short term debts , debt-equity ratio, earnings per share, profit before tax etc. We have also graphically represented the data. For the study data for the last 5 years have been used (2006 2010). Data was gathered from the balance sheets , annual reports, chairmans report, profit & loss account etc. of the respective companies. The scope of the study is limited to automobiles falling under the category of Two-wheelers (Bajaj Auto, Hero Honda), Three-wheelers (Bajaj Auto , M&M), Cars (Tata Motors, Maruti Suzuki, and M&M) and Commercial Vehicles (excluding Tractors) (Tata Motors , M&M).
5
What
does Capital Structure mean?
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds. For example, a firm that sells Rs. 20 billion in equity and Rs. 80 billion in debt is said to be 20% equity-financed and 80% debt-financed. Debt comes in the form of bond issues or long-term notes payable , while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure.
Factors Determining Capital Structure
y
Trading
on Equity- The word equity denotes the ownership of the company. Trading on
equity means taking advantage of equity share capital to borrowed funds on reasonable basis. It refers to additional profits that equity shareholders earn because of issuance of debentures and preference shares. It is based on the thought that if the rate of dividend on preference capital and the rate of interest on borrowed capital is lower than the general rate of companys earnings, equity shareholders are at advantage which means a company should go for a judicious blend of preference shares , equity shares as well as debentures. Trading on equity becomes more important when expectations of shareholders are high.
y
Degree of control- In a company, it is the directors who are so called elected representatives
of equity shareholders. These members have got maximum voting rights in a concern as compared to the preference shareholders and debenture holders. Preference shareholders have reasonably less voting rights while debenture holders have no voting rights. If the companys management policies are such that they want to retain their voting rights in their hands, the capital structure consists of debenture holders and loans rather than equity shares.
y
Flexibility of financial plan- In an enterprise , the capital structure should be such that there
is both contractions as well as relaxation in plans. Debentures and loans can be refunded back as the time requires. While equity capital cannot be refunded at any point which provides rigidity to plans. Therefore , in order to make the capital structure possible , the company should go for issue of debentures and other loans.
6
y
Choice of investors- The companys policy generally is to have different categories of
investors for securities. Therefore , a capital structure should give enough choice to all kind of investors to invest. Bold and adventurous investors generally go for equity shares and loans and debentures are generally raised keeping into mind conscious investors.
y
Capital market condition- In the lifetime of the company , the market price of the shares has
got an important influence. During the depression period , the companys capital structure generally consists of debentures and loans. While in period of boons and inflation , the companys capital should consist of share capital generally equity shares.
y
Period of financing- When company wants to raise finance for short period , it goes for loans
from banks and other institutions; while for long period it goes for issue of shares and debentures.
y
Cost of financing- In a capital structure, the company has to look to the factor of cost when
securities are raised. It is seen that debentures at the time of profit earning of company prove to be a cheaper source of finance as compared to equity shares where equity shareholders demand an extra share in profits.
y
Stability of sales- An established business which has a growing market and high sales
turnover, the company is in position to meet fixed commitments. Interest on debentures has to be paid regardless of profit. Therefore , when sales are high , thereby the profits are high and company is in better position to meet such fixed commitments like interest on debentures and dividends on preference shares. If company is having unstable sales , then the company is not in position to meet fixed obligations. So, equity capital proves to be safe in such cases.
y
Sizes of a company- Small size business firms capital structure generally consists of loans
from banks and retained profits. While on the other hand , big companies having goodwill, stability and an established profit can easily go for issuance of shares and debentures as well as loans and borrowings from financial institutions. The bigger the size , the wider is total capitalization.
7
Maruti Suzuki India Limited Market Market Capita pitalisa lisation: 36 3640 402 2 67 rore ress Maruti Suzuki India Limited is a passenger car c mpany The c mpany is engaged in the business of
¡
manufacturing purchase and sale of motor vehicles and spare parts The other activities of the company include facilitation of pre-owned car sales, fleet management and car financing. The company is a subsidiary of Suzuki Motor Corporation , Japan. The company has a portfolio of 13 ¢
¡
brands and over 150 variants. £
ntere nteresst Coverage Ratio Ratio
¤
120
arnin arning gs Per Sh Share
100 105.39
100 80
60
61.01
60
40.93
40
34.21
20
0
0
2007
2008
2009
2010
42.18
41.16
2006
Debt Debt Equit Ratio Ratio
59.91
54.07
40
20
2006
86.45
80
90.62
2007
2008
2009
2010
¥
Pro Pro it Bef ore Int Intre rest st an Tax Margin Margin §
¦
0.12
0.11
0.1
15
0.09
0.08
0.07
0.06
12.74
0.07
0.04
7
5
0.02
0.01
0 2006
2007
10.7
10
9.73 5.62
0 200 8
20 09
20 10
2 00 6
20 07
2008
20 09
201 0
1000
800 600 400
900.2 630.8
698.9
821.4
200 0 71.7
2006
2007
2008
2009
2010
Maruti Su uki - Total Debts ¨
8
Ana An al sis The gross revenu e of the Company for the year (2010 2010 2011 was Rs. 301,198 million as against Rs. ©
214,538 million in the previous year showing growth of 40 . Sales of vehicles in the domestic
market increased to 870,790 as compared to 722,144 in the previous year showing a growth of 21 .
Exports of vehicles grew at an impressive rate of 111 The overall growth was 29 .
from 70,023 to 147,575 in the current year.
Earnings before depreciation, interest, tax and amortization (EB ITA) stood at Rs. 44,510 million against Rs. 24,333 million in the previous year.
Profit b efore tax (PBT) stood at Rs. 35,925 million against Rs. 16,758 million inthe previous year and profit after tax (PAT) stood at Rs. 24,976 million again st Rs. 12,187 million in th e previous year. The board recomm ends a dividend of Rs. 6.00 per e uity share of Rs. 5.00 each for the year end ed 31st March 2010 amountingtoRs.1733 million.
Pri vate Coporat e Bodi es 6
Share Holdin Holding g Pa Patt tter ern n Others 0
General Public 3
FII's 21
Foreign Promoters 56
Banks and Fin. Institutes 14
Maruti Suzuki, the leader in the passenger car segment has seen volatility in the mix of debt and e uity capital of company over the last 5 years. Sales of the company have increased continuously
during the last decade. Its eff ec ect can be seen from th e rise in Profit Before Inter est and Tax Margin (PBT). There is a fall in PBT in the last year because of a rise in operating expense of the compan y. Most of the funding re uirements of the company were done by the internal accruals which were created through continuous profits.
Maruti Suzuki will maintain its strong business and financial risk profiles on the back of the health y cash generation and good liquidity. The company is expected to sustain its dominant position in the
domestic passenger car segment, given its large product portfolio. Maruti s financial risk profile is a
9
also expected to remain comfortabl e, with incremental capital expenditure b eing funded entirely through internal sources. Though the company has a history of depend ence on the internal funds, it has capability of raising debt if required for funding. Seeing to its good debt equity, there is a chance for the company to acquire debt for funds required for investment opportunity. Interest coverage ratio is also to be paid on borrowed amount.
T ata ata
Motors Limited
Market Market Capita pitalisa lisation: 78 7818 185 5 92 cr cro ore ress Tata Motor s Ltd is a multinational automoti ve corporation headquart ered in Mumbai, India. The Company continues to be amongst the top three players in the passenger vehicle mark etwhich has over 25 players. Tata Motors has products in the compact, midsize car and utility vehicle segments. The compan y is the world's fourth largest truck manufacturer, the world's second largest bus manufacturer, and employs 24,000 workers.
Intere nterest st Coverage Coverage Ratio Ratio
Earnin Earning gs Per Sh Share
10
60
50
7.62
7.19 6.2
6
52.63
49.65
40
39.94
39.26
30 4 2.77
2.43
2
20
19. 4
10
0
0 200 6
2 007
20 0
2009
20 10
20 06
Debt Debt Equit Ratio Ratio 1. 2 1.06
0.8
1. 11
0.53
0. 59
4
0.2
2
0
0 2 00 7
2 0 08
20 10
7.82
7.25
8.82
8.16
6
0.4
2006
20 09
10 8
0.8
0.6
2 00
Profit Profit Before fore Int Intre rest st and Tax Margin Margin
1
200 7
20 09
2010
3.2
20 06
200 7
2 00 8
2 009
20 10
10
20,000.00 15,000.00 10,000.00
16,625.91
13,165.56
5,000.00 2,936.84 0.00
4,009. 14
2 00 6
6,280.52
2007
20 08
200 9
2 01 0
Tota ot al Debt Debt - Tat Ta ta Moto Motorrs
Ana An al sis The Company recorded a sale of 633,862 vehicles in 2009-10, a growth of 34
over previous year
(472,885 vehicles) in the domestic mark et in India, representing a 25.5
share in the industry
(improving from 24.4
share in the previous year).
The Tata Motor s Group turnover was Rs.95,567 crores, a growth of 29
over previous year
contributed mainly by market reco ver y, improved realization and successful launch of new products.
Consolidated Profit Before Tax was Rs.3,523 crores (Loss of Rs.2,129c 2,129 crores in 2008-09 ) and Consolidated Profit for th e year was Rs.2,571 crores (Loss of Rs.2,505 crores in 2008-09). The Profit Before Tax of Rs.2,830 crores and Profit After Tax of Rs.2,240 crores also grew significantly over the previous year by 179.1 and 123.7 respectivel y.
The borrowings of the Company as on March 31, 2010 stood at Rs.16,625.91 crores (previous year Rs.13,165.56 crores). The key highlights were - In 2009-10, the Company raised Rs.4,200 crores from
the issue of Secured, Rated, Credit Enhanced, Listed, 2 Coupon Non-Convertible Debentures (NCDs) with premium on red emption and Rs.200 crores from the issue of 9.95 Secured NCDs.
Ge neral Publi c 8
Govt 0
Share Holdin Holding g Patt Patter ern n
Pri vate Corporat e Bodi es 1
O thers 14
Indian Promoters 38
FII's 25
Banks and Fin. Institutes 14
11
In a challenging financial market environment, the Company successfully rolled over in May 2009 , the bridge finance it had obtained for acquisition of the Jaguar Land Rover business for a period of 18 months, till December 2010. Subsequently , the Company was able to prepay this loan facility in !
ctober 2009 from certain divestments , improved cash generation from operations and also
through fund raised, US$ 375 million from the issue of lobal Depository Receipts and US$ 375 "
million from issue of Foreign Currency Convertible Notes. The Company will further consider suitable steps to de-leverage and hence de-risk the balance sheet from volatility and has also taken and will continue to implement suitable steps for raising long term resources to match the Companys fund requirement and to optimize its loan maturity profile. In the Last 5 years the debt equity ratio of Tata Motors is has remained around 0.8 which is near to the industry average of debt to equity. Company has been making huge amount of profits and thus have sufficient surplus and reserves for funding the requirements of the company. Major proportion of the liquidity requirement of the company is met internally with the accumulated reserves and surplus. With a good interest coverage ratio in last 4 years except for the year ended on March 2009 , company has been able to raise the debt easily from the market. There has been significant rise in the debt during the year 2008 because of TATA-Jaguar deal. EPS of the company was around 52 at the end of the year March 2008 when the Debt-to-equity ratio was 0.7. EPS has decreased during the last year because of fall in sales and also the equity capital has increased with the right issue. During last year company has also raised fund through issue of debentures. Company is not in a healthy position to raise debt from the company because currently the interest coverage ratio is less than 2 which means that company has higher proportion of its profit to be distributed as interest.
12
Mahindra & Mahindra Limited Market Market Capita pitalisa lisation: 43 4319 195 5 89 cr cro ore ress Mahindra & Mahindra Limited is the flagship company of the Mahindra Group, a multinational multinational conglomerate based in Mumbai, India.
Mahindra & Mahindra is a ma jor automobile manufacturer of utility vehicles, passenger cars, pickups, commercial vehicles, and two wheelers. Its tractors are sold on six continents It has acquired plants in Chinaand China and the United Kingdom, and has three assembly plants in the USA. M&M has partnerships with international companies like Renault SA, France and International Truck and Engine Corporation, USA.
Interest Cov Coverage Rati Ratio
Earni Earnings Per Share
80
$
67.24
60
0
46.1
44.88
40
#
36.89
36.72 30.69
30
40 32.17
20
20
14.64
18.9 9.69
0
10 0
2006
2007
2008
2009
2010
2006
Deb Debt-Equi quity ty Rati Ratio 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0
2007
2008
2009
2010
Profi Pro fitt Bef ore ore Interest and an d Tax Tax 16 14.04
14
0.77
12 0. 6
10
0. 46
8 0.37
0.31
8.05
8.97
7.87
7.41
6 4
2 0 2006
20 07
2 008
2 00 9
20 10
20 06
2007
2 00 8
2009
20 10
13
5000 4000
3000 4,052.76
2000 1000 883.39 0
1,636.00
2006
2,880.15
2,587.06
2007
2008
2009
2010
Total Debt
Ana An alysis The Automotive Divisions of M&M have clocked one of their best performances reflecting in substantial growth in the net income of the Company by 40.7 %
to Rs.18,801 crores in the year under
revi ew from Rs.13,364 crores in the Financial Year 2009. The Profit for th e year before Depreciation, Interest, Exceptional items and Taxation was Rs.3,154.59 crores as against Rs. 1,362.9 crores in the previous year , an increase of 131.45 . Profit after tax was %
Rs.2,087.75 crores as against Rs.836.78 crores in the previous year clocking an increase of 149.50 . %
The compan y recommended a dividend of Rs.8.75 per Ordinary (Equity) Share and also a Special Dividend of Rs.0.75 per Ordinary (Equity) Share aggregating Rs.9.50 per Ordinary (Equity) Share of the face value of Rs.5 each. M&M recorded total sales of 2,36,759 vehicles and 45,360 three ee--wheelers as compared to 1,61,882 vehicles and 44,806 three ee--wh eelers in the previous year registering a growth of 46.3 %
and 1.2 %
in
vehicles sales and three ee--wh eeler sales respectively.
Share Holdin Holding g Patt Patter ern n General Public 9 Others 10 &
&
Indian Promoters 25
Govt. Provate 0 Corporate odies Bodi 8 '
&
&
FII's 24
Banks and Fin Institues 21
Foreign Promoters 3 '
'
&
14
Even while financing its ongoing modernisation and growth initiatives , it was ensured that the Company had abundant liquidity. It did not need to tap the capital market and in fact used its strong liquidity at its disposal to repay foreign currency loans aggregating U SD 94.5 million without the need for refinancing. As was reported in the previous year's Director's Report , the Company had, in July, 2008, issued 9.25% p.a. Unsecured Fully and Compulsorily Convertible Debentures Debentures (FCD) , each FCD having a face value of Rs. 745 and convertible into one Equity Share of Rs. 10 each in the Company at a price of Rs. 745 per Share. In January, 2010, in accordance with the terms of the issue , the FCDs were converted into Equity Shares of the Company and your Company allotted 93 ,95,974 rdinary (Equity) Shares of (
Rs.10 each, adding Rs. 700 crores to its Net Worth.
During the year under review, your Company allotted: 1) 10,00,000 rdinary (Equity) Shares of Rs.10 each to the Trustees of Mahindra & Mahindra (
Employees' Stock : ption Trust; and (
2) 93,95,974 rdinary (Equity) Shares of Rs.10 each to (
)
olboot Holdings Limited upon compulsory
conversion of 93 ,95,974 Fully and Compulsorily Convertible ; Debentures. M&M follows a prudent financial policy and aims to maintain optimum financial gearing at all times. The Company's total Debt to Equity Ratio was 0.37 as at 31st March , 2010.
During the year, CRISIL reaffirmed its rating of AA and revised its rating outlook to AA/ Stable from AA/Negative for M&M's Long Term Facilities under Basel II. During the year , ICRA also reaffirmed its rating of LAA+ for the Company and also revised its rating outlook from LAA+/Negative to LAA+/Stable and CARE has maintained a Long Term Rating of CARE AA+.
15
Hero Honda
Motors Limited
Market Market Capita pitalisa lisation: 35 3548 488 8 46 cr cro ore ress Hero Honda
Motors Limited is a two wheeler manufacturer based in India. Hero Honda is a joint
venture between the Hero Group of India and Honda of Japan. The company is the largest two
wheeler manufacturer in India.
Profit Profit Before fore Int Intere erest st and Tax Margin Margin
Intere nterest st Coverage Coverage Ratio Ratio
20 15
16.01
14.44 10.63
10
12.64
11.57
5
0 2006
2007
2008
2009
1400 1200 1000 800 600 400 200 0
2010
100 80
64.19
0
0 2008
2010
0.07
0.04
48.47
0.02
2007
2009
0.09
0.06
20 2006
2008
0.1
0.08
42.96
2007
0
111.77
48.64
453.39
DebtDebt-Equ Equit it Ratio Ratio
120
40
711.75 648.15 664.4
2006
Earnin Earning gs Per Share
60
1262.36
2009
2010
0.04 0.02
2006
2007
2008
2009
0.02
2010
200 1 50 100 185.78
165.17 132
50
78.49
66.03
2009
2010
0 2006
2007
2008 Tota otal Debt Debt
16
Ana An alysis During the year under review, the Compan y, the worlds largest two-wheeler manufa cturer for the past nine years in a row recorded its highest-ever annual revenue, operating income and earnings per share. The Company reported a consolidated turnover (Net sales and other income) of Rs. 16,098.79 crores, a whopping growth of 28.12 percent over the consolidated turnover record ed in the previous financial year, i.e. Rs. 12,565.21 crores. For the year under review, the Company has recorded an EBIDTA margin of 17.45 per cent as compared to 14.13 per cent in the financial year 2008-09 . Ge neral Publi c 8
Share Holdin Holding g Patt Patter ern n
3
O thers 1
Private Corporat e Bodies 2
3
Indian Promoters 26
2
2
FII's 32 3
Banks and Financial Institutes 5
For eign Promoter s 26 2
2
Celebrating the strength of its operation s and the resulting strong financial position, declared and paid an Interim Silver Jubilee Special Dividend of 4,000 i.e. Rs. 80 per Equity Share of the face value of Rs. 2 each, aggregating to Rs. 1,597.5 crores (exclusive of Tax on Dividend). The dividend, in percentag e terms, is the highest pay out by an Indian company till date. 1
Reaffirming the financial strength of the Company, a sum of Rs. 225 crores has been transf erred to the Gen eral Reserve of the Company for the financial year 2009-10. Hero Honda
being the leader in two wheeler segment has been doing well as far as the returns to shareholder are consid ered. Company by far has remained a low debt compan y. Ma jority of the funding of the company is done from accumulated reserves and surplus out of the past profits. From the figure in the balance sheet it can be seen that the reserves has increased by more than 10 times in last 10 years. Because of its increasing sales continuously company has remained least dep end ent on the external financing in past. It has also not raised any equity capital from th e mark et by issue of shares.
17
With a current position of low debt and equity company has backed itself with good credibility. It has maintained a strong liquidity position with high interest coverage ratio which in the last year was moving in the range of 700+. This shows that company has good image of itself to raise any debt if required from th e mark et.
Bajaj
Auto
Market Market Capita pitalisa lisation: 41 4191 910 0 47 cr cro ore ress Ba ja j Auto is a ma jor Indian automobile manufacturer based in Pune, Maharashtra. Over the last
decade, the company has successfully changed its image from a scooter manufacturer to a two wheeler manufacturer. Its product range encompasses scooterettes, scooters and motorcycles. Its real growth in numbers has come in the last four years after successful introduction of a f ew models in the motorcycl e segment.
Intere nterest st Coverage Coverage Ratio Ratio
Profit Profit Before fore Int Intere erest st And Tax Margin Margin
5,000.00 4,280 .03
4,000. 00
25 20
3,000.00
15
2,000. 00
19. 78 13.7
10
1,000. 00 421. 06 280. 28 224.91 53.71
0.00 2006
2007
2008
2009
10.88
0
2010
2006
2007
2008
2009
2010
Debt Debt Equity quity Ratio Ratio
140
100
10.03
5
Earnin Earning gs Per Sh Share 120
11.65
1 122.35
117. 69
108.87
0.84
0.8
0.84
0.6
80
60
52.25
40
45.37
0.4
0. 46
0.31
0.2
20
0
0.29
0 2006
200 7
2 00 8
20 09
201 0
20 06
20 07
2 008
2009
2010
18
2,000.00 1,500.00
1,000.00 1,467.15 500.00
1,625.43
1,570 .00
1,334. 34
1,338.58
0.00 2 006
20 07
2 008
2009
2010
Tota otal Debt Debt
Ana An alysis The compan y focuses on motor cycles in the two-wheeler segment. It operates in segments, such as automotive and investment. Its product portfolio comprise Scooters, Autorickshaws, Motorcycles and Mopeds. Its subsidiaries include Ba ja j Auto international Holdings BV and Pt Ba ja j Auto 4
Indonesia. It has sales and service network co vering ma jor cities of j jawa, Sumatara, Bali and Sulawesi islands. Ba ja j Auto has maintained health y internal accrual for funding he requirement of the company. With
the increase in the profits of the company there has been steady rise in the reserves and surplus of the compan y.
Share Holdin Holding g Patt Patter ern n
General Public 17
Others Pri vate 1 5
6
Corporat e Bodi es 9 6
FII' s 19
Indian Promoters 51 5
6
Banks and Fin. Institutes 3 5
Though profits of the company have been rising, it has also raised debt from th e market regularly. Company has raised debt but has maintained a healthy position as far as the debt equity of the company is considered. During 2007 debt to equity was around 0.29. With the rise in sales and also rise in the profits it has been able to deliver good returns to its shareholder. EPS has steadily risen to 115 in the year 2007. Compan ys profit has raised as compared
19
to its other competitors in the two wheeler segment because of the sale of high profit margin three wheeler. Total foreign exchange earned by the company during the year under review was Rs.32 ,690 million, compared to Rs. 26,819 million during the previous year. With its strong financial base company has very good credit rating. In the last year though companys sales has reduced but it is still the second largest player in the two wheeler segment. CRISIL has given a stable rating to the company as far as long term and short term debt are considered. This makes company enable to raise any further debt from the market. Another indicator of this is the high interest coverage ratio of the company. Current debt of Baja Auto comprises of loans from bank against the hypothecation of assets , raw materials, finished goods and cash credit.
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Conclusion Comparing the overall performance of the 5 companies selected, it is Hero Honda which had displayed displayed a steady and constant performance over the past 5 yeras. The EPS for Hero Hero Hon da shares stood at Rs. 111.77 at year end 2010. The EP S has been on a g radual rise till year end 2009 and has seen a swift rise in 2010. No drastic or sudden falls have been clocked. Profit of the company is rising along with EP S. Reduction in in debt over t he run has also also helped the company to maintain its goo debt to equity ratio. Hero Hondas interest coverage ra tio has been at an impressive 1262.36 at year end 2010 with Bajaj auto being the next closest at 421.06 followed by Maruti Suzuki uzuki at 105.39 105.39 in th e third place. However s far as the PBT are concerned Hero Honda is only second to Bajaj Auto which has a 19.78 cr. compared to its 16.01 cr. The companies in the sector which we have compared are in different segment. Within the two wheeler segment Hero Honda has the best capital structure. In the commercial vehicle segment TATA Motors has adequate ratio of debt to equity giving maximum returns to its shareholders. Seeing to its current capital structure it also has capacity to raise further capital if required requir ed for funding.
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