Thekngmkr@gmail.

com amar

INTRODUCTION:-
Maruti Suzuki Ltd:
Established in December 1983, Maruti Suzuki India Ltd. has ushered a revolution in the Indian
car industry. This car is meant for an average Indian individual which is affordable as well as has
elegant appeal. Maruti Suzuki India Ltd. is the result of collaboration of Maruti with Suzuki of
Japan. At this time, the Indian car market had stagnated at a volume of 30,000 to 40,000 cars for
the decade ending 1983. This was from where Maruti took over.
The company has crossed the milestone of becoming the first Indian company in March 1994, by
manufacturing in totality one million vehicles. It is known for its mass-production and selling of
more than a million cars. Maruti Suzuki India Ltd. is the India's largest automobile company
which entered in the market with affirmed aim to render high quality fuel – efficient and low -
cost vehicles.
By the year 1998-99, the company has modernize the existing facilities and expand its capacity
by 1,00,000 units.
In the small car segment it produces the Maruti 800 and the Zen. The big car segment includes
the Grand Vitara, Maruti Esteem and the Maruti 1000. Along with them, the company also
manufactures Maruti Omni. Other models includes Wagon R and the Baleno.
Headquarter in Gurgaon, on 17 September 2007, Maruti Udyog was renamed to Maruti Suzuki
India Limited. Both in terms of volume of vehicles sold and revenue earned, the company is
India's leading automobile manufacturers and the market leader in the car segment. Sales
recorded in June 2008, is Rs. 4,753.58 crores.

Tata motors Ltd

1
Thekngmkr@gmail.com amar

Tata Motors Limited is the largest automobile company in India with revenues touching to Rs.
20,483 crores (USD 4.7 billion) in the financial year 2004-05. It leads the market in commercial
vehicles in each segment and is the second largest in the passenger vehicles segment. Globally,
Tata Motors stands fifth in the medium and heavy commercial vehicle manufacturer category.
Established just in 1945, the company's presence cuts across the length and breadth of the
country. More than 3 million its-manufactured-vehicles ply on the Indian roads since the first one
rolled out in 1954. This company is the first from the country's engineering sector to be listed in
the New York Stock Exchange (Sep. 2004) and has also emerged as a global automotive
company.
Through its subsidiaries, Tata Motors has engaged in providing engineering and automotive
solutions. With the pace of new product development, the company has launched Tata Ace, in the
year 2005, India's first indigenously developed mini-truck.
Tata Motor's 22,000 employees are guided with the vision, "best in the manner in which we
operate, best in the products we deliver and best in our value system and ethics."

Note:
All ratio calculated by taking data in terms of crores

1. Gross profit ratio

A company's revenue minus its cost of goods sold. Gross profit is a company's residual profit
after selling a product or service and deducting the cost associated with its production and sales
Formula to calculate gross profit
Gross profit ratio=gross profit/net sales

2
Thekngmkr@gmail.com amar

Gross profit of Tata Motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

Net Sales 20,088.63 26,664.25 28,738.30
Gross profit 2,321.59 2,711.27 2,874.77
Gross profit ratio 11.55673632 10.16818399 10.0032709

Gross profit ratio of Maruti.

31-MAR-2006 31-MAR-2007 31-MAR-2008
Gross profit 2,186.20 3,165.20 3,081.70
Net Sales 12,197.90 14,806.40 18,066.80
Gross Profit Ratio 17.9227572 21.37724227 17.05725419
Analysis of gross profit of Tata motors and Maruti
Higher the GP ratio more amount is available with the company for indirect expenses and vice-
versa.
The gross profit of Maruti has increases by 19% from 2006 to 2007 but it has decreased by 20%
from 2007 to 2008. This shows that the company is not consistent .Negative growth in gross
profit is not considered as a good sign.

The gross profit ratio of Maruti decreased by 12% from 2006 to 2007 and decreased by 1% from
2007 to 2008.this shows that the company’s growth is not at all healthy.
On the other hands Tata motors GP ratio is decreasing but company is more consistent than
Maruti.
Graphical representation is as shown below:

3
Thekngmkr@gmail.com amar

2. NET PROFIT RATIO

It is the net profit after tax to that of the sales of the company. It is the ratio of net profit to net
sales
Formula of calculate net profit ratio
NET PROFIT RATIO= (PAT/SALE)*100
Net profit ratio of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,528.88 1,913.46 2,028.92
Net Sales 20,088.63 26,664.25 28,738.30
NET PROFIT RATIO 7.610673301 7.176125336 7.059986151

Net profit ratio of Maruti

31-31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,220.80 1,613.30 1,808.20
Net Sales 12,197.90 14,806.40 18,066.80
net profit ratio 10.00828011 10.89596391 10.00841322

Analysis of net profit of Tata motors and Maruti

There is an 8% increase in the net profit ratio of Maruti in the year 2006-07.again in 2007-08
again there is a fall in net profit ratio. But it almost maintained stability in the growth. Raise in
net profit ratio is a healthy signal for the company’s growth.

4
Thekngmkr@gmail.com amar

There is a very negative decline in the net profit ratio of Tata motors in the year 2006-07.there is
a 43%decline in the net profit during this period. The same negative trend had continued in the
year 2007-08 .the net profit ratio came down by 1.6% during 2007-08
It is better to prefer Maruti when compared to Tata motors
Graphical representation is as shown below:

3. Operating Ratio
The operating ratio will shows efficiency of a company's management by comparing operating
expense to net sales of the company. As smaller the Operating ratio, the greater the organization's
ability to generate profit if revenues decrease. When using this ratio, however, investors should
be aware that it doesn't take debt repayment or expansion into account.
Formula to calculate operating ratio: Operating Ratio=operating expenses/net sales
Operating ratio of Tata motors:-
31-MAR- 31-MAR-
31-MAR-2006 2007 2008
Total Expenses 18,199.18 24,427.42 25,696.91
Net Sales 20,088.63 26,664.25 28,738.30
OPERATING RATIO 90.59443078 91.6111273 89.4169453
Operating ratio of Maruti:-
5
Thekngmkr@gmail.com amar

31-MAR- 31-MAR- 31-MAR-

2006 2007 2008
Total Expenses 10,499.90 12,349.60 15,774.40
Net Sales 12,197.90 14,806.40 18,066.80
OPERATING RATIO 86.0795711 83.4071753 87.3115328
Analysis of operating ratio of Tata motors and Maruti
The operating ratio of Maruti decreased by 3% in the year 2006-07 which is a very good
indication for the growth of the company but in the year 2007-08 it had a great bulge by 22%
which is a very bad indication for the growth of the company

The operating ratio increased be 1.1% in the year 2006-07 which is very negligible .and the
operating ratio decreased by 2.3% in 2007-08 which a very good symbol for the growth of
company.
Tata motors is preferred to Maruti when we compare the operating ratios of these two companies

Graphical representation is as shown below:

6
Thekngmkr@gmail.com amar

4. Return on Capital Employed - ROCE

ROCE ratio indicates the efficiency and profitability of a company's capital investments.
Formula to calculate ROCE

ROCE of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBIT 1,889.45 2,236.83 3,041.39
Total Assets 8,473.91 10,878.89 14,120.02
Current Liabilities 6,673.61 6,956.88 10,040.37
ROCE 1.049519525 0.57032746 0.74550268

ROCE of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBIT 1,698.00 2,456.80 2,292.40
Total Assets 5,524.30 7,484.70 9,315.60
Current Liabilities 1,704.80 2,288.60 2,718.90
ROCE 0.44456081 0.47281615 0.34750709
Analysis of ROCE of Tata motors and Maruti
ROCE should always be higher than the rate at which the company borrows; otherwise any
increase in borrowing will reduce shareholders' earnings. ROCE has increased in the year 2006-
07 which is a healthy signal but it has a great fall in the year 2007-08 which is a bad signal for
the company’s growth

ROCE came down more than 50% in the year 2006-07 which the worst signal for company’s
growth. It had recovered a bit and came up by 25% in the year 2007-08 which is considered a
good signal for the healthy growth of company.
I prefer Maruti when compared to Tata motors after the analysis of ROCE
7
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

8
Thekngmkr@gmail.com amar

5. RETURN ON NET WORTH

Ratio of net income after taxes to total end of the year Net Worth. This ratio indicates the return
on stockholder's total equity
Formula to calculate Return on Net worth
RETURN ON NET WORTH: Pat/Net worth
Return on Net worth of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,528.88 1,913.46 2,028.92
Net worth 5,537.07 6,869.75 7,839.50
RETURN ON NET
WORTH 27.61171522 27.8534153 25.8807322

Return on Net worth of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,215.40 1,579.90 1,731.60
Net worth 5,452.60 6,853.90 8,415.40
Return on Net worth 22.2902835 23.0511096 20.576562

Analysis of Return on Net worth of Tata and Maruti

The Return on Net worth for Maruti has increased by 3.4% in 2006-07 .growth of Return on Net
worth is a healthy signal for the company’s growth .but 3.4 is not considerable growth .in the
year 2007-08 the ratio decreased by 10% which is a very bad implication for companies growth.

9
Thekngmkr@gmail.com amar

The Return on Net worth of Tata has increased by 0.6% in 2006-07 and by 0.03% in 2007-08
these are very negligible .the positive growth in Return on Net worth is good for the company.
From the above inference I prefer Tata motors when compared with Maruti.

Graphical representation is as shown below:

10
Thekngmkr@gmail.com amar

6. Earnings per Share (EPS)

EPS is the earning per shear. high EPS is a healthy signal for companies growth.
Formula to calculate EPS
EPS: - Pat/No. of Equity Shares
EPS of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,528.88 1,913.46 2,028.92
NO OF SHARES 38.287 38.541 38.554
EPS 39.93209183 49.6473885 52.6254085
EPS of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

PAT 1,215.40 1,579.90 1,731.60
NO. OF EQUITY SHARES 28.9 28.9 28.9
EPS 42.0553633 54.6678201 59.916955
Analysis of EPS of Tata and Maruti
The EPS of Maruti came up by 29% in the year 2006-07 which is a very good implication for
companies growth. In the year 2007-08 the EPS came up by 9.6% .it is a good implication but it
is considerably less when compared to that of previous years
The EPS of Tata came up by 24% in 2006-07 which is a very good implication .but in the year
2007-08 the growth is only 5.9% .the growth in EPS came down by considerable amount.
Both the companies are almost sailing in the same boat. Both the companies are equally
proffered when we compare with regard to EPS

Graphical representation is as shown below:

11
Thekngmkr@gmail.com amar

7. Price Earning Ratio

A valuation ratio of a company's current share price compared to its per-share earnings.
Calculated as:

PER=Market value per share/Earning per ratio

Price earnings ratio of Tata motors
31-MAR-2006 31-MAR-2007 31-MAR-2008
EPS 39.93209183 49.6473885 52.6254085
Market price 871.03 680.67 582.06
Price earnings ratio 21.81278165 13.7100867 11.0604367
Price earnings ratio of Maruti
31-MAR-2006 31-MAR-2007 31-MAR-2008
EPS 42.0553633 54.6678201 59.916955
Marketing Price 874.3 820.2 827
Price earning ratio 20.7892628 15.003342 13.8024371

Analysis of patio of maruti and Tata

The price earnings ratio of maruti went down bearishly .this is not a good indication for the
growth of the company. The growth is negative it is not preferred
The price earnings ratio of Tata decreased by 37% in the year 2006-07 this is a very bad signal.

12
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

13
Thekngmkr@gmail.com amar

8. Dividend per Share

The sum of declared dividends for every ordinary share issued. Dividend per share (DPS) is the
total dividends paid out over an entire year (including interim dividends but not including special
dividends) divided by the number of outstanding ordinary shares issued.
Formula to calculate DPS

D - Sum of dividends over a period

DPS of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

Equity Dividend (%) 130 150 150

DPS of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

Dividend per share 70 90 100

Analysis of DPS of Tata and Maruti

Dividends are a form of profit distribution to the shareholder. Having a growing dividend per
share can be a sign that the company's management believes that the growth can be sustained.
Maruti gave 11% more dividend amount.
Tata gave same dividend as last year.

14
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

15
Thekngmkr@gmail.com amar

9. Dividend payout ratio

The percentage of earnings paid to shareholders in dividends.
Formula to calculate dividend payout ratio:
Dividend per share/earnings per share
Dividend payout ratio of Tata

31-MAR-2006 31-MAR-2007 31-MAR-2008

EPS 39.93209183 49.6473885 52.6254085
Dividend per share 130 150 150
Dividend payout ratio 3.255526922 3.02130695 2.85033417
Dividend payout ratio of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

EPS 42.0553633 54.6678201 59.916955
Dividend per share 70 90 100
Dividend payout ratio 1.6644726 1.64630673 1.66897667
Analysis of dividend payout ratio of Maruti and Tata
The dividend payout ratio of Maruti is negative in year 2006-07.it is about -1%.it is considered
good if it is positive growth. In 2007-08 the Dpr is positive but very negligible. It is one%
The dividend payout ratio of Tata is 7% negative in 2006-07. And it is even negative in the next
year. It came down by 5% in 2007-08.this is not considered as a positive sign for the growth of
company.
It is better to prefer Maruti when compared to that of Tata motors. The dpo of maruti came up in
the consecutive years. The Dpo of Tata also came up but the growth is in negative. So it is better
to prefer Maruti than Tata.

16
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

17
Thekngmkr@gmail.com amar

10. Dividend yield ratio

A financial ratio that shows how much a company pays out in dividends each year relative to its
share price. In the absence of any capital gains, the dividend yield is the return on investment for
a stock.
Formula to calculate Dividend yield ratio
Dividend yield ratio= (Dividend per Share/Closing Price)*100
Dividend yield ratio of Tata motors

31-MAR-2006 31-MAR-2007 31-MAR-2008

Equity Dividend (%) 130 150 150
Market price 871.03 680.67 582.06
Dividend yield ratio 14.9248591 22.03711 25.770539
Dividend yield ratio of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

Dividend per share 70 90 100
Market Price 874.3 820.2 827
Dividend yield ratio 8.006405 10.972933 12.091898
Analysis of Dyr of Tata and Maruti
The dividend yield ratio of Maruti came up by 37% in 2006-07 which is a very good signal for
the company’s growth. In the next consecutive year it came up by 10% .it means the company is
in growth stage .it is very good for investing in the company
The dividend Yield ratio of Tata motors came up by 47% in 2006-07 .it is the best time to invest
in this company. In 2007-08 it came up by 16% .it shows that it is very good to invest in this
company.

18
Thekngmkr@gmail.com amar

Both Tata and Maruti have a very good considerable growth in their dividend yield ratio. But
Tata motors is preferred compared to Maruti as it has higher growth than the later

Graphical representation is as shown below:

19
Thekngmkr@gmail.com amar

11. Interest Coverage Ratio

A ratio used to determine how easily a company can pay interest on outstanding debt. The
interest coverage ratio is calculated by dividing a company's earnings before interest and taxes
(EBIT) of one period by the company's interest expenses of the same period
Formula to calculate Interest coverage ratio

Interest coverage ratio of Tata

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBIT 1,889.45 2,236.83 3,041.39
Interest expenses 350.24 455.75 471.56
Interest coverage ratio 5.394729328 4.90801975 6.44963525
Interest coverage ratio of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBIT 1,698.00 2,456.80 2,292.40
Interest expenses 20.4 37.6 59.6
Interest coverage ratio 83.2352941 65.3404255 38.4630872
Analysis of Interest coverage ratio of Tata and Maruti
The interest coverage ratio of Maruti is very good .it has very good funds to replace its debts .it
is risk proof to invest in this company.
The intrest coverage ratio of Tata motors is 5.6,4,6 in 2006, 2007, 2008 respectively. This
indicates that the company has more than enough capital to repay its debts.

20
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

21
Thekngmkr@gmail.com amar

12. Ebitda to sale

Formula to calculate ebitda
EBITDA TO SALE=EBDTIA/NETSALES
Ebitda to sale of Tata

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBITDA 2,410.39 2,823.12 3,693.70
Net Sales 20,088.63 26,664.25 28,738.30
EBITDA to sales 0.119987774 0.1058766 0.12852883
Ebitd to sale of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

EBITDA 2,055.80 2,588.80 2,588.80
Net Sales 12,197.90 14,806.40 18,066.80
EBITDA to sales 0.16853721 0.17484331 0.14329046
Analysis of ebitda of Tata and Maruti
Ebitda ratio of Maruti is good but it considerably came down during this time period. In 2006-07
it climbed up by 3.7% but in 2007-08 it came down by 1.3%.the higher the ebitda value the
greater the preference given to the company
Ebitda ratio of Maruti is also very good. It maintained almost strong stability in its growth .in
2006-07 it came down but it recovered during 2007-08
It is better to prefer Maruti when compared to that of Tata. The ebdit value of Maruti is greater
than Tata so it’s better to consider Tata over Maruti

22
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

23
Thekngmkr@gmail.com amar

13. DEBT SERVICE COVERAGE

Formula to calculate debt service coverage
Debt service coverage= (TOTAL EXPENSE-OPERATING PROFIT)/TOTAL DEBT SERVICE
Debt service coverage of Tata

31-MAR-2006 31-MAR-2007 31-MAR-2008

Operating Profit 2,146.36 2,586.51 3,000.91
Total Debt 2,936.84 4,009.14 6,280.52
Debt service coverage 0.73083995 0.64515332 0.47781235
Debt service coverage of Maruti

31-MAR-2006 31-MAR-2007 31-MAR-2008

Operating Profit 1,897.70 2,256.10 2,628.70
Total Debt 71.7 630.8 900.2
Debt service coverage 26.4672245 3.57656944 2.92012886
Analysis of debt service coverage ratio of Tata and Maruti
Maruti has very less debts. It has a very good debt coverage ratio it is very easy for the company
to overcome its debts
Tata also had a good debt coverage ratio .it is always above 5 which means it has more than
enough funds to repay its debts
In comparisons to Tata and Maruti taking debt coverage ratio to concern it is better to prefer
Maruti when compared with Tata.

24
Thekngmkr@gmail.com amar

Graphical representation is as shown below:

25
Thekngmkr@gmail.com amar

Conclusion:
Tata motors and maruti are the leading manufacturers of automobile industry in india .the
contribute a great income in India’s share capital. From the above analysis we can clearly
understand that the companies are not performing good in 2008 when compared to that of
2006.this is due to the recession strike. Maruti’s performance is better in some concerns when
compared to that of tata but both the companies are sailing on the same boat .I prefer Maruti over
Tata as it has a higher gross profit ratio and a low operating ratio.

Bibliography:
www.google.com
www.investopedia.com
www.marutisuzuki.com/

www.tatamotors.com

www.moneycontrol.com

Text book:

Financial management 9th edition I.M.Pandey

26