TVS MOTORS

Course Code: ACC-506 Course Title: Financial Accounting And Analysis

Course Instructor: Dr. Anil Kumar

Academic Task No.: 2 Academic Task Title: TVS MOTORS (AUTOMOBILE

SECTOR)

Date of Allotment: 5 Sep. 2019 Date of submission: 27 sept 2019

Student’s Roll no: A03 Student’s Reg. no: 11900221

Evaluation Parameters: based on year to year analysis and by comparing companies with help
of ratioes

Learning Outcomes:) This assignment has given us clear picture about the accounting ratios

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other student’s
work or from any other source except where due acknowledgement is made explicitly in the text,
nor has any part been written for me by any other person.

Student’s Signature:

CHETHAN S N

Evaluator’s comments (For Instructor’s use only)

Evaluator’s Signature and Date:

General Observations Suggestions for Best part of assignment
Improvement

Marks Obtained: _______________ Max. Marks: ______________

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CONTENTS

1. INTRODUCTION

2. QUARTERLY FINANCIAL RESULTS OF TVS MOTORS- 2018 AND

2019

3. COMPETITORS

4. ANALYSIS OF RATIOS AS PER BALANCE SHEET

5. CONCLUSSION

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INTRODUCTION

TVS Group is the third largest two-wheeler manufacturer in India. The company
manufactures a wide range of two-wheelers from mopeds to racing inspired motorcycles. The
company also manufactures three-wheelers. The company has an annual production capacity of 4
million 2 wheelers & 120000 three wheelers. It is one of the leading two-wheeler and three-
wheeler exporters from India distributing to over 60 countries. The company has manufacturing
plants located at Hosur in Tamil Nadu Mysore in Karnataka and Nalagarh in Himachal Pradesh.
It also has one manufacturing unit located at Karawang in Indonesia.In the year 1979 TVS Group
company Sundaram-Clayton Ltd started Moped Division at Hosur to manufacture TVS 50
mopeds. In the year 1982 the company entered into a technical know-how and assistance
agreement with Suzuki Motor Co Ltd of Japan and in the year 1985 they incorporated a new
company Lakshmi Auto Components Pvt Ltd for the manufacture of critical engines and
transmission parts.

On 28 June 2017 TVS Motor Company announced its partnership with Abans Auto a leading
distributor in Sri Lanka. Through this tie-up TVS King the 200 cc passenger three-wheeler will
be launched in the Sri Lankan market. As a part of the agreement TVS Motor Company will
leverage Abans Auto's network of over 200 showrooms and appointed dealers in strategic
locations around Sri Lanka. Furthermore Abans Finance will provide finance schemes to the
customers of TVS Motor Company at affordable rates.On 26 September 2017 TVS Motor
Company announced that its popular scooter brand TVS Jupiter has clocked sales of 2 million
units within 4 years of its launch. On 6 December 2017 TVS Motor Company announced the
launch of TVS Apache RR 310. The motorcycle marks TVS Motor Company's entry into the
super-premium segment both in domestic and international markets.On 5 February 2018 TVS
Motor Company announced its foray in the 125cc scooter segment with the launch of TVS
NTORQ 125. Designed for the youth TVS NTORQ 125 has been developed based on the TVS
Racing pedigree and comes with the state-of-the-art CVTi-REVV 3 Valve engine. The scooter
also marks the launch of an exclusive technology platform - TVS SmartXonnect - making it
India's first connected scooter.

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On 14 March 2018 TVS Motor Company launched the new 2018 TVS Apache RTR 160 4V. A
testimony to the racing legacy of the TVS Apache RTR series the new TVS Apache RTR 160
4V is the most powerful 160cc motorcycle creating a new benchmark in the segment. On 23
August 2018 TVS Motor Company launched a new 110cc commuter motorcycle - TVS Radeon.
On 10 September 2018 TVS Motor Company announced that its premium motorcycle brand
TVS Apache has crossed a key sales milestone of 3 million units. On 18 September 2018 TVS
Motor Company announced that its 125cc scooter offering TVS NTORQ 125 has crossed the 1
lakh sales mark. On 19 September 2018 TVS Motor Company announced its association with
leading distributer in the Mexican region Torino Motors a subsidiary of Groupo Autofin. In the
first year of the association Torino Motors will work with TVS Motor Company to open 40
exclusive stores in the country for the distribution of two-wheelers. With over 40 years of
experience in the region Torino Motors specialises in automobile and retail finance.

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QUARTERLY FINANCIAL RESULTS OF TVS MOTORS- 2018 AND 2019

FIGURES IN RS CRORE JUN-2019 MAR-2019 DEC-2018 SEP-2018 JUN-2018

REVENUE 4468.62 4384.02 4663.98 4993.47 4168.45

OTHER INCOME 1.20 3.58 0.65 0.74 2.57

TOTAL INCOME 4469.82 4387.60 4664.63 4994.21 4171.02

EXPENDITURE 4112.83 4075.89 4288.25 4565.29 3847.24

OPERATING PROFIT 3963.56 3874.59 4147.72 4457.87 3725.51

INTEREST 29.11 24.69 16.69 21.16 18.02

PBDT 185.58 153.19 181.30 196.45 159.15

DEPRECIATION 119.37 103.09 101.24 101.60 93.34

PBT 208.51 183.93 258.45 306.16 212.42

TAX 66.21 50.10 80.06 94.85 65.81

NET PROFIT 142.30 133.83 178.39 211.31 146.61

EPS (RS) 3.00 2.82 3.75 4.45 3.09

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COMPETITORS

1. BAJAJ AUTO:Bajaj Auto manufactures and sells motorcycles, scooters and auto
rickshaws.Bajaj Auto is a Public company. Bajaj Auto generates $533.8K in revenue per
employee Bajaj Auto's top competitor is TVS , led by K N Radhakrishnan, who is their
President & CEO.

2. ATHER ENERGY: Ather Energy is a designer, manufacturer and supplier of electric

scooters.Ather Energy is a Private company. Tarun Mehta is the Co-Founder & CEO of
Ather Energy and has an approval rating of 85 from Owler members. Ather Energy has
received a total of $102M in funding. Ather Energy's top competitor is GoGreenBOV, led
by Dhivik Reddy, who is their CEO.

3. HERO MOTOCORP: Hero MotoCorp is a manufacturer and supplier of motorcycles

and scooters.Hero MotoCorp is a Public company. Pawan Munjal is the Chairman & CEO
of Hero MotoCorp and has an approval rating of 80 from Owler members. Hero
MotoCorp has 3 companies in its portfolio, and its first investment was made in 2016.

4. YAMAHA MOTOR: Yamaha Motor is a manufacturer of motorcycles, marine products

such as boats and outboard motors and other motorized products.Yamaha Motor is a
Public company. Yoshihiro Hidaka is the President & CEO of Yamaha Motor and has an
approval rating of 56 from Owler members. Yamaha Motor's top competitor is Honda, led
by Takahiro Hachigo, who is their President & CEO.

5. TRIUMPH MOTORCYCLES: Triumph Motorcycles is the manufacturer and

distributor of motorcycle and also offers clothing and accessories for the riders.Triumph
Motorcycles's headquarters is in Atlanta, Georgia. Triumph Motorcycles has a revenue of
$698.9M, and 1,300 employees. Triumph Motorcycles's main competitors are Harley
Davidson, Viper Motorcycle and Piaggio.

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ANALYSIS OF RATIOS AS PER BALANCE SHEET

 PROFITABILITY RATIO: Here by assessing TVS’s ability to generate

earnings relative to its revenue, operating costs, balance sheet assets, and
shareholders' equity over time, using data from a specific point in timeis a bit
lesser compared to BAJAJ.

 GROSS PROFIT MARGIN = GROSS PROFIT / NETSALES

Gross profit=Revenue−Cost of goods sold

= 5925.3 – 795.49

YEAR GROSS PROFIT NET SALES GROSS PROFIT

MARGIN(%)

2017-2018 789.76 15129.66 5.22

2018-2019 1032.50 18,209.92 5.67

From previous financial year company perform exceedingly well in terms of Gross
Profit Ratio. In the financial year 2017 – 2018 company having 5.22 Gross profit
percentage, which means that company sales were less than the company COGS. This
financial year company targets efficient use of the production from which they get the
results. Company having good Gross Profit Ratio this year, that indicates satisfactory
sales and less production cost

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 NET PROFIT RATIO = NET PROFIT / NET SALES

YEAR NET PROFIT NET SALES NET PROFIT

RATIO

2017-2018 661.166 15129.66 4.37

2018-2019 670.125 18,209.92 3.68

Investors can assess if a company's management is generating enough profit from its
sales which is not and operating costs and overhead costs are not being contained.
Company can have growing revenue,

But if it’s operating costs are increasing at a faster rate than revenue, its net profit margin
will shrink which it did. Ideally, investors want to see a track record of expanding
margins meaning that net profit margin is rising over time.

 RETURN ON ASSET RATIO = NET INCOME / TOTAL AVERAGE

ASSET
NET INCOME = It is equal to net earnings (profit) calculated as sales less cost of
goods sold, selling, general and administrative expenses, operating expenses,
depreciation, interest, taxes and other expenses
TOTAL AVERAGE ASSET = it is net income of company to its average assets
AVERAGE ASSET = (Beginning asset + ending asset)/2

YEAR NET INCOME TOTAL RETURN ON

AVERAGE ASSET RATIO
ASSET

2017-2018 15274.44 165666.37 9.22

2018-2019 18217.46 227718.25 8.00

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The more assets a company has amassed, the more sales and potentially more profits
the company may generate. As economies of scale help lower costs and improve margins,
returns may grow at a faster rate than assets, ultimately increasing return on assets

 RETURN ON CAPITAL EMPLOYED :

= NET OPERATING PROFIT / CAPITAL EMPLOYED
NET OPERATING PROFIT = Operating Profit = Operating Revenue - Cost of
Goods Sold (COGS) - Operating Expenses - Depreciation – Amortization.
CAPITAL EMPLOYED = Total assets−Current liabilities

YEAR NET CAPITAL RETURN ON

OPERATING EMPLOYED CAPITAL
PROFIT EMPLOYED(%)

2017-2018 1129.21 4641.22 24.33

2018-2019 1433.25 6143.37 23.33

Investors tend to favour companies with stable and rising ROCE numbers over
companies where ROCE is volatile and bounces around from one year to the next.
But, here as numbers are decreasing the investors may lose their faith.

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 RETURN ON EQUITY = NET INCOME / SHARE HOLDERS EQUITY

YEAR NET INCOME SHARE RETURN ON

HOLDERS EQUITY(%)
EQUITY

2017-2018 15274.44 61590.48 24.8

2018-2019 18217.46 79552.22 22.9

As a company increases its asset size and generates a better

return with higher margins, equity holders can retain much of the return growth when
additional assets are the result of debt use.

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LIQUIDITY RATIO: It indicates TVS’s current asset will not be sufficient to

meet its obligations when they become due but BAJAJ can go through this when
we see higher liquidity ratio.

1. CURRENT RATIO = CURRENT ASSET / CURRENT LIABILITY

COMPANY CURRENT CURRENT CURRENT

ASSET LIABILITY RATIO

TVS MOTORS 2750.1552 3525.84 0.78

BAJAJ LTD. 4444.01 5445.31 1.14

In comparison to its competitor TVS have better liquidity position. Company is able to
pay its liabilities and can have working capital to run its business. Company is able to
turn its assets into cash more effortlessly in the industry in comparison to its competitor.

2. QUICK RATIO/ACID TEST RATIO :

= LIQUID ASSETS / CURRENT ASSETS

COMPANY LIQUID ASSETS CURRENT QUICK RATIO

LIABILITIES

TVS MOTORS 1727.66 3525.84 0.49

BAJAJ LTD. 3781.30 5445.31 0.97

In comparison to its competitor TVS have better quick ratio. The ideal situation is that the
acid test ratio have to be greater than 1, but it depend upon the industry. Here, BAJAJ
LTD. is having better quick ratio in compare to TVS. It means that BAJAJ LTD can pay
the 97% of its current liabilities with immediate effect.

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 EFFICIENCY RATIO: An efficiency ratio can calculates the turnover of

receivables, the repayment of liabilities, the quantity and usage of equity,
and the general use of inventory and machineryof both TVS and BAJAJ and
in this case we can come to know that tvs is handling its performace well
than its compititor.

1. INVENTORY TURNOVER RATIO:

= COST OF GOODS SOLD / AVERAGE INVENTORY COST

COMPANY COST OF AVERAGE INVENTORY

GOODS SOLD INVENTORY TURNOVER
RATIO

TVS MOTORS 5135.54 795.495 15.49

BAJAJ LTD. 22405.5 712.19 31.46

The company which is fastest to convert its stocks into sales is BAJAJ. It is showing
that in the company BAJAJ there is efficient management that help them to convert
its stock into sales at a very rapid rate. Whereas TVS need to revamp their strategy of
sales to increase the ratio of converting stocks into sales. TVS not using their
resources efficiently that’s why the company is not able to convert its stock into sales
rapidly.

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2. DEBTORS TURNOVER RATIO :

= NET CREDIT SALES / AVERAGE ACCOUNT RECEIVABLE

COMPANY NET CREDIT AVERAGE DEBTORS

SALES ACCOUNT TURNOVER
RECEIVABLE RATIO

TVS MOTORS 5018.34 244.43 20.53

BAJAJ LTD. 7565.01 506.69 14.93

This ratios shows that the TVS have better position in the market as compare to its
competitor. It means that the other company having issues regarding to the rules and
norms of sale of the goods on the credit to other companies. TVS having better
position while collecting the credit amount from their creditors.

3. TOTAL ASSET TURNOVER RATIO = TOTAL SALES / TOTAL ASSETS

COMPANY TOTAL SALES TOTAL ASSETS TOTAL ASSET

TURNOVER
RATIO

TVS MOTORS 18209.92 4377.38 4.56

BAJAJ LTD. 30249.96 21762.56 1.39

It tells us about efficiency of the tvs shich is better than bajaj. As the ratio is higher it
tells tvs is doing good than bajaj generating more revenue to the price of asset.

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 SOLVENCY RATIO: It indicates TVS company’s cash flow is sufficient

to meet its short-and long-term liabilities compared to BAJAJ.
1. CURRENT DEBT TO NET WORTH RATIO :
= CURRENT LIABILITY / NET WORTH

COMPANY CURRENT NET WORRTH CURRENT DEBT

LIABILITY TO NET WORTH
RATIO

TVS MOTORS 3525.84 3347.32 1.05

BAJAJ LTD. 5445.31 21779.9 0.178

The ideal debt equity ratio is almost twice the long term debts. Here the company
improve its debt equity position from BAJAJ LTD. financial ratio. In the TVS
company it is just the ideal ratio, but in this BAJAJ LTD. company is having
shareholders 5.8 times less of the shareholders in comparison to the long term debts.
It means that the company is having ample amount of the shareholders under its belt.
Company getting more shareholders due to many reasons like expansion strategy, low
price shares or low risk of financial losses.

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2. FIXED AMOUNT TO NET WORTH RATIO:

COMPANY FIXED AMOUNT NET WORTH FIXED AMOUNT

TO NET WORTH
RATIO

TVS MOTORS 4725.26 3347.32 1.41

BAJAJ LTD. 21779.9 21779.9 1

Company operating profit is very satisfactory due to which company can pay their
interest very rapidly. The interest coverage ratio is very high which means it can attract
more and more shareholders towards the company. It also suggest that the company
shareholder contributing more in the company expenses.

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CONCLUSSION

In the domestic market, two-wheeler industry sales grew from 202 lakh units in 2017-18 to 212
lakh units in 2018-19, registering a growth of 5% over last year. On the other hand, second half
saw a decline of 0.8% led by slowdown in retail demand on account of increased insurance costs,
retail finance crunch and fuel price escalation.

Scooter as a category, lost share for the first time since 2007-08. Scooters registered a marginal
decline of 0.3% over 2017-18 leading to category share reduction from 33% in 2017-18 to 31.6%
in the year 2018-19.

The motorcycle category grew at 8% (136 lakh units) over the last year. Within motorcycles, the
premium segment grew by 13% from 18.9 lakh units in 2017-18 to 21.3 lakh units in 2018-19.
Commuting segment also grew 7% from 97 lakh units in 2017-18 to 104 lakh units in 2018-19.

In the international market, two-wheeler industry had a growth of 17% over last year. Crude oil
prices remained above Rs.65/ bbl for most of 2018-19 touching Rs.80/ bbl in October 2018.
Consistent higher crude prices during the year drove economic growth in many international
markets. Improved foreign exchange availability in Africa further aided the growth of export
industry over last year. Latin America, Africa and few countries in Asia are some of the markets
where demand improvement was witnessed

Majorly, industry will undertake a significant change in migrating from BSIV to BSVI emission
norms commencing from April 1, 2020. Hence, in second half of 2019-20, BSVI transition will
pose some challenges and the Company is gearing itself to meet the same. Changing trade
policies of USA, Brexit and unforeseen challenges in Chinese economy can lead to escalation of
uncertainty in global economic growth. Crude prices are expected to remain at the increased
level of Q4 2018-19 during 2019-20 and may lead to higher costs for customers and OEMs. The
trend of increased crude prices and improved exchange to local currency is expected to aid
export market growth especially in oil dependent economies. Consequently, the growth in two-
wheeler industry during 2019-20 is expected to be around 6-8% over 2018-19.

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