Financial Analysis Of eicher Motors Ltd.

Submitted by
Saurabh Sharma(09112039) Manu Aggarwal(09112021) Shivam Singh(09112040) Sandeep Kumar(09112037) Sarvesh Kumar(09112038) Vivek Pandey(09112047) Rajat Ganesh(09112033) Ravnish Bagga(09112036) Ravi Kumar(09112034) Ravi Chaudhary(09112035)
1

Department:
Chemical Engg.
B.Tech. II Year

Table of Contents 1. Vertical Analysis 2. Horizontal Analysis 3. Key Financial Ratio 4. Finacial Report 5. Ratio Analysis 6. Analysis

Page No. 3 7 16 20 22 23

Vertical Analysis
Common Size Income Statement Profit & Loss a/c for Eicher Motors Ltd. For the year ending Dec 31, 2009
Rs. In Crores Amount % of Net Sales 411.42 32.92 378.5 29.47 2.57 410.54 245.77 5.03 31.74 2.27 109 9 100 7.8 0.7 108.5 64.9 1.3 8.4 0.6

Particulars Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses

54.74

14.5

13.79 0

3.6 0

353.34

93.4

Amount

Particulars

% of Net Sales 3

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

27.73 57.2 0.42 56.78 10.1 0 46.68 -95.19 -48.51

7 15 0 15 3 0 12 -25 -13

9.1 37.53 107.57 0 18.69 0.87 0

2 10 28 0 5 0 0 33 8 18 81

126.6 29.64 70 306.85

Common Size Balance Sheet of Eicher Motors Ltd. As on Dec 31, 2009
Rs. in crores Amount % of Total Assets

Particulars Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

12.66 12.66 14.03

3.1 3.1 3.4

0 375.81 0 402.5 8.75 2.05 10.8 413.3

0 91 0 97 2 0.5 2.6 100

Particulars

Amount % of Total Assets

Application Of Funds Gross Block Less: Accum. Depreciation 145.93 82.16 35 20

Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

63.77 1.7 299.55 22.03 5.19 3.78 31 50.67 110.22 191.89

15 0.4 72 5 1 1 8 12 27 46

0 112.77 30.84 143.61 48.28 0 413.3

0 27.3 7.5 34.7 11.7 0 100

120.04 306.85

29 74

Horizontal Analysis
Note : Data is annualised without taking into account the seasonal dependence. Income Statement of Eicher Motors Ltd. for the year ending March 31, 2006 to Dec 31, 2009
Rs. In Crores Mar '06 Mar '07 Mar '08 Dec '08 Dec'09

Particulars

12 mths

12 mths

12 mths

12 mths 12mths

Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments

1,870.12 2,238.19 2,533.19 1036.73 220.74 269.55 314.36 108.24 1,649.38 1,968.64 2,218.83 928.493 186.88 17.64 16.18 50.9467 40.71 -5.57 42.11 -20.773

411.42 32.92 378.5 29.47 2.57 410.54 245.77 5.03 31.74 2.27

Total Income 1,876.97 1,980.71 2,277.12 958.667 Expenditure 0 Raw Materials 1,279.89 1,445.53 1,672.08 684.6 Power & Fuel 13.19 14.86 15.88 7.30667 Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses 93.36 7.67 103.09 9.22 128.47 64.24

10.36 4.25333

210.11

258.17

296.4 121.093

54.74

11.75

6.46

7.44 7.22667

13.79

Preoperative Exp Capitalised Total Expenses

-0.19

-0.64

-0.36

-0.16

1,615.78 1,836.69 2,130.27

888.56

353.34

Mar '06 12 mths Particulars Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) 74.31 261.19 16.51 244.68 46.82 2.13 195.73 1.72 197.45

Mar '07 12 mths

Mar '08 Dec '08 12 mths 12 mths

Dec'09 12mths

126.38 144.02 13.83 130.19 40.53 1.46 88.2 1.4 89.6

130.67

19.16

27.73 57.2 0.42 56.78 10.1 0 46.68 -95.19 -48.51

146.85 70.1067 17.77 4.78667 129.08 65.32 43.07 20.2667 0.63 0 85.38 45.0533 0.89 -0.0667

86.27 44.9867

-19.46 216.88 335.89 0 11.24 1.58

27.64 61.26 391.16 0 81.47 11.43

22.56 63.05 458.19 0

-7.08 52 203.96 0

9.1 37.53 107.57 0 18.69 0.87

14.05 18.7333 2.39 3.18667

280.94 77.2

280.94 21.81

280.94 374.587 22.44 18.5067

126.6 29.64

Equity Dividend (%) Book Value (Rs)

40 158.4

290 147.14

50 66.6667 163.14 228.227

70 306.85

Horizontal Common Size Statements of Income Statement for the year ending March 31, 2006 to Dec 31, 2009 (as % of March 2006 level)
Rs. In Crores Mar '06 Particulars 12 mths Mar '07 12 mths Mar '08 Dec '08 Dec '09 12 mths 12 mths 12 mths

Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials

100

120

135

55

22

100 100 100 100

122 119 9 -14

142 135 9 103

49 56 27 -51

15 23 16 6

100

106

121

51

22

100

113

131

53

19

Power & Fuel Cost Employee Cost Other Manufacturing Expenses

100

113

120

55

38

100 100

110 120

138 135

69 55

34 30

Selling and Admin Expenses

100

123

141

58

26

Miscellaneous Expenses

100

55

63

62

117

Preoperative Exp Capitalised

100

337

189

84

Total Expenses

100

114

132

55

22

Mar '06 Particulars 12 mths 100 100 100 100 100 100

Mar '07 12 mths 170 55 84 53 87 69

Mar '08 Dec '08 Dec '09 12 mths 176 56 108 53 92 30 12 mths 26 27 29 27 43 0 12 mths 37 22 3 23 22 0

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items)

100

45

44

23

24

100

81

52

-4

-5534

100

45

44

23

-25

Tax

100

-142

-116

36

-47

10

Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax

100

28

29

24

17

100

116

136

61

32

100 100

725 723

125 151

167 202

166 55

Per share data (annualised)

Shares in issue (lakhs) Earning Per Share (Rs)

100

100

100

133

45

100

28

29

24

38

Equity Dividend (%) Book Value (Rs)

100

725

125

167

175

100

93

103

144

194

Note : Data is annualised without taking into account the seasonal dependence. Eicher Motors Ltd. Condensed Comparative balance sheets as on 31 March 2003 to Dec. 31 , 2009
Rs. In Crores Mar '06 Mar '07 Mar '08 Dec 08 Dec '09

11

Particulars

12 mth s

12 mths

12 mths

12 mths

12 mths

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities

28.0 9 28.0 9 0

28.09 28.09

28.09 37.4533 28.09 37.4533

12.66 12.66

14.03

416. 385.28 430.24 603.733 375.81 92 0 0 0 0 0 445. 413.37 458.33 641.187 01 87.6 120.98 143.23 4.49333 3 85.6 2 74.41 54.59 4.18667 402.5 8.75 2.05 10.8 413.3 Dec '09 12 mths

173. 195.39 197.82 8.68 25 618. 608.76 656.15 649.867 26 Mar '06 12 mth s Mar '07 12 mths Mar '08 12 mths Dec 08

12 mths

Application Of Funds Gross Block Less: Accum. Depreciation

500. 531.45 581.52 180.973 145.93 39 205. 17 237.7 276.57 98.48 82.16

12

Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses

295. 293.75 304.95 82.4933 22 7.25 8.5 19.33 2.6

63.77 1.7

268. 272.13 286.77 15.5733 299.55 9 161. 168.91 210.38 25.8267 23 117. 189.38 141.32 6.77333 6 25.5 2 47.08 48.38 44.3333 22.03 5.19 3.78

304. 405.37 400.08 76.9333 35 190. 219.74 243.74 30.6133 05 0.58 0.65

31

50.67

0.6 599.413 110.22 706.96 191.89

494. 625.76 644.42 98 0 0 0

348. 466.66 429.69 122.053 112.77 77 101. 125.35 169.63 35.7067 30.84 41 450. 592.01 599.32 157.76 143.61 18 44.8 2.09 33.75 0.63 45.1 0 549.2 0 48.28 0

Total Assets Contingent Liabilities Book Value (Rs)

618. 608.76 656.15 649.867 26

413.3

131. 132.95 126.94 171.573 120.04 11 158. 147.14 163.14 228.227 306.85 4

13

Eicher Motors Ltd. Condensed Comparative balance sheets as on 31 March 2006 to Dec. 31, 2009 (as % of March 2006 level)
Rs. In Crores Mar '06 Particulars Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans 100 100 100 93 138 87 103 163 64 144 5 5 90 10 2 100 92 103 145 90 100 100 100 100 100 100 133 133 45 45 12 mths Mar '07 12 mths Mar '08 Dec '08 Dec '09 12 mths 12 mths 12 mths

14

Total Debt Total Liabilities

100 100

113 98

114 106

5 105

6 67

Mar '06

Mar '07

Mar '08 Dec '08 Dec '09

12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit 100 100

12 mths

12 mths

12 mths

12 mths

106 116

116 135

36 48

29 40

100 100

100 117

103 267

28 36

22 23

100 100 100 100

101 105 161 184

107 130 120 190

6 16 6 174

111 14 4 15

100

133

131

25

10

100

116

128

16

27

100

112

103

103347

19003

100

126

130

143

39

15

Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets

100 100 100

134 124 132

123 167 133

35 35 35

32 30 32

100

75

101

1226

108

100 100

30 98

0 106

0 105

0 67

Contingent Liabilities Book Value (Rs)

100 100

101 93

97 103

131 144

92 194

Key Financial Ratios

Mar '06 Mar '07 Mar '08 Dec '08 Dec '09

Investment Valuation Ratios Face Value Dividend Per Share Operating Profit Per Share (Rs) Net Operating Profit Per Share (Rs) Free Reserves Per Share (Rs) Bonus in Equity Capital

10 4 26.44

10 29 44.74

10 5 46.28

10 5 5.1

10 7 21.83

587.09

700.73

789.79

247.87

298.97

147.57

136.83

153.05

161.08

295.53

--

--

--

--

--

16

Profitability Ratios Operating Profit Margin(%) Profit Before Interest And Tax Margin(%) Gross Profit Margin(%) Cash Profit Margin(%) Adjusted Cash Margin(%) Net Profit Margin(%) Adjusted Net Profit Margin(%) Return On Capital Employed(%) Return On Net Worth(%) Adjusted Return on Net Worth(%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations Return on Long Term Funds(%) Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio

4.5

6.38

5.85

2.05

7.3

1.64

4.28

3.88

-0.12

4.29

4.48

6.57

3.91

-0.12

4.63

15.82

5.12

4.81

5.29

11.71

5.65 13.01 2.71

5.18 3.08 3.06

4.81 2.81 2.81

5.29 5.42 5.42

11.71 9.19 9.19

6.85

16.82

15.9

4.33

11.43

48.74 10.22

14.82 14.77

13.75 13.97

8.1 4.75

9.66 9.71

20.3

146.91

163.14

171.17

306.85

20.3

146.91

163.14

171.17

306.85

8.18

20.11

18.55

4.36

12.1

0.85 0.72 0.39

0.86 0.75 0.47

0.82 0.7 0.43

4.24 4.27 0.01

1.19 1.14 0.03

17

Long Term Debt Equity Ratio Debt Coverage Ratios Interest Cover Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Management Efficiency Ratios Inventory Turnover Ratio Debtors Turnover Ratio Investments Turnover Ratio Fixed Assets Turnover Ratio Total Assets Turnover Ratio Asset Turnover Ratio Average Raw Material Holding Average Finished Goods Held Number of Days In Working Capital

0.16

0.23

0.23

0.01

0.01

2.57 0.39

7.41 0.47

5.87 0.43

5.89 0.01

112.52 0.03

5.53

10.44

8.33

10.12

136.57

17.1

8.47

7.01

16.1

114.4

10.34

11.77

12.63

42.03

19.61

11.97

12.83

13.42

9.51

73.71

12.19

13.97

12.63

42.03

19.61

6.29

8.21

4.34

5.88

2.94

2.96

3.61

3.79

1.48

0.96

3.76

4.21

4.34

5.88

2.94

20.76

21.72

18.58

5.72

15.69

18.11

14.45

20.08

2.88

9.63

9.78

6.17

7.32

159.7

45.92

18

Profit & Loss Account Ratios Material Cost Composition Imported Composition of Raw Materials Consumed Selling Distribution Cost Composition Expenses as Composition of Total Sales

77.59 2.27

73.42 1.6

75.35 1.7

73.73 0.52

64.93 0.66

8.35

8.86

9.19

7.55

8.44

7.44

7.9

7.67

7.48

7.99

Cash Flow Indicator Ratios Dividend 5.91 Payout Ratio Net Profit Dividend 4.82 Payout Ratio Cash Profit Earning 71.71 Retention Ratio Cash Earning Retention Ratio AdjustedCash Flow Times 86.4 1.84

151.64

26.07

42.15

52.11

89.97

15.4

30.33

41.06

-52.37 9.78 1.9

74.34 84.75 1.84

28.06 56.8 0.17

48.18 59.12 0.23

Mar '06

Mar '07

Mar '08 Dec '08 Dec '09

Earnings Per Share Book Value

77.2 158.4

21.81 147.14

22.44 163.14

13.88 171.17

29.64 306.85

19

Financial Report
BUSINESS ENVIRONMENT Indian economic growth is steadily picking momentum. After experiencing recessionary situation in last quarter of 2008 and the first quarter of 2009, the economy has bounced back from the second quarter of 2009 with an expected GDP growth of 7% plus for the year2009. Automobile Industry also recorded a smart recovery in second half of year 2009. The Company is a niche player in 350cc and above segment of two wheeler industry and in linewith improvement in business environment; two wheeler industry registered a growth of 16%during the year 2009. The Commercial vehicle industry in which the company operates through the Subsidiary Company namely VE Commercial Vehicles Limited (VECV), also recovered in the second half of2009 with handsome gains in last quarter of 2009 in all the vehicle segments. DIVIDEND The Directors are pleased to recommend a dividend of 70% (Rs.7/-per Equity Share ofRs.10/- each) for the year ended December 31, 2009. BUY BACK OF EQUITY SHARES OF THE COMPANY During the year, the Company successfully completed the buy back of 1408969 equityshares of Rs. 10 each at a price of Rs. 691.68 per share. An amount of 974.6 MINR including premium of 960.5 MINR was used for this purpose. The promoters' group and ABVolvo, Sweden did not participate in that. TWO WHEELERS BUSINESS The year 2009 has been an extremely good year for the Company with an all time highsales of 51955 motorcycles against 43298 motorcycles during 2008, thus registering a growth of 20%. Performance was good in both domestic as well as export markets with sale of 50002 motor cycles (previous year 41542) and 1953 motorcycles (previous year 1756)respectively. Spare parts sales also recorded a good growth with sales at 397.8 MINR in 2009(Previous period 250.9 MINR)

20

The Company experienced a very good demand throughout the year and production lagged the demand month after month. Based on productivity improvements, investments made in balancing equipment and also outsourcing of some operations, the Company was able to increase the production capacity of motorcycles during the year to 5000 motorcycles per month as against the previous year capacity of 3750 motorcycles per month. Necessary steps are being taken to jack up the capacity further during the current year 2010. The company operates in the "Leisure Cruiser" segment with engine capacityof 350 cc and above and it continues to be the only domestic player in this segment in Indian market. Another major highlight of the year 2009 was introduction of "Classic" bike in the two categories of 350cc and 500cc. The "Classic" bikes are powered by a single cylinder 500 cc Unit Construction Engine (UCE) supported by Electronic Fuel Injection (EFI). The UCE has an integrated assembly for the engine, gear box and clutchand this reduces the friction between the movable parts, resulting in lower transmission losses. These bikes received tremendous response from the market and also got an excellent media coverage. MARKET AND FUTURE PROSPECTS The two wheeler industry outlook has been positive in 2009 with 18% growth in domestic volumes as compared with 2008. The economy segment (100 cc) that had stagnated last year has also seen a revival, posting a growth of 16%. In future, a fraction of this huge segment is likely to upgrade to higher capacity products which may ensure long term prospects for the premium and executive segments. The Power Style and Technology Segment (PST), represented by motorcycles over 125cc is continuing to show a healthy growth. This segment has grown by 9% during the year under review. One indicative example of the good reception in the domestic market for PST segment is the staggering growth registered by the Completely Built Units (CBU) imports by International brands. Further the advent of the biking culture and lifestyle orientation in the bigger cities in Indian market will trigger growth in this segment. The Internationally popular players are also focusing now in India which will help the Leisure Cruiser segments to register stable growth levels.

21

Ratio Analysis
In 2009 the current ratio of company is 1.19 which is greater than 1. So current assets are greater than current liabilities.This ratio is increasing continuously from .85 in march 2006 with suddenly going to 4.24 in dec. 2008. This may mean that the company has more money than it can efficiently use. In march 2006-2008 current ratio is less than 1 which mean that there is a high financial risk because, in business, cash is more important than profit.This means ease with which assets can be converted into cash. Return on capital employed has increased gradually as shown in table from 6.85 to 11.83 .This means that profit of the company has increased in these years. The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. It helps answer the question: "If all sales revenues should disappear, could my business meet its current obligations with the readily convertible `quick' funds on hand?"It has increased from .72 to 1.14 in 5 years with 4.27 in Dec. 2008. Debt equity ratio is less than 1 from .39 in 2006 to .03 in 2009 which means that total stake of the share holders is very much higher than the stake of the outsiders. Same is the case with long term debt equity ratio. Debt coverage ratio 2.57 to 112.52 in these 5 years. So sudden growth in 2009 in this ratio . Solvency Indicates the proportion of shareholders funds in the total liabilities. The higher the solvency ratio, the higher the proportion of shareholders funds in the total financing of the business. Following ratios help in measuring the solvency of an enterprise Debt Equity ratio Interest Coverage ratio Debt Service Coverage ratio

22

Analysis
In these 5 years shares of the company have reduced to almost half as that of base year with quick up from march 2008 to dec.2008 and down in last from dec. 2008 to dec. 2009.The loans and debts are also reduced to one tenth of base year.Thus in all liabilities are reduced to about 67% that of base year with sudden decrement in last year. There is sudden decrement in money in Net Block, Capital Work in Progress, Investments, Inventories, Sundry Debtors , Total Current Assets , Loans and Advances from march 2008 to dec. 2008. This is because of blockage of money in fixed deposits that money could have been used in development of current business or staring new business and also using it in increasing current assets. But current liabilities are reduced suddenly In dec. 2008 as compared to in march 2008. Net sales have reduced over the years to 23% of base year in dec. 2009 . Stock adjustments have become negative as compared to base year in march 2007 and dec. 2008. There is a sudden rise from march 2006 to march 2007 in Preoperative Exp Capitalised. Extra ordinary items suddenly have gone to -5534 in dec. 2009. Exise duty has reduced to 15% in dec. 2009. So total income has reduced to 22% of base years total income. Sales are decreased due to lesser investment of money in raw material, other manufacturing expenses thus very less expenses(22%)in dec. 2009 as compared to base year.Though miscellaneous expenses first increased in march 2007 and then suddenly decreased in dec. 2008.And earning per share and shares issued have also decresed in these years. Equity dividend suddenly increased to 725% of base year in march 2007 then suddenly decreasing to 125% of base year in march 2008. Reported net profit has decreased to 17% of base year in final year. Operating profit has reduced to 37% in final year with rise in march 2007 and sudden drop in dec. 2008.

23

24