Ratio analysis of Maruti Suzuki

Prepared & submitted by :

Mr Biswajit Dutta, Roll - 05
EPGDIB 2017-19 Batch, Kolkata Campus.

Submitted to :
Dr. Jayanta Kumar Seal
INDEX:

• Introduction -------------------------------------------- ------------------------------------------------ (A)

• Objectives of study------------------------------------ ----- ---- ---------------------------------------- (B)

• Ratio Analysis-------------------------------------------- ------------------------------------------------ (C )

• Concusion------------------------------ ------------------------------------------------------------------- (D)

(A)Introduction : Maruti Suzuki, incorporated in 1981, is the country's largest passenger vehicle
manufacturer with a domestic market share of close to 40%. The Company offers 14 models with over 200
variants across the Industry segments such as passenger cars, utility vehicles and vans. It has 5 plants in the
Gurgaon and Manesar areas of Haryana with a production capability of 1.55 million units per annum. After
remaining a near monopoly till 1992, the entry of other multinationals has resulted in the company losing
market share. Maruti Suzuki comes under passenger car sector in India and it’s immediate rivals are
companies like Hyundai India, Tyota Kirloskar, Tata Motors etc. However in this report, top five Indian
manufacturers (Net sales wise) of Automobile has been selected to analyse performance of Maruti Suzuki
based on various financial ratios. Under these five companies, Bajaj Auto and hero MotoCorp comes under
2 & 3 wheeler sector.

Net Sales
80000.00
70000.00
60000.00
50000.00
40000.00
30000.00 Net Sales

20000.00
10000.00
0.00
Maruti Tata M&M Hero Bajaj Auto
Suzuki Motors Motocorp

(B) Objectives Of The Study :

- To study the growth and development of Maruthi Suzuki India limited Company.

- To examine the consistency and growth rate of selected ratios of the particular Maruthi Suzuki Company

- To analyze profitability and liquidity status of the Maruthi Suzuki Company Limited on basis of ratios

- Compare performance of Maruti over top four Automobile manufacturers.

(C)Ratio analysis :

I) Liquidity and Solvency ratio :

Solvency ratios are a financial metric used to measure the ability of a firm in meeting its long-term debt and
other obligations. This indicates whether the cash flow of a company is sufficient enough to meet its debt
obligations there-by hinting towards the financial stability of the firm. The following four ratios are
evaluated here under Liquidity & Solvency ratio.

Liquidity and Solvency ratio

1.2
1
0.8
0.6
Ratio

0.4
0.2
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Current Ratio 1.04 0.77 0.68 0.63 0.55
Quick Ratio 0.9 0.67 0.41 0.37 0.35
Debt Equity Ratio 0.07 0.08 0.01 0 0.01
Long Term Debt Equity Ratio 0.03 0.02 0.01 0 0

I.(i) Debt-Equity Ratio Analysis:

Debt-Equity ratio measures the financial leverage and indicates the proportion of equity and debt used to
finance a company’s assets. A lower number indicates a higher financial soundness and a higher number
means increased leverage and a greater financial risk. Debt-Equity ratio is calculated to measure the
relative claims of outsider or owners against the company’s asset. It is a leverage ratio which compares
total liabilities to it’s total shareholder equity.

D-E Ratio Comparison

1.6
1.4
1.2
1
0.8
Ratio

0.6
0.4
0.2
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Bajaj Auto 0.01 0.01 0.01 0.01 0
Hero MotoCorp 0.06 0 0 0 0
Mahindra 0.22 0.22 0.14 0.08 0.11
Tata Motors 0.75 0.76 1.35 0.63 0.92
Maruti Suzuki 0.07 0.08 0.01 0 0.01

Since last 5 years, the D-E ratio of Maruti Suzuki is decreasing and reached at 0.01. This means the company
is using less outsider’s fund in financing the company’s asset. Whereas it’s competitor in same sector M/s
Tata Motors and M/s Mahindra is more dependent on outsider’s fund. It means M/s Maruti Suzuki’s
competitors want to do business with maximum outsider’s fund which reduces their risk and to increase
their earning (per share) by paying lower rate of interest to the outsiders.
We see that the Debt-equity ratio has gone up for Tata Motors in 2015 compared to 2014 which means
that the level of debt financing for the company has gone up. This can be attributed to the fact that the
company raised additional debt for its international expansion during this period.

I.(ii) Long term debt equity ratio Analysis:

The ratio calculated on the basis of outsider’s fund excluding current liabilities is called as long term debt
equity ratio. Nil ratio since last two financial years of M/s Maruti may interpret that during these years the
company is not using outsider’s fund Or, they have not taken significant long terms loan from outside.

Long term D-E Ratio Comparison

1
0.8
0.6
0.4
0.2
Ratio

0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 0.03 0.02 0.01 0 0
Tata Motors 0.42 0.51 0.83 0.48 0.66
Mahindra 0.22 0.22 0.13 0.07 0.09
Hero MotoCorp 0.06 0 0 0 0
Bajaj Auto 0.01 0.01 0.01 0.01 0

On the basis of above analysis and interpretation in can be concluded that Maruti Suzuki and it’s rivals are
maintaining long term debt equity ratio at an average less than standard debt equity ratio of 2:1. A long
term debt equity ratio of less than 2:1 is considered to be good and more than 2:1 is considered to be risky
from the view point of long term solvency. Long term debt equity ratio indicates the proportion of funds
which are obtained by long term borrowings in comparison to shareholders fund. If the proportions of long
term borrowings are more than twice the shareholders’ funds it reflects that a firm is more dependent on
long term borrowings. Higher dependence on long term borrowings reduces the solvency of firm in long
term and lesser dependence on long term borrowings increases the solvency of firm in the long run. If
debts are twice the equity or less than twice the equity it means that a firm will be able to repay its debts in
long run without any problem, and if debts are more than twice the equity it means that a firm might face
difficulty to repay its debts in long term. Since, all the aove companies are maintaining long term debt
equity ratio of less than 2:1, So they are maintaining good solvency from long term point of view and both
will be able to meet their long term commitments without any problem.
I.(iii) Current ratio :

Current ratio Comparison

1.4
1.2
1
Ratio
0.8
0.6
0.4
0.2
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 1.04 0.77 0.68 0.63 0.55
Tata Motors 0.42 0.43 0.42 0.53 0.52
Mahindra 1.02 1.19 1.05 1.01 1.03
Hero MotoCorp 0.06 0 0 0 0
Bajaj Auto 0.88 0.8 0.89 1.27 1.07

It is seen that the current ratio of M/s Maruti Suzuki is declining and reached at 0.55 in March’ 2017 which
is lowest since last 5 years. Declining current ratio represents that the liquidity position of the company is
not in a very comfortable shape and the firm’s fund position to pay it’s current liability in time without
facing difficulties is also declined over past 5 years. This may also indicates that the business may be trading
beyond it’s capacity. However, compares to it’s direct rival firm (Tata Motors), the current ratio position of
M/s Maruti Suzuki is in a much better position. So the company is in a better position to pay it’s bills and
liabilities as compared to Tata Motors. However, it should also be considered that the marketing &
distribution expenses of the company has been increased since past few years which may be one of the
reason for declining Current ratio.

Promotional expense trend

25,000.00
20,000.00
values

15,000.00
10,000.00 Distribution expenses
5,000.00 Marketing expenses
0.00
Advertising expenses
Mar'2008
Mar'2009
Mar'2010
Mar'2011
Mar'2012
Mar'2013
Mar'2014
Mar'2015
Mar'2016
Mar'2017

Val in Million

Source : Prowess Data Bank

It is also very significant to mention that the Company has paid huge amount during last 3 years mainly for
the payment towards Royalties & technical knowhow fees to it’s Principle company and also invested
heavily in domestic R&D. Following graph shows the expense trend for the same :
Values in Million

40,000.00
35,000.00
30,000.00
25,000.00
Royalties, technical know-how
20,000.00
fees, etc
15,000.00
10,000.00 R & D expenses (capital & current
5,000.00 account)
0.00

Source : Prowess data bank

I.(iv) Quick Ratio Or, Acid Run Ratio Analysis :

Quick Ratio Comparison

1.2
1
Ratio

0.8
0.6
0.4
0.2
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 0.9 0.67 0.41 0.37 0.35
Tata Motors 0.4 0.36 0.42 0.41 0.42
Mahindra 0.77 0.93 0.84 0.83 0.83
Hero MotoCorp 0.52 0.47 0.72 0.67 0.72
Bajaj Auto 0.74 0.67 0.72 1.04 0.88

This ratio indicates whether the firm has sufficient short term fund/assets to cover it’s immediate liabilities
without selling inventory. Quick run ratio of Maruti Suzuki decreases since last 5 years. Therefore, the
company is in difficult situation to meet it’s immediate liabilities. Maruti’s quick ratio is stable and constant
when compared to current ratio and far better than tata motors which states that the company follows
conservative policy and liquidity of the company is better off when compared to Tata motors.
II. Management efficiency ratio :

Management efficiency ratio

60
50
40
Ratio 30
20
10
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Inventory Turnover Ratio 26.67 28.65 21.08 20.84 23.69
Debtors Turnover Ratio 36.21 30.31 40.24 48.76 54.48
Investments Turnover Ratio 26.67 28.65 21.08 20.84 23.69
Fixed Assets Turnover Ratio 2.25 1.96 1.94 2.02 3.77

II. (i) Fixed asset turnover ratio analysis :

This ratio indicates how well the fixed assets are being utilised. This ratio establishes the relationship
between net sales and net fixed assets.

Fixed asset turnover ratio = Net sales / Net fixed assets.

From the above table, it is understood that the fixed asset turnover ratio of Maruti Suzuki has reached
highest level in March 2017 since last 5 years as the net sales increased and the efficiency of utilisation of
fixed asset has reached to highest rate. So we can say, Maruti Suzuki is utilising it’s fixed asset as most
efficient way in FY16-17.

As per the below graph & table, the performance of Maruti Suzuki in passenger car vehicle sector is much
better than it’s direct rival firm M/s Tata Motors, even it has also performed better than M/s Mahindra &
Mahindra. However, the two & three wheeler sector has always performed better in comparison with four
wheeler sector in way of better utilisation of fixed asset over net sales.

Fixed asset turnover ratio Comparison

12
10
8
6
Ratio

4
2
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 2.25 1.96 1.94 2.02 3.77
Tata Motors 2.03 1.49 1.48 1.65 1.34
Mahindra 4.82 4.02 3.55 3.22 3.41
Hero MotoCorp 7.32 7.4 5.99 4.92 4.2
Bajaj Auto 5.22 4.94 5.27 5.28 9.82
II. (ii) Inventory turnover ratio analysis :

Every firm has to maintain inventory of finished goods so as to meet the business requirement. This ratio
indicates the velocity of conversion stocks into sales. Inventory turnover ratio explains the ability of the
company to convert its inventories to cash by selling.

Inventory turnover ratio Comparison

50
45
40
35
30
Ratio

25
20
15
10
5
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 26.67 28.65 21.08 20.84 23.69
Tata Motors 11.07 9.78 8.23 9.52 8.92
Mahindra 17.94 15.38 16.87 16.22 17.34
Hero MotoCorp 40.3 40.56 35.93 45.85 47
Bajaj Auto 33.2 33.08 27.66 33.35 31.7

In March’2015, the inventory turnover ratio of Maruti Suzuki saw a sharp fall thus indicating that the
inventory levels for the company had gone up and the firm was then having increased cash being blocked in
the inventory.

The above comparison table indicates that though the inventory turnover ratio of Maruti Suzuki performed
well over it’s direct competitors like Tata Motors and Mahindra, it’s own ratio has been slightly changed
over 5 years (increased in FY16-17 over last two FY). It shows that there is efficient management because
more frequently the stocks are sold; the lesser amount of money is required to finance the inventory and
the company is able to liquidate its inventory more efficiently than its peers (Tata & Mahindra). However,
the two wheeler manufacturers are more efficient to liquidate inventory vis-à-vis Four wheeler
manufacturers.

II. (iii) Debtor’s turnover ratio analysis :

This ratio indicates the velocity of debt collection of a firm Or, it indicates the no of times average debtor’s
are turned over during the year.

Debtor’s turnover ratio = Credit sales / Average accounts receivables

 Debtor's turnover ratio Comparison
60
50
40
Ratio 30
20
10
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 36.21 30.31 40.24 48.76 54.48
Tata Motors 19.78 22.6 31.14 31.58 24
Mahindra 19.27 17.17 15.37 16.13 16.13
Hero MotoCorp 50.72 31.88 23.88 21.4 20.02
Bajaj Auto 33.6 25.77 28.57 31.62 26.05

The above data shows the steady growth of Debtor’s turnover ratio of Maruti Suzuki over other automobile
manufacturers. It means Maruti Suzuki is much more efficient to manage the debtor’s/sales or, more liquid
are the debtors. All the above companies except Maruti Suzuki shows inconsistent trend.

II. (iv). Investment turnover ratio :

The investment turnover ratio compares the revenues produced by a firm to its debt and equity. The ratio
is used to evaluate the ability of a management team to generate revenue with a specific amount of
funding. The "turnover" part of the term indicates the number of multiples of revenue that can be
generated with the current funding level.

Investment turnover ratio = Net sales ÷ (Shareholders' equity + Debt outstanding)

Investment turnover ratio comparison

50
45
40
35
30
Ratio

25
20
15
10
5
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 26.67 28.65 21.08 20.84 23.69
Tata Motors 11.07 9.78 8.23 9.52 8.92
Mahindra 17.94 15.38 16.87 16.22 17.34
Hero MotoCorp 40.3 40.56 35.93 45.85 47
Bajaj Auto 33.2 33.08 27.66 33.35 31.7

From the above comparison among top five Indian Automobile manufacturers, it is seen that the
performance of Maruti Suzuki is more efficient in terms of it’s management ability to generate revenue
with specific amount of funding compares to other two four wheeler manufacturers but two wheeler
manufacturers M/s Hero and Bajaj is more efficient than Maruti.
III. Interest coverage ratio analysis :

It measures how well a company has its interest obligations covered. It is also known as Times interest
earned (TIE).

Interest coverage ratio = Net profit before interest and tax / Interest on long-term loan.

Interest Cover ratio

Interest Cover
112.2

81.18

21.8 24.63
16.76

Mar '13 Mar '14 Mar '15 Mar '16 Mar '17

Maruti Suzuki since it’s debt has been decreased over years and is less comparable to equity the interest
rate is also low thus Interest cover ratio has increased over years. It means it will be able to cover its
interest well its peers long run basis.

IV. Profitability ratio :

A very important and most widely used financial metric, which is used to assess a firm’s ability to generate
income as compared to its expenses. Higher the number is better it is for the company. Here we have
evaluated the following profitability ratios: Gross Profit Margin, Net profit, Return on capital employed and
Return of net worth.

Profitability ratio
Gross Profit Margin(%) Net Profit Margin(%) Return On Capital Employed(%)

27.36
24.42
21.24

15.92 16.91

10.65 11.3910.78
8.49 7.42 7.91
6.89 6.36
5.43 5.48

Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
IV. i) Gross Profit Ratio Analysis :

Gross profit margin measures the financial health of a firm by comparing the revenues with its cost of
goods sold. It indicates the percentage of revenues spent on procuring/producing the goods sold.

Gross profit margin (%) comparison

25
20
15
10
Ratio

5
0
-5
-10
-15
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 5.43 6.89 8.49 10.65 11.39
Tata Motors -0.24 -8.69 -10.58 -0.32 -3.88
Mahindra 9.88 9.52 8.21 8.46 7.86
Hero MotoCorp 9.01 9.62 10.88 14 14.54
Bajaj Auto 17.35 19.48 17.81 19.71 18.9

We see that the Gross profit margin has been somewhat consistently increasing over the last five years for
Maruti Suzuki compares to it’s rival in passenger car sectors. This indicated that M/s Maruti Suzuki has
been highly efficient in managing its materials and labor flows along-with the direct cost incurred as
opposed to its peers. However, the cost for raw material and labours are lower for two wheeler
manufacturers Hero and Bajaj for which their ratio growth rate is more than Maruti Suzuki and other four
wheeler manufacturers in India.

IV. ii) Net profit margin Analysis :

Net profit margin comparison

20
15
10
5
Ratio

0
-5
-10
-15
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 5.48 6.36 7.42 7.91 10.78
Tata Motors 0.67 0.97 -13.05 0.55 -5.59
Mahindra 8.29 9.27 8.52 7.74 9.03
Hero MotoCorp 8.91 8.34 8.64 10.95 11.85
Bajaj Auto 15.21 16.09 13.01 16.09 17.58

Net profit margin of Maruti Suzuki increases year on year basis since March 2013 which implies that the
revenue for Maruti Suzuki is greater than the cost involved. It is also seen that the profit margin ratio of
Maruti Suzuki is greater than it’s rival Tata motors and Mahindra. This indicator says the good performance
by Maruti Suzuki over it’s competitors.

IV. iii) Return on capital employed (%) Analysis :

Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the
efficiency with which its capital is employed. The ROCE should always be higher than the rate at which the
company borrows money. ROCE is calculated as: ROCE = Earnings Before Interest and Tax (EBIT) / Capital
Employed.

Return on capital employed comparison

60
50
40
30
Ratiio

20
10
0
-10
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 15.92 16.91 21.24 24.42 27.36
Tata Motors 5.92 2.52 -5.61 5.48 -1.86
Mahindra 25.44 22.29 18.51 18.33 16.84
Hero MotoCorp 47.86 51.41 53.42 55.34 46.13
Bajaj Auto 53.51 47.92 41.01 43.24 31.33

The above table indicates the ROCE of Maruti Suzuki is growing over the years, even more than it’s rival
M/s Tata motors. Therefore, the fund of owner’s are profitably utilised. However, from March’2013 to
March’2014 the ROCE of Mahindra is much more which indicates it’s higher return mainly from the
Institutional segment like Defence. Again from 2015 onwards, Maruti Suzuki came to the higher track.

IV. iv) Return on net worth Analysis :

It is a relationship between net profits and owner’s fund. This ratio indicates how profitable a company is
by comparing it’s net income to it’s average shareholder’s equity. The higher ratio percentage, the more
efficient management is in utilising it’s equity base and better return is to investors.

RONW = Net profit / Share holder fund

Return on net worth Comparison

50
40
30
20
10
Ratio

0
-10
-20
-30
-40
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 12.87 13.26 15.65 16.92 20.28
Tata Motors 1.57 1.74 -31.93 1.04 -11.91
Mahindra 22.88 22.39 17.25 14.59 15.4
Hero MotoCorp 42.31 37.66 36.47 39.42 33.39
Bajaj Auto 38.51 33.75 26.31 29.71 22.46
The RONW of Maruti Suzuki is increasing from March’2013, it means compares to it’s peers the company is
maintaining increasing return to shareholder every year from2013 and also optimally utilising shareholder’s
fund. On the other hand, it’s rival M/s Tata Motors has declined significantly in negative in 2015 and 2017
may be due to huge investment in their foreign assets.

V) Investment valuation ratios :

V. i) Dividend per share :

Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. Dividend per share (DPS) is the total dividends paid out by a business, including
interim dividends, divided by the number of outstanding ordinary shares issued.

Dividend per share

90
80
70
60
50
40
Ratio

30
20
10
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 8 12 25 35 75
Tata Motors 2 4.1 0 0.5 0.18
Mahindra 13 14 12 12 13
Hero MotoCorp 60 65 60 72 85
Bajaj Auto 45 50 50 55 55

This ratio is increasing significantly every year with a greater growth rate compares to it’s rival
companies in passenger car segment. This gives a signal to the investors that the company is doing
well in financially. Investors are very confident on it’s performance and putting more funds.

V). ii) Book value per share :

The book value per share formula is used to calculate the per share value of a company based on
its equity available to common shareholders. The term "book value" is a company's assets minus
its liabilities and is sometimes referred to as stockholder's equity, owner's equity, shareholder's
equity, or simply equity. If a business can increase its BVPS, investors may view the stock as more
valuable.
 Book Value/Share (Rs.)
1400
1200
1000
Ratio800
600
400
200
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 615.2 694.64 784.91 894.27 1,197.72
Tata Motors 59.98 59.58 46.17 65.87 61.27
Mahindra 248.32 284.44 325.58 366.28 432.42
Hero MotoCorp 250.69 280.41 327.56 397.83 506.32
Bajaj Auto 273.07 332.03 369.5 424.77 588.66

The above table shows how stock value of maruti is valuable and attractive to the investor. It’s growing
trend over it’s competitors also shows it’s steady growth.

V). iii) Basic Earnings per share :

Basic earnings per share is a rough measurement of the amount of a company's profit that can be allocated
to one share of its stock. Basic earnings per share (EPS) do not factor in the dilutive effects of convertible
securities. Basic EPS is calculated as follows:

Basic EPS = (net income – preferred dividends) / weighted average number of common shares outstanding

Basic EPS
300
250
200
150
Ratio

100
50
0
-50
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 79.19 92.13 122.85 151.33 242.91
Tata Motors 0.93 1.03 -14.72 0.68 -7.3
Mahindra 56.85 63.67 56.23 53.51 66.7
Hero MotoCorp 106.07 105.61 119.46 156.86 169.12
Bajaj Auto 105.2 112.1 97.2 126.2 132.3

The performance of Maruti Suzuki’s share in the stock market is showing growing trend over years from
2013 onwards. Among top five Automobile manufacturers in India, Maruti has shown positive sentiment
among investors as well as continuous growth in EPS. This data makes Maruti Suzuki in benchmark position
based on EPS performance.
V). iv) Revenue from Operations/Share (Rs.) : Sales per share is a ratio that computes the total
revenue earned per share over a 12-month period. It is calculated by dividing total revenue earned in
a fiscal year by the weighted average of shares outstanding for that fiscal year.

Revenue from operations/Share (Rs.)

2,500.00
2,000.00
1,500.00
Ratio

1,000.00
500.00
0.00
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 1,443.31 1,447.04 1,654.66 1,912.13 2,252.81
Tata Motors 140.32 106.52 112.76 124.77 130.63
Mahindra 685.07 686.21 658.53 689.88 737.6
Hero MotoCorp 1,190.19 1,265.67 1,381.34 1,432.11 1,425.89
Bajaj Auto 691.06 696.32 746.86 784.03 752.21

From the above table we understand that Revenue per share of Maruti Suzuki much more compare to
other four Automobile manufacturers. The increased trend of Maruti is also steady which indicates
operational efficiency of the company.

VI). (i). Enterprise-Value-To-Revenue Multiple :

The enterprise-value-to-revenue multiple (EV/R) is a measure of the value of a stock that compares a
company's enterprise value to its revenue. EV/R is one of several fundamental indicators that investors use
to determine whether a stock is priced well. The EV/R multiple is also often used to determine a
company's valuation in the case of a potential acquisition.

EV/Net operating revenue

6
5
4
Ratio

3
2
1
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 0.9 1.39 2.24 1.95 2.68
Tata Motors 2.23 4.16 5.4 3.42 3.99
Mahindra 1.29 1.45 1.82 1.74 1.77
Hero MotoCorp 1.3 1.79 1.91 2.05 2.26
Bajaj Auto 2.57 2.96 2.68 3.04 3.72
The above table shows that in 2013, Maruti Suzuki had lowest ratio compare to other top Automobile
manufacturers. However, in 2017 it toppled to Mahindra and Hero MotorCorp. It means Maruti Suzuki’s
valuation has been increased significantly over 5 years.

VI). (ii). Market Cap/Net Operating Revenue:

Market-cap to net operating revenue is used for spotting recovery situations or for double checking that a
company's growth has not become overvalued. If the ratio is less than 1 then the stock is considered to be
undervalued.

Market cap/net Operating revenue

6
5
4
Ratio

3
2
1
0
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 0.89 1.36 2.24 1.95 2.67
Tata Motors 1.92 3.74 4.88 3.1 3.57
Mahindra 1.26 1.43 1.8 1.75 1.74
Hero MotoCorp 1.3 1.8 1.91 2.06 2.26
Bajaj Auto 2.6 2.98 2.7 3.07 3.73

The ratio of Maruti was 0.89 in 2013 which was undervalued. However, from 2014 to 2017 it has
performed much better and toppled Mahindra.

VI). (iii). Retention ratio (%):

The retention ratio refers to the percentage of net income that is retained to grow the business, rather
than being paid out as dividends. It is the opposite of the pay-out ratio, which measures the percentage of
earnings paid out to shareholders as dividends.

Retention ratio %
150
100
50
0
Ratio

-50
-100
-150
Mar '13 Mar '14 Mar '15 Mar '16 Mar '17
Maruti Suzuki 89.89 86.97 79.65 76.87 85.59
Tata Motors -113.77 -93.87 0 73.95 102.45
Mahindra 76.19 77.05 77.55 76.46 81.77
Hero MotoCorp 43.43 38.4 49.77 54.1 48.55
Bajaj Auto 57.21 55.39 48.57 56.42 96.22
From the above data, it is understood that maruti Suzuki is optimally used it’s income to grow it’s business
unlike to Tata Motors. Every year Maruti maintained healthy dividend to the shareholder and also
balancing the investment from the earning towards expansion of business.

(D)Conclusion and critical observation :

Based on liquidity and leverage ratios we can say that Maruti Suzuki is having low current liability and debt
appetite compared to it’s peers firms. Through the current asset and liability ratio it can be seen that Tata
Motors is going for more of short term financing than on long term basis and also has a great difficulty in
paying them back due to low current and quick ratio compare to Maruti Suzuki. The interest coverage ratio
is also considerably less compare to that of to Maruti Suzuki which shows that Maruti Suzuki is safe for
creditors compare to Tata Motors. Overall, it can be seen that Maruti is more efficient than other top four
automobile manufacturers in India.

It is known fact that ratios are calculated from the past records and have no indicator of future and are also
not compared according to standard. In the shadow of above revelation and fact the study conclude that
Maruti suzuki have better strategic position in comparison to its competitor in all the respective ratios. It
has secured top position in Liquidity analysis, in profitability analysis in relation to sales and in relation to
investment, in efficiency analysis, in leverage analysis, in market valuation and has secured first rank.

The study explored that ratios are calculated from the financial statements which are prepared as desired
by the management and policies adopted on stock values and thus produce only a collection of facts
expressed in monetary term and cannot produce complete and authentic picture of the business and also
may not highlight other factors which affects performance. It is also known fact that ratio is simple
comparison of numerator and a denominator and in comparing ratios it become difficult to adjudicate
whether differences are due to change in the numerator or denominator or in both. It is also found that
ratios are interconnected but are often treated by management in isolation.

Note : All the ratios are taken from Moneycontrol.com

Disclaimer: The analysis is made based on secondary data and research. All the analysis are
completely the writer’s own logic and no other party/source is liable for this.