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Mahindra & Mahindra Ltd (BOM:500520) |
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WIKI ANALYSIS
With revenues of Rs 12,894.94 crore, Mahindra & Mahindra Ltd (BOM:500520) is the third largest tractor manufacturer in the world and the largest in India.[1] It has a market share of over 40% in Indian domestic tractor market.[2] It is also the largest manufacturer of utility vehicles in India with a market share of over 42%.[3] Amongst the hard top and pick up sub-segment, it has a market share of over 51% and 77%.[4]It is the second largest player in the light commercial vehicles segment and has a market share of 27%.[3] Over the past five years the revenues and net profit have grown at average annual growth rate of 23.62% and 54.14% respectively.
The Company identifies niche markets for its automotive products throughout the world, especially in geographical areas that have similar sales, distribution and marketing conditions as India.[5] In FY2008,it launched vehicles in Australia, Chile and Sudan. Also Completely knocked down units assembly plants were set up in Egypt and Brazil.[5] The company entered passenger car market in India with a joint venture with Renault. The Mahindra-Renault venture has launched Logan in India and holds around 2% market share in the passenger vehicles category.[6] It has also formed a joint venture with Yueda Yueda Group to form Mahindra Yueda Yancheng Tractor Company (MYYTCL) in addition to Mahindra China Tractor Company Ltd (MCTCL) to exploit the opportunities in China.[7]
Business Overview
Mahindra & Mahindra Limited (MNM) manufactures a range of automotive vehicles, agricultural tractors, implements, and industrial engines.[8]The company offers multi utility vehicles, light commercial vehicles, three-wheelers, and tractors.[8] It also provides services related to financing, leasing, and hire purchase of automobiles and tractors.[8] In addition, the company operates in the real estate, special economic zones, the hospitality industry, infrastructure development, and project engineering consultancy and design industries.[8] It provides telecommunication products and services and information security services.[8] The company has made forays to enter foreign markets.From FY2005 to FY2008, the company introduced its vehicles into new countries including Europe, Middle East, South America and South-East Asia by adapting unique business models for each country.[5] The company also entered in a joint venture with Navistar International's operating company, International Truck and Engine Corp, to produce and market light, medium, and heavy commercial vehicles for India and export markets.[9] It has four main manufacturing plants.[10] Three in Maharastra and one in Andhra Pradesh. The units in Mumbai, Nasik and Igatpuri in Maharastra, deal with multi-utility vehicles and engines.[10] The plant in Andhra Pradesh deals with the manufacture of light commercial vehicles and three wheelers.[10] In addition to these the company has plants planned in Chakan, Maharashtra and Orgadam, outside Chennai in Tamil Nadu; both of which are to become operational in 2010.[11]
Business and Financial Metrics
From FY2004 to FY 2008, sales revenues have grown from Rs 5,914.54 crore to Rs 11,503.48 crore, at average annual rate of over 23.62%.[14][15] In the same period, net profit grew from Rs 348.54 crore to Rs 1,103.37 crore by over 54.14% average annual growth rate.[14][15].In FY2008, due to general economic slowdown, the sales of MNM in the quarter ending December fell by 24.36% as compared to the same quarter in FY2007.[13] With the fall in sales, the operating margin fell from 9.95% to 1.53% and the net profit margin fell from 12.02% to 0.05%.[13]. Repot By Unmesh Lulu , Sr. Engineer BID department. The long term debt to equity ratio has gone up from 0.4 to 0.62 due to investments in capacity expansion.[16] On 16 March 2009, the company announced the reduction in capacity expansion plans by around Rs 500 crore. The company had originally planned to invest around Rs 4000 crore in its Chakan plant in Maharashtra.[17]
Share holding pattern: The promoters namely, Mahindra family owns 21.73% of MNM. FII's own 24.18% while banks financial institutions and Insurance companies own another 23.2%. SBI Magnum Contra Fund , SBI Magnum Tax Gain Scheme, SBI Blue Chip Fund and Franklin India Flexi Cap Fund are some of the mutual funds invested in the firm, with 0.33%, 0.19%,0.18% and 0.10% ownership respectively.[18] The government retains a minor share of 0.09% in the company.[3]
| Entity | Percentage |
|---|---|
| FII's | 24.18% |
| Banks Fin. Inst. and Insurance | 23.20% |
| Mahindra Family | 21.73% |
| General Public | 9.65% |
| FII's | 8.82 % |
| Others | 7.1% |
| Private Corporate Bodies | 5.03% |
| Foreign Promoters | 4.75% |
| Government | 0.09% |
| NRI's/OCB's/Foreign Others | 0.76% |
unmesh lulu is new appoint for the six sigma ans ISO verification officer in B.I. D. department in our nagpur plant.
Key Trends and Forces
Economic slowdown resulting in adverse impact on the sales
Automobile industry is a cyclical industry. It is substantially affected by general economic conditions. The demand is influenced by factors including the growth rate of the economy, easy availability of credit, increase in disposable income, interest rates and oil prices.[19] Lack of vehicle finance availability, lower growth on GDP and/or increases in fuel prices lead to a decline in the demand for automobiles. The Indian economy has shown a sharp decline in GDP from 7.1% in the 2nd quarter of FY2008-09 to 5.3% in 3rd quarter of FY2008-09.[20] The performance of the rural economy has a direct relation with the sales of MNM as about 60% of the utility vehicles sales happen in rural India also tractor sales are dependent on the rural economy.[21] Decrease in agricultural commodity prices and poor rainfall can affect the agriculture dependent rural economy and reduce MNM sales. In 2008, India recorded normal rainfall of around 98% of the long period average.[22] Despite the 62% decline in the international gasoline prices, the gasoline prices have dropped by only 10% in India.[23]
Raw material price fluctuations directly affect the operating margin and net profit margin
Raw material costs comprises of about 70.41% of the price of the finished products.[26] Any price increase of the raw materials have a direct bearing on the overall operating margin. As can be seen from the Amex steel index and the world steel price index, there is high degree of volatility in the steel prices. This volatility not only affects the operating margin but also the inventory management of the steel required for production.[27] In August 2008 steel prices peaked to over 1100$/tonne 40% higher then the steel price in January 2008.[28] Whereas on the other hand in March 2009, the steel prices have fallen to 4 year low of $473/tonne.[29] Tyres are also an important part of the raw material required for manufacturing. Tyre prices are correlated to the rubber prices. The chart above shows the volatility present in the rubber market. The rubber volatility also affects the operating margin and consequently the net profit margin.
Currency and exchange rate fluctuations and its adverse effects on the earnings
The value of the Indian Rupee(INR) compared to the U.S. dollar impacts the profit margin of exports. A strengthening INR adversely impacts the export earnings of MNM.The Company’s exports constitute 25% of the revenues .[30]Moreover MNM has operations in China and USA through MCTCL. All the dividend earnings from this subsidiary are exposed to the currency risk. MNM undertakes steps to hedge the currency risk for its operational requirements, but a weakening of the rupee against the dollar or other major foreign currencies can lead to significant losses in cases where the hedging has not been done. In Jan 2009, MNM reported Rs 93 crore forex loss in its 3rd quarter result which resulted in to 93% dip in net profit.[31]
Competition
Utility Vehicles:
- Tata Motors -Based in Mumbai, India, Tata Motors Limited is a part of Tata Group. It manufactures commercial and passenger vehicles primarily in India. It offers passenger cars, multi-utility vehicles, and pick-ups; medium and heavy commercial vehicles, such as rigid trucks, tractor trailers, and tippers; intermediate, light, and small commercial trucks; buses; and defense related vehicles. The company, through its subsidiaries, also provide engineering and automotive products; manufacture of construction equipment; automotive vehicle components manufacturing and supply chain activities; and provision of machine tools and factory automation products, as well as offers high-precision tooling, and plastic and electronic components for automotive and computer applications. In addition, it provides automotive retailing and services, as well as financing for the vehicles sold by the company. The company markets its products in Europe, Africa, the Middle East, south Asia, south east Asia, and Australia.[32]
- Toyota - Headquartered in Toyota City, Japan, Toyota Motor Corporation operates in the automotive industry worldwide. It designs, manufactures, assembles, and distributes passenger cars, recreational and sport-utility vehicles, minivans and trucks, and related parts and accessories. It also offeres hybrid vehicles. Its products also comprise conventional engine vehicles, including subcompact and compact cars, mini-vehicles, passenger vehicles, commercial vehicles,auto parts, mid-size models and luxury models.In addition, Toyota offers sports and specialty vehicles, recreational and sport-utility vehicles, pickup trucks, minivans and cab wagons, trucks and buses. Further, the company provides finance to dealers and their customers for the purchase or lease of Toyota vehicles. Additionally, it is also involved in the design and manufacture of prefabricated housing and information technology-related businesses, including intelligent transport systems and an e-commerce marketplace, called Gazoo.com.[33]
- Force Motors (FORCEMOT-BY) -The Group's principal activity is to manufacture and market utility and light commercial vehicles, agricultural tractors and diesel engines. Its plant are located at Bombay Pune road, Akurdi, Pune and Pithampur, District Dhar, Madhya Pradesh.[34] With technical collaboration of MAN AG, Germany, Force Motors has a range of heavy commercial vehicles with a payload capacity ranging from 16 to 50 tonnes.[35]
Light Commercial Vehicles:
- Tata Motors -Same as above
- Eicher Motors (EICHERMOT.EQ-IN) -Headquartered in New Delhi, Eicher Motors Limited manufactures and markets trucks, buses, motorcycles, automotive gears, and components in India. It operates in four segments: Commercial Vehicles, Two Wheelers, Components, and Others. The Commercial Vehicles segment offers CNG trucks, cruiser buses, buses on HCB platform, and tippers. The Two Wheelers segment provides motorcycles and bikes. The Components segment offers gears, gear boxes, construction and earthmoving equipment, and forklifts. The Others segment provides engineering products to automotive, aerospace, heavy engineering, consumer durables, power generation, and other segments. Eicher Motors has a joint venture agreement with Volvo AB.[36]
- Force Motors (FORCEMOT-BY) -Same as above
- Swaraj Mazda - Headquartered in Nawanshahar district, Punjab, the Company's principal activity is to manufacture and sale of commercial vehicles and spares for both goods and passenger applications.[37] The company has inked a technical assistance agreement with Isuzu Motors, Japan on Jun. 30, 2006. The agreement is for the expansion of vehicle production capacity, new assembly line for Isuzu vehicles and also setting up of in-house facilities for the manufacture of luxury buses based on existing Mazda and Isuzu chassis.[38]
Financial Comparison of the competitors:
| Financial metrics FY2007 | |||
|---|---|---|---|
| Name | Revenue in Rs Crore | Net Profit Margin | Operating Margin |
| Tata Motors[39] | 28,738 | 6.96% | 10.44% |
| Toyota[40] | 14,31,096 | 5.80% | 8.64% |
| Force Motors[41] | 930 | -8.02% | -5.04% |
| Eicher Motors[42] | 2,218 | 2.81% | 5.85% |
| Swaraj Mazda[43] | 671 | 3.75% | 7.80% |
Market share
References
- ↑ Mechanist, Mahindra Yueda Yancheng Tractor Company inaugurated in China
- ↑ Farm trader, In the industry, Mahindra and mahindra limited
- ↑ Mahindra and Mahindra Ltd, Annual report 2007-08, M&M Performance,The Automotive Sector
- ↑ 5.0 5.1 5.2 Mahindra and Mahindra Ltd, Annual report 2007-08, Page 23
- ↑ Dance with shadows, Renault and Mahindra set up $165 million Indian venture
- ↑ Mahindra, Yueda Yueda Groups joint venture in China
- ↑ 8.0 8.1 8.2 8.3 8.4 linkedin, company profile,Mahindra & Mahindra Ltd
- ↑ Trailer body builders,Navistar completes joint venture with Mahindra & Mahindra of India
- ↑ 10.0 10.1 10.2 Automobile India, Mahindra & Mahindra
- ↑ Top news.in,Mahindra & Mahindra to pump Rs 1500 crore more in Chakan facility
- ↑ Rediff money,Mahindra & Mahindra Ltd, annual result
- ↑ 13.0 13.1 13.2 rediff money, Mahindra & Mahindra Ltd, quarterly results
- ↑ 14.0 14.1 Average Annual Growth is calculated by dividing the past four years revenue increase by the number of years
- ↑ 15.0 15.1 rediff money, MNM, Annual results
- ↑ Mahindra & Mahindra Ltd, ratios
- ↑ Auto india, Mahindra & Mahindra cuts capital expenditure plan by Rs.500 Crore
- ↑ Money control, Mahindra & Mahindra Ltd , MFs invested in MNM
- ↑ Tata Motors, SEC filing, Risk associated with Our Business and the Automotive Industry, Page 10
- ↑ Times of India, GDP growth at 6-year low
- ↑ scribd, stock select,Quantum Information Services Private Limited,Mahindra & Mahindra Ltd,Strengths in the UV and tractor segments
- ↑ press information bureau,Review of Southwest Monsoon 2008
- ↑ Indian express, Petrol to go cheaper by Rs 5 from Wednesday
- ↑ steel on the net, MEPS Steel Product Price Levels across 2007 - 2008, Current prices & historic pricing levels.
- ↑ Malaysian rubber board, monthly average prices
- ↑ Rediff money, Mahindra & Mahindra ltd, Ratios, Component ratios
- ↑ One steel, steel and tube holdings limited,chairman's address
- ↑ High Beam, Builders Feel Squeeze as Steel Prices Jump
- ↑ Purchasing, Steel-market prices reflect lack of demand at OEM, service center levels
- ↑ & Mahindra Ltd ,Organisation Profile,eSangathan international conference
- ↑ Live mint, Forex loss hits Mahindra and Mahindra, Q3 net dips 93%
- ↑ Linkedin company profile, tata motors
- ↑ Linkedin, Toyota
- ↑ Wright reports, company profile, Force motors
- ↑ Linkedin company profile, force motors
- ↑ Linkedin company profile, Eicher Motors
- ↑ Alacra store, Swaraj Mazda
- ↑ Swaraj Mazda Limited, business profile,myiris
- ↑ rediff money, maruti suzuki profile
- ↑ Google finance, Toyota motor company
- ↑ rediff money, force motors
- ↑ Eicher motors rediff moneyt
- ↑ rediff money, Swaraj Mazda
- ↑ Indian auto sector,DSB cholamandalam securities limited, utility vehicles market
- ↑ Indian auto sector,DSB cholamandalam securities limited, Light commercial vehicles market
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