LONDON SCHOOL OF COMMERCE

NAME: NIKUNJ PATEL

STUDENT ID: 0661SWSW1109 MBA (II)

TUTOR: MAKAILLA McConnell

SUBJECT: CORPORATE FINANCE

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 INTRODUCTION

I am going to represent my home country one of the car production

company Maruti Suzuki India Limited it normally known as Maruti Udyog
limited is a subsidiary of Suzuki Motor Corporation. Japan, MSIL has
been the leader of the Indian car market for over two and a half
decades. The company manufacturer plant located at Gargaon and
Manesar, south of new delhi.this manufacture plant produce over the
million of car unites annually .just before 2 month ago company issue its
own articles and company CEO announced a further investment
RS.1700 cr.(17 billion)for annually car unit production 26,000 units.
The maruti Suzuki company has car production 13 brands over 152
different variety across maruti Suzuki 800,omni and also international
brands Alto and Wagon R,Swift ,A-star, Ritz and Estilo,off –roader car
like Gypsy,suv Grand vitara,sedands Sx4 and swift Dzire and the newest
entrant Eeco.

The director and managing executive officer and admin MR.HIROFUMI

NAGAO and company secretary and chief legal officer MR.ANIL
RUSTGI those both spokesman said at the end of the financial year
march 2010 maruti Suzuki had a market share 53.4%of Indian
passenger car market.maruti Suzuki pvt ltd.company one of the largest
company in asia.they sold a record 10, 18,365 vehicles in the current
year 2009-10 including 1, 47,575 car units of exports outside India. The
company managing director and CEO (chief executive officer) MR.
SHINZO NAKANISHI said past decades in the year 2003-04 company
net sales was RS.93,456 million. That was boundary by year 2004-05 in
net sales 109,105 million .and in 2006-07 RS.145, 922 million and year

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2007-08 maruti Suzuki net sales was RS.178, 603 million. The company
revenue posted of RS.301, 197 million. Last two year CAGR is 27% of
net sales.

The company is listed on Bombay stock exchange and national stock

exchange .the Company has over 8000 employees on its rolls. The
government of Japan has honoured maruti Suzuki with the METI award
for promotion of Japanese brand in India. Maruti Suzuki is one of
company got the best sold car prestigious award.

TO: Financial Controller

FROM: Management Accountant

Subject: Analysis of Maruti Suzuki Pvt ltd.

Maruti Suzuki Pvt ltd.with substantial amount of car production, our main
consideration has to be the ability of the company to pay for these good
on time to answer this we need to consider two key aspects of their
financial statements. And we have to find out what their current liquidity
position is and what are the longer term prospects (profitability) for the
company? It must be noted, however that the financial data provided in
the accounts relates to the past whereas these two aspects relates to
the presents and future. We shall have to use past data to help predict
the future.

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 PERFORMANCE HIGHLIGHTS

SALES: Maruti Suzuki recorded in highest sales in India over 4.72 lac
vehicles in the domestic and exports markets which resulted in gross
sales revenue of RS.112,840 million in the term of view company growth
sales 25.8% over 2002-03.that figure indicated that was highest sale in
growth in the last 7 years.

EARNING PER SHARE: Company doing well progress in High volume

of sales in car market. With importance improvement in operational
efficiencies, has translated into much higher returns on investment in
Earning per Share (EPS) more than RS.5.14 in 2002-03 to RS.18.77 IN
2003-04

LIQUIDITY: The current situation has risen from 1.5 to 1.9 while the acid
test has failure 1.25 to 0.72.these are not high ratio like both current and
acid one but not unusual for car manufacturing companies. However, the
upward trend masks a potentially difficult situation because inventories
(stock) have increased 1.48 % significantly. Mean while sundry debtors’
downturn trend masks a potentially financial situation decreased 0.88%
significantly. To financial condition increased and decreased .the maruti
Suzuki ltd now has been secured loans and unsecured loans and some
long term debt for the first time. These all situations give some cause for
concern, though not alarm. If possible further details are needed as to
why debtors have increased by 1 %(0.88% so nearly expected) resulting
in an additional 5 days (13 days -18 days) credit being offered to the
customer similarly, we need to know why stock levels have risen by

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nearly 1.48% and stock has been lying around the warehouse for an
extra 4 days (19-15) this year.

PROFITABILITY: The profit and loss account shows that gross sales
have upward slightly but Excise duty is more liabilities in both year and
given a impact of inflation, it is likely that the volume of sales has in fact
increased. Gross profit in year 2007 is 0.95% while in the year 2008
gross profit is 0.94%.so 0.1% decreased in compared to both year. Than
Net profit (operating) in same level in both years like 0.17%.and retain
on capital employed in the year 2007 1.42% and in the year 2008 4.88%
so increased by 3.46%.

All three profitability ratios have dropped significantly perhaps

suggesting one of the following:

 Maruti Suzuki pvt ltd car productions are past their sell by date.
More achieved stock are building up and customer have been
offered improved payment s terms is an attempts to attract
business.
 A few major customer are in difficulty and they neither paying on
time instalments. Many time car insurance company providing one
year free insurance those who loyalty customer. But after one year
they cancelled insurance. This could be happen temporary and
permanent.
 Maruti Suzuki company has international brand car importing and
exporting all over the world so intense competition from overseas
has caused a reduction in the selling price and, despite this, maruti
Suzuki to selling car more and more via advertising and best
service to providing to product because of stock level are rising.

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 It should also be noted that the proposed dividend has risen whilst
have fallen. Does this indicate confidence in the future or is it an
attempt to divert attention from the current poor results.

SUMMARY: The review does not reveal a thriving company but, without
further information, it is hard to decide whether the situation is so bleak
that you would seriously consider not supplying maruti Suzuki with their
goods. Perhaps initial trading could be done on a cash basis before we
felt secure enough to offer credit payments terms. Furthermore, it would
be unwise for us to make any huge internal investments (purchase of
machinery) until we have a bit more confidence about the long –term
future of maruti Suzuki pvt ltd.

On the basis of 2004-05 profit and loss accounts shown the company
has not taken any loan, secured or unsecured also company registered
under act section 301.the company borrowed from government end of
the year balance of such loans aggregates of rupees 639 million and
rupees 538 million respectively.

The company has losses as at march 31, 2005 and it has not incurred
any cash losses in the financial year ended on that date or in the
immediately preceding financial year.

Analysis –Key % Movement for the (2005/2006)

Sales increase of 1.10% (124814/113465)

Cost of sales increase of 1.11% (120034/109108)

These all calculated amount explain to us gross profit is high volume.

Operating Expenses increase of 1.10% (106320/96653)

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Depreciation increase of 0.62% (2854/4568)

Interest Expenses in year 2005 was 360 and 204 in 2006.so different
156 interests is increased better than last year. So company wasn’t
taken any loan, borrowed money from outsider source.

Stock Increased of 1.32%

(8812/6666)

Debtors Increased of 1.09%

(6548/5995)

Company stock increased with 1.32% but company liabilities increased

with 1.09%.so this figure indicate no any investment needed end of the
year 2006.

Analysis –key % Movement For the (2007/2008)

Sales increase of 1.23% (188,238/152,523)

Cost of sales increase of 1.22% (178,603/145,922)

This figure tells us immediately that the gross profit level will be so good.

Operating expenses increase of 1.28% (160,045/124,771)

Depreciation increase of 2.09% (5682/2714)

Increase of 2.03% (6278/3090)

 Both increase exceeded the sales % increase and therefore the

net margin will be poorer than the previous year.

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Interest expenses last year 376 but this year 596.so different 220
interests is increase better that last year. So company doesn’t need
using borrowed monies to finance the business.

Stock increase of 1.48% (10380-7014)

Debtors increase of 0.88% (6555-7474)

Company stock increase with 3366 (10380-7014) but this year liabilities
decrease with 919 (6555-7474).so this figure indicated where additional
investment has been needed.

The other significant movement from the balance sheet is in the

cash/liquidity position. And also positive cash from last year been
replaced by a bank loan this year. Links in to the interest payment shown
on the profit and loss account.

Ratio 2008 2007

Profitability

Gross profit 0.94% (178603/188238) 0.95

(145922/152523)

Net Margin 0.17% (31308/188238) 0.17%

(25888/152,523)

ROCE 4.88 %( 31308/2722+3695) 1.42 %

(25888/13326+4905)

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Liquidity ratio :( Short term Solvency)

Current ratio 1.9:1 (30909/28187) 1.5:2 (38341/25015)

Acid test -

Quick Ratio 0.72:1(30909-10380/28187 1.25:2(383417014/25015)

Efficiency Ratio:

Stock turnover 19 days (10380X365/209493) 15days

(7014X365/171442)

Debtors collection period 12.71 (13 days) 17.88(18 days)

(6555X365/188238) (7474X365/152523)

Creditors payment 42.67 (43 days) 42.81(43 days)

(24492X365/209493) (20110X365/171442)

Capital structure: (long term solvency)

Gearings 3.90% 6.40%

Borrowed capital X100/total capital

(3695 X 100/94857) (4905 X 100 /76522)

Interest cover: PBIT /interest

53 Times (31308/596) 69 Times (25888/376)

Dividend cover: PAT /dividends

11.97 %( 17308/1445) 12.01 %( 15620/1300)

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Debt Ratio: 0.22% 0.24%

Fixed assets +Investment +Current assets/Current liabilities and

provisions.)

(40,328+51,807+30,909/28,187) (29,104+34,092+38,341/25,015)

Ratio 2007 2008 2005 2006

PROFITABILITY
Gross profit 0.94% 0.95% 0.95% 0.95%
109770/11498 91296/95976
1
Net margin 0.17% 0.17% 0.16% 0.14%
18542/114981 14083/95976
ROCE 4.88% 1.42% 1.35% 2.89%
18542/13640 14083/4871
LIQUIDITY:
Current ratio 1.9:1 1.5:2 1.8:2 1.3:1
29720/16080 20189/15318
Quick ratio 0.72:1 1.25:2 1.43:1 1.04:1
29720- 20189-
6666/16080 4398/15138
EFFICIENCY
RATIO:
Stock Turnover 19 Days 15Days 14 Days 21 Days
Debtor collection 12.71(13 17.88(18 18.82(19 Days) 20.2(20 Days)
period Days) Days)
Creditors payments 42.67(43 17.88(18 29 Days 32 Days
Days) Days)

CAPITAL
STRUCTURE
Gearing Ratio 3.90% 6.40% 7.20% 8.30%
Interest Cover 53 Times 69 Times 50 Times 32

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 18140/360 Times13805/434
Dividend cover 11.97% 12.01% 14.76% 12.51%
8536/578 5421/433
Debt ratio 0.22% 0.24% 0.25% 0.28%

BIBLOGRAPHY AND REFERENCES

Business Finance (Theory and practice) Eddie McLane university

of Plymouth business school www.pearson.co.uk seventh Edition

Financial management (Theory and Practice) Eugene F. Brigham

(university of Florida,) Michael C.Ehrharat (university of Tennessee).

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Principles of Money, Banking and Financial Market (12 th Edition)
Lawrence S.Ritter (Late New York University) William L.Silber (New York
university) Gregory F. UDELL (Indiana university).

Brealey Mcuers (Principles of corporate Finance) McGraw Hill Richard

A. Brealey (Emeritus Professor of Finance, London Business School)
Stewart C. Mysers (Gordon Y.Billard Professor of Finance Sloan School
of management Mcissachusells institutes of Technology)

INVESTMENTS (Seventh Edition) Zvi Bodie (Boston University) Alex

Kane (university of California, San Diego) Alan J.Marcus (Boston
College)

“Financial Theory and Corporate Policy” Thomas E.copeland (managing

director of finance dept., Cambridge) J.fred.Weston (university of
California at Los Angeles) Kuldeep Shastri (University of Pittsburgh)

www.investopedia.com/university/ratio

www.thetimes100.co.uk/.../theroy-ratio-analysis-301.php

Annual Report of Maruti Suzuki

www.marutisuzuki.com/annual-report-newroom.aspx

Maruti Suzuki India Directors Report, Maruti Suzuki

www.moneycontrol.com

Maruti Suzuki Ltd 2(1)-Annual Report Analysis.

www.scribd.com/Annual-Report-Analysis-Maruti-Suzuki-Ltd-2-1

www.wikinvest.com/stock/maruti_suzuki_india_(BOM:532500)

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