Automobile IndustryPRESENTED BY:Faliya Rahul Joshi Nishant Hinsu Kanil Mehta Viral Kanani Vishal Hudani Daymand Gandhi Kunjan

The art and science of making decision about investment mix and policy, matching investment to objectives, asset allocation for individual and institutions, and balancing risk against performance. Portfolio management is all about strength, weaknesses, opportunities and threats in the choice of debt v/s equities, domestic v/s international, growth v/s safety and many other trade offs encountered in the attempt to maximize return at a given appetite for risk.

To achieve long term capital gain To get regular income

The Indian Automotive Industry is manufacturing over 11 million vehicles and exporting about 1.5 million every year. The dominant products of the industry are two wheelers with a market share of over 75% and passenger cars with a market share of about 16%. Commercial vehicles and three wheelers share about 9% of the market between them.

About 91% of the vehicles sold are used by households and only about 9% for commercial purposes. The industry has attained a turnover of more than USD 35 billion and provides direct and indirect employment to over 13 million people. In 2011, estimated rate of growth of India Auto industry is going to be 9% . The industry turnover is estimated to reach a level of US$ 155 billion by 2016.

A Porter's Five Forces Analysis explores five principal industry factors to determine the attractive of a given industry in a given market. In any P5F analysis, one must examine the following: 1. The threat of new entrants 2. The bargaining power of buyers/customers 3. The threat of substitute products 4. The amount of bargaining power suppliers have 5. The amount of rivalry among competitors

In most markets, the capital and expertise needed to setup an auto or parts manufacturing facility, would be a great enough barrier to entry to prevent many new entrants from setting up. However, given India's incredible growth forecasts, infrastructure progress (especially new and better roads), and ever-expanding financing options to rural residents, the market is attractive. As such, we expect the threat of new entrants to be high. Result: Unfavorable

Buyers in India have a wide variety of choice. There are more than 20 foreign manufacturers selling in India (including ultra high-end such as Rolls-Royce and Lamborghini). Of course there are also a plethora of incredibly cheap choices, like the famous Tata Nano. Result:Unfavorable

India is famous for its two-wheelers (bikes and mopeds) and three-wheelers. These are very real and obvious threats to auto manufacturers. Result: Unfavorable

It is likely that the suppliers to the manufacturers have considerable bargaining power. They are not held ransom by one single manufacturer as they can market their products to any of the others in India. Result: Unfavorable

High. The industry is not yet in its shakeout phase and is still struggling to find the up-and-coming stars and possibly topple the leaders. As there is higher competition in automobile sector for capturing large market share from different companies. Result:Unfavorable

GDP: Inflation: Interest rates: Government policy: Exchange rate:

2010Q1 7.3 Q2 9.4 Q3 9.3 Q4 8.9

2011Q1 8.3 Q2 7.8 Q3 7.7 Q4 6.9

Result: Unfavorable

Source: www.tradingeconomics.com

Year Jan

Feb Mar Apr May June July Aug Sept Oct Nov Dec

2011 9.35 9.54 9.68 9.70 9.56 9.44 9.22 9.78 9.72 9.73

9.34 9.52

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47

Average rate of 2011 : 9.55% Average rate of 2010 : 12.11% Source: www.tradingeconomics.com

Bank Rate: 6% P A. Reverse Repo Rate: 7.50% (with effect from 16 September, 2010); RBI Policy Rate Repo Rate: 8.50% (with effect from 16 Sept, 10) CRR : 6.00% (with effect from 24 Apr, 2010)Source: www.rbi.org.in

Removal of the special additional duty and reduction of duties on import of items likes aluminum and steel which constitute a major part in components manufacturing. Steps for development of infrastructure for small and medium enterprises involve in auto component manufacturing. National mission for hybrid and electric vehicles to be launched for promotion of electric and hybrid mobility. Source: Union budget 2011-12

Exchange Rate

INR / 1 USD : 53.2288 INR/ 1 EURO : 69.1265 INR/ 1 POUND : 82.8666

Source: www.rbi.org.in

Industry specific index also called as sectorial index are those indices, which represent a specific industry sector. All stocks in a sectorial index belong to that sector only. Hence an index like the BSE auto index is made of auto stocks. Sectorial Indices are very useful in tracking the movement and performance of particular sector.TATA MOTORS MAHINDRA & MAHINDRA BAJAJ AUTO LTD. MARUTI SUZUKI HEROHONDA MOTORS EXIDE INDUSTRIES CUMMINS INDIA LTD. BHARAT FORGE ASHOK LEYLAND APOLLO TYRES AMTEK AUTO LTD M.R.F LTD

We

have selected companies on the basis of weightage in the industry specific index. took top five companies which forms the index.

We

Here we have calculated cut off rate for different securities to shortlist securities.

Security list: Cut off Auto From these analysis we have selected three securities, i.e., HERO MOTOCORP BAJAJ AUTO EXIDE INDUSTRY

And we have selected two securities from the financial analysis. For that we have use various ratios. We have selected following two securities MAHINDRA AND MAHINDRA MARUTI SUZUKI

EPS NET PROFIT MARGIN DIVIDEND PER SHARE DEBT-EQUITY RATIO CURRENT RATIO P/E RATIO

120 100 80 Amt in Rs. 60 40 20 0 HERO MOTO CORP 48.47 64.19 111.77 96.55 BAJAJ AUTO EXIDE INDUSTRY 3.13 3.55 6.32 7.84

EARNING PER SHARE

MAHINDRA

MARUTI SUZUKI 59.91 42.18 86.45 79.21

2008 2009 2010 2011

52.25 45.37 117.69 115.42

46.15 30.69 36.89 45.33

NET PROFIT MARGIN25

20 Margin in %

15

10

5

0

HERO MOTO CORP 9.27 10.3 14 9.89

BAJAJ AUTO 8.32 7.4 14.23 19.8

EXIDE INDUSTRY 7.92 7.55 12.7 12.86

MAHINDRA 9.45 6.25 11.08 11.14

MARUTI SUZUKI 9.34 5.72 8.34 6.13

2008 2009 2010 2010

DIVIDEND PER SHARE120 100 Amount in Rs. 80 60 40 20 0 HERO MOTO CORP 19 20 110 105 BAJAJ AUTO 20 22 40 40 EXIDE INDUSTRY 0.4 0.6 1 1.5 MAHINDR A 11.5 10 9.5 11.5 MARUTI SUZUKI 5 3.5 6 7.5

2008 2009 2010 2011

DEBT EQUITY RATIO0.9 0.8 0.7 0.6 in % 0.5 0.4 0.3 0.2 0.1 0 HERO MOTO CORP 0.04 0.02 0.02 0.5 BAJAJ AUTO 0.84 0.84 0.46 0.07 EXIDE INDUSTRY 0.35 0.26 0.04 0 MAHINDR A 0.6 0.77 0.37 0.23 MARUTI SUZUKI 0.11 0.07 0.07 0.02

2008 2009 2010 2011

CURRENT RATIO1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 HERO MOTO CORP 0.48 0.46 0.58 0.24 BAJAJ AUTO EXIDE INDUSTRY 1.14 1.08 1.39 1.53 MAHINDRA MARUTI SUZUKI 0.91 1.51 0.91 1.47

2008 2009 2010 2011

0.88 0.84 0.69 0.8

0.86 0.9 1.11 0.86

From the above analysis we can take the decision of selecting best securities from the automobile sector.

COMPANY NAME HERO MOTOCORP BAJAJ AUTO EXIDE MAHINDRA & MAHINDRA MARUTI SUZUKI

YEARLY RETURN 46% 60% 24% 14% 8%

BETA 0.45 0.66 0.56 0.96 0.67

VARIANCE 4.98 9.26 7.01 11.52 5.68

OTHER COMPANY RETURN: