This document provides an analysis of Mahindra and Mahindra Ltd. for the years 2011-12 and 2012-13. It includes an introduction to the company's history and operations in various industries. The document then analyzes the company's financial performance through ratio analysis and discusses key revenue generators, growth drivers, accounting policies, financial health, major expense items, and cash flow statement analysis. It aims to give an overview of Mahindra and Mahindra Ltd.'s financial performance and position over the two-year period.

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On
Mahindra and Mahindra Ltd.
(2011-12 and 2012-13)
Prepared by:
Nimisha Agarwal (2013173)
Priya Jain (2013210)

2. CONTENTS
S.No. Topic Page No.
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1. Introduction 3
2. Ratio Analysis 4-7
3. Main revenue generating activities 8
4. Major growth drivers of the company 8
5. Accounting Policies 9-11
6. Financial health of the company 11
7. Major expense heads for the company 12
8. Cash Flow Statement analysis 13-14
9. Management Discussion Analysis 15
10. References 16

3. Founded in 1945 as a steel trading company, the company entered automotive manufacturing in 1947
with a license to bring the iconic Willys Jeep onto Indian roads. Over the years, they have diversified
into many new businesses in order to better meet the needs of the customers. They follow a unique
business model of creating empowered companies that enjoy the best of entrepreneurial independence
and Group-wide synergies. This principle has led our growth into a US $16.2 billion multinationa l
group with more than 155,000 employees in over 100 countries across the globe.
Today, their operations span 18 key industries that form the foundation of every modern economy:
aerospace, aftermarket, agribusiness, automotive, components, construction equipment, consult ing
services, defence, energy, farm equipment, finance and insurance, industrial equipment, informa t ion
technology, leisure and hospitality, logistics, real estate, retail, and two wheelers.
Their federated structure enables each business to chart its own future and simultaneously leverage
synergies across the entire Group’s competencies. In this way, the diversity of their expertise allows
them to bring their customers the best in many fields.
From the founding in 1945, they have been connected internationally by business partnerships, a
multinational workforce, and the boundless ambition to integrate themselves with global communit ies
and bring opportunity to customers across the world.
Their products and services support the customers’ ambitions to improve their living standards;
responsible business practices positively engage the communities they join through employme nt,
education, and outreach; and their commitment to sustainable business is bringing green technology
and awareness into the mainstream through their products, services, and light-footprint manufactur ing
processes.
Mahindra & Mahindra was set up as a steel trading company in 1945. It eventually saw business
opportunity in expanding into manufacturing and selling larger MUVs, starting with assembly under
licence of the Willys Jeep in India. Soon established as the Jeep manufacturers of India, the company
later commenced upon the task of expanding itself, choosing to utillize the manufacturing industry
of light commercial vehicles (LCVs) and agricultural tractors. Today, Mahindra & Mahindra is a key
game player in the utility vehicle manufacturing and branding sectors in the Indian automobile
industry with its flagship UV Scorpio and swiftly exploits India's growing global market presence in
both the automotive and farming industries to push its products in other countries.
Over the past few years, the company has taken interest in new industries and in foreign markets. They
entered the two-wheeler industry by taking over Kinetic Motors in India. M&M also has controlling
stake in REVA Electric Car Company and acquired South Korea's SsangYong Motor Company in
2011.
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INTRODUCTION

4. The US based Reputation Institute once ranked Mahindra amongst the top Ten Indian companies in its
'Global 200: The World's Best Corporate Reputations' list.
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RATIO ANALYSIS
1. RETURN ON INVESTMENT RATIO
Ratio
Return on Assets 12.92 12.98
Return on Invested Capital 18.04 17.83
Return on Net Worth 22.87 23.65
2. ACTIVITY/ TURNOVER RATIO
2012-13
(%)
2011-12
(%)
Ratio 2012-13 2011-12
Total Asset Turnover Ratio 1.48 1.332
Invested Capital Turnover Ratio 2.067 1.92
Inventory Turnover Ratio 13.01 10.36
Working Capital Turnover Ratio 50.3 50.51

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Ratio
2012-13
(Days)
2011-12
(Days)
Average Collection Period 20.20 22.78
Day’s Inventory 28.06 35.23
3. LIQUIDITY RATIO
Ratio 2012-13 2011-12
Current Ratio 1.10 1.09
Acid Test Ratio 0.80 0.77

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4. SOLVENCY RATIO
Ratio 2012-13 2011-12
Debt Equity Ratio 0.317 1.23
Debt to Total Invested Capital 0.24 0.52
Interest Coverage Ratio 34.86 24.57
5. CAPITAL MARKET RATIO
Ratio 2012-13 2011-12
Earnings per Share 56.85 48.97

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Ratio 2012-13 2011-12
Price Earning Ratio 14.29 18.03
Ratio
2012-13
(Rs.)
2011-12
(Rs.)
Cash Realization 1.236 0.95

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6. PROFITABILITY RATIO
Ratio
2012-13
(%)
2011-12
(%)
Gross Profit Ratio 21.09 23.26
Net Profit Ratio 6.62 8.15
Operating Profit Ratio 11.69 12.62
Main Revenue Generating Activities
The main revenue generating activities of Mahindra & Mahindra Ltd. are:
 Automotive sector: The automotive sector launched several new products and also received
numerous awards and accolades. Company’s market share of the total Indian automotive

9. market increased to 13.2% in the Financial Year 2012-13 as compared to 11.5% in the
previous year.
 Farm Equipment sector: With its quest to deliver ‘Farm Tech Prosperity’ to the Indian
farmer, the Financial Year 2012-13 saw numerous initiatives by the Farm Equipment Sector
in the area of farm mechanisation and across the agriculture value chain.
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Major Growth Drivers of the Company
 Opportunity to Cross-Sale
a) The company’s farm division recorded sales of 236666 tractors against the 214325 tractors
sold in the previous year, recording a growth of 10.4%.
b) The Mahindra Powerol Brand, the company achieved a gross revenue of Rs. 1000 crore.
This achievement was despite the fact that the telecom segment DG sales accounting for
only 19% of revenues.
 Given a wider client base
Mahindra and Mahindra in order to strengthen its product portfolio have entered new segments
and the company has successfully launched many new products over the past two years. In the
oversea market, the company registered a volume growth of 11.2% over the previous year. The
growth was driven by volume in SAARC countries, Chile and South Africa.
 Better Cost Management
The company continues with a rigorous cost restricting exercise and efficiency improvements
which have resulted in significant saving through continued focus on cost controls, process
efficiencies and product innovations thereby enabling the company to maintain profitable
growth in current economic scenario.
 Good Performance in Weak Economic Times
In these challenging times, the Automotive and Farm Divisions of your Company have secured
good performance reflection in substantial growth in the net income of the Company by 26.8%
from Rs. 32319 crores in the previous year to from Rs. 40990 crores in the current year.
 Performance of the Subsidiary Companies
Subsidiary companies continue to contribute to the overall growth of the company. The major
subsidiary such as Mahindra & Mahindra Financial Services Limited with a 44% growth in its
consolidated profits and Mahindra Lifespace Developers limited with a 19% growth.
Accounting Policies
(A) Basis of Accounting:
The financial statements are prepared in accordance with the generally accepted accounting
principles in India and comply with the Accounting Standards notified under sub-section (3C) of
Section 211 of the Companies Act, 1956 and the relevant provisions thereof.

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(B) Tangible Assets:
(a) (i) Tangible assets are carried at cost less depreciation except as stated in (ii) below. Cost includes
financing cost relating to borrowed funds attributable to the construction or acquisition of qualifying
tangible assets upto the date the assets are ready for use. Where the acquisition of depreciable tangible
assets are financed through long term foreign currency loans (having a term of 12 months or more at
the time of their origination) the exchange differences on such loans are added to or subtracted from
the cost of such depreciable tangible assets.
When an asset is scrapped or otherwise disposed off, the cost and related depreciation are removed
from the books of account and resultant profit (including capital profit) or loss, if any, is reflected in
the Statement of Profit and Loss.
(ii) Land and Buildings had been revalued as at 31st October, 1984 at depreciated replacement values
on the basis of a valuation made by a firm of Chartered Surveyors and Valuers.
(b) (i) Leasehold land is amortised over the period of the lease.
(ii) Depreciation on assets is calculated on Straight Line Method over their estimated useful lives,
or lives based on the rates specified in Schedule XIV to the Companies Act, 1956, whichever is higher.
Accordingly depreciation is provided on:
(1) Certain items of Plant and Machinery individually costing more than Rs. 5,000 - over their
useful lives (2 years, 3 years, 5 years or 7 years, as the case may be).
(2) Cars and Vehicles – at 15% of cost.
(iii) Depreciation charge for each year is after deducting the amount representing the depreciation
on the increase due to revaluation of Land and Buildings, transferred from the Revaluation Reserve.
(C) Intangible Assets: Intangible assets are initially measured at cost and amortised so as to reflect
the pattern in which the asset’s economic benefits are consumed.
(a) Technical Knowhow: The expenditure incurred is amortised over the estimated period of benefit,
not exceeding six years commencing with the year of purchase of the technology.
(b)Development Expenditure: The expenditure incurred on technical services and other
project/product related expenses are amortised over the estimated period of benefit, not exceeding five
years.
(c) Software Expenditure: The expenditure incurred is amortised over three financial years equally
commencing from the year in which the expenditure is incurred.
(D) Impairment of Assets: The carrying value of assets/cash generating units at each balance sheet
date is reviewed for impairment. If any indication of impairment exists, the recoverable amount of
such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds
their recoverable amount.
(E) Investments: Long term investments are valued at cost. Current investments are valued at the
lower of cost and fair value, determined by category of investment.
(F) Inventories: Inventories comprise all costs of purchase, conversion and other costs incurred in
bringing the inventories to their present location and condition.

11.  Raw materials and bought out components are valued at the lower of cost or net realisable
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value. Cost is determined on the basis of the weighted average method.
 Finished goods produced and purchased for sale, manufactured components and work-in-progress
are carried at cost or net realisable value whichever is lower. Excise duty is included
in the value of finished goods inventory.
 Stores, spares and tools other than obsolete and slow moving items are carried at cost. Obsolete
and slow moving items are valued at cost or estimated net realisable value, whichever is lower.
(G) Foreign Exchange Transactions: Transactions in foreign currencies (other than firm
commitments and highly probable forecast transactions) are recorded at the exchange rates prevailing
on the date of transaction. Monetary items are translated at the year-end rates.
(H) Derivative Instruments and Hedge Accounting: The Company uses foreign currency forward
contracts and currency options to hedge its risks associated with foreign currency fluctuations relating
to certain firm commitments and highly probable forecast transactions. The Company has applied to
such contracts the hedge accounting principles set out in Accounting Standard 30 ‘Financia l
Instruments: Recognition and Measurement’ (AS 30) by marking them to market at each reporting
date.
(I) Revenue Recognition: Sales of products and services including export benefits thereon are
recognised when the products are shipped or services rendered. Excise duty recovered on sales is
included in “Revenue from Operations”. Dividends from investments are recognised in the Statement
of Profit and Loss when the right to receive payment is established.
(J) Government Grants :The Company, directly or indirectly through a consortium of Mahindra
Group Companies, is entitled to various incentives from government authorities in respect of
manufacturing units located in developing regions. The Company accounts for its entitlement as
income on accrual basis.
(K) Employee Benefits: In respect of Defined Contribution Plans/Defined Benefit Plans/Long term
Compensated Absences.
(L) Borrowing Costs: All borrowing costs are charged to the Statement of Profit and Loss except
expenses incurred on raising long term borrowings are amortised over the period of borrowings.
(M) Product Warranty: In respect of warranties given by the Company on sale of certain products,
the estimated costs of these warranties are accrued at the time of sale.
(N) Leases: The Company’s significant leasing arrangements are in respect of operating leases for
premises (residential, office, stores, godowns, computer hardware etc.). The aggregate lease rentals
payable are charged as rent.
(O) Taxes on Income: Current tax is determined as the amount of tax payable in respect of taxable
income for the year. Deferred tax is recognised, subject to consideration of prudence, on timing
differences, being the difference between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods.
(P) Segment Reporting: Segments are identified having regard to the dominant source and nature of
risks and returns and internal organisation and management structure. Revenues and expenses have
been identified to the segment based on their relationship to the business activity of the segment.

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Financial Health of the Company
1. Shareholders ( Present & Potential)
The present and potential shareholders of the company predicts the financial health with the
help of ratios like return on invested capital, return on net worth, debt equity ratio, debt to
total invested capital, earning per share and profitability ratio. There has been a marginal
decrease in return on investment and profitability ratio but earning per share has shown a
significant increase which the most important ratio is considered by the present and potential
shareholders. The earnings per share has increased by Rs.7.88 i.e. approximately by 16%
whereas the profitability ratio has shown a decrease of 5-10%.
2. Managers( Efficiency)
The managers are concerned about the return on investment, activity ratio, liquidity ratio and
profitability ratio in order to measure the degree of efficiency of their operations. The return
on investment has decreased marginally which plays an important role in wealth creation for
shareholders. The activity ratios like total asset turnover ratio and inventory turnover ratio
have shown a increase of 15-20% which indicates that the management is able to use its
assets effectively and activity ratios like average collection period and day’s inventory have
decreased which implies that the operational activities of the management are effective as
they are able to generate good revenues from its resources.
3. Lenders (Long term and Short term)
The lenders are concerned with the each ratio so as to analyze the credibility and liquidity of
the company. The short term fund providers i.e. working capital fund providers are majorly
concerned about the liquidity and activity ratio. The company’s liquidity has increased
marginally by 1-2% over a period of time i.e. the company has the ability to meet any
emergency arising out of uneven flow of funds. The long term fund providers are concerned
about the return on investment, solvency ratio and profitability ratio. The return on
investment and profitability ratio have decreased by 5-10% which is matter of concern for the
lenders as their funds are at risk but the increase in interest coverage ratio shows the safety of
payment of interest charges to the lenders.
Major Expense Heads of the Company
The major expense heads of the company are:
 Cost of material consumed is equal to opening stock of raw material plus purchase of
raw material minus closing stock of raw material which has increased by 10.35%
 Purchases of stock in trade increased by 84.27%
 Employee benefit expense includes salaries, bonus, contribution to provident fund and
other employee related expense which has increased by 9.68%

13.  Finance Costs includes interest charges, discount charges and other borrowing
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charges which has increased by 17.47%
 Depreciation and Amortization expense increased by 23.37%
 Other expenses includes manufacturing, administrative and selling & distribution
expenses which has increased by 19.88%.
2011-12
64%
Cost of Materials
Consumed
Purchases of Stock-in-
Trade
Employee Ben efits
Expense
Finance Costs
Depreciation and
Amortisation
Expense
Other Expenses
2%
1%
10%
2012-13
26% 56%
Cost of Materials
Consumed
Purchases of Stock-in-
Trade
Employee Benefits
Expense
Finance Costs
Depreciation and
Amortisation
Expense
Other Expenses
Cash Flow Statement Analysis
2%
1%
18%
6%
9%
5%
While analyzing the cash flow statement, the activities of the company are divided into 3 categories:
1. Operating Activities: Principle revenue generating activities of the company
Cash flow generated from operating activities helps the firm to maintain its operating capabilities,
repay loans and make new investments without accessing to external/alternative source of financing.

14. The cash flows generated from operating activities have increased approximately by 52% i.e.
increased from Rs.2734.95 to Rs.4145.71 due to following reasons:
 Cash receipts from sale of goods and rendering services i.e. sales revenue increased by
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Rs.8511.09 from 2011-12 to 2012-13.
 Cash payments to and behalf of employees i.e. Employee benefit expense increased by
Rs.164.67 from 2011-12 to 2012-13.
2. Investing Activities: Acquisition and disposal of long term assets and other investments
Cash flow generated from investing activities is a key indicator of the extent to which organisation
has made expenditure for resources intended to generate future income and cash flows. The cash
used in investing activities have increased approximately by 53% i.e. increased from Rs.1885.33 to
2895.95 due to following reasons:
 Cash payments to acquire fixed assets worth Rs.1374.69 in 2011-12 and Rs.1435.62 in 2012-
13.
 Cash receipts from disposal of fixed assets worth Rs.34.27 in2011-12 and Rs.46.32 in 2012-
13.
 Cash payments to acquire investments both current and non-cuurent worth Rs.22271.87 in
2011-12 and Rs.41769.42 in 2012-13.
 Cash receipts from sale of both current and non-current investments worth Rs.21207.57 in
2011-12 and Rs.40486.87 in 2012-13.
 Interest and dividend received on investments of Rs.270.28 in 2011-12 and Rs.325.22 in
2012-13.
3. Financing Activities: Change in the size and composition of the owner’s capital and
borrowings
Cash flow generated from financing activities helps in predicting the claims of fund providers
on future cash flows. The cash used in financing activities have increased approximately by
300% i.e. increased from Rs.306.15 to Rs.1221.89 due to following reasons:
 Cash proceeds from issuing shares or other similar instruments worth Rs.0.64
in 2012-13
 Cash proceeds from issuing debentures, bonds and short/long term borrowings
worth Rs.900.97 in 2011-12 and Rs.227.48 in 2012-13.
 Cash repayments of amounts borrowed i.e. Rs.249.72 in 2011-12 and
Rs.380.73 in 2012-13.
 Dividend paid of Rs.800.78 in 2011-12 and Rs.866.97 in 2012-13.
 Interest and finance charges paid of Rs.149.57 in 2011-12 and Rs.201.50 in
2012-13.
Particulars 2012-13 2011-12
Operating Activities 4145.71 2734.95
Investing Activities -2895.95 -1885.33
Financing Activities 1163.96 1136.11

15. 5000
4000
3000
2000
1000
0
-1000
-2000
-3000
-4000
Cash Flow Statement Analysis
Operating Activities Investing Activities Financing Activities
Net Flow of funds
Type of activity
Conclusion:
The company is able to finance its investing activities from the cash flow from operating
activities and is not dependent upon external funds in order to fund its activities. But over a
period of time, the company has tremendously increased the financing activities which in turn
will affect the profits of the company due to the burden of financing costs like interest on
loan and dividend on shares. The company is able to increase its revenue from operating
activities by 52% which reflects its operating efficiency as the capital base has remained
same during the period.
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Note:
All figures are in Crores.
Management Discussion Analysis
Some major issues covered in MDA are as follows:
2012-13
2011-12

16. 1. Capacity: With the rapid growth of the Indian auto industry, Company’s key suppliers
occasionally face capacity constraints and are unable to meet demand peaks. This could lead
to loss of volumes and market share.
2. Competitive Intensity: The company continues to invest in new product development and
technology upgrades and will focus on delivering customer centric products. Frugal innovat ion
remains a thrust as it moves forward.
3. Tax and Excise Duty Regulations: With the resulting lower price tag for small cars, customers
may opt to postpone large car purchases or buy small car which could impact the growth large
car segment.
4. Diesel – Petrol price parity: Deregulation of the prices will impact the cost of ownership and
may have an impact on the demand of your Company’s products, as almost all its products are
diesel powered.
5. Commodity Prices: Commodity prices declined in the first half of the Financial Year 2013-
14, but rupee depreciation restricted the price decline in India, resulting in moderate commodit y
inflation.
6. Environment and Alternate fuels: Stringent regulatory norms are being introduced to
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safeguard the environment, especially in the area of emissions.
7. Financial Market Conditions: The cutting of CRR, the cost of borrowing in the corporate
loan market remained relatively high. Continued CAD and the depreciation of INR can have
implications for the management of fiscal and monetary policies.
8. New Projects: To meet customer needs, the company is investing in an aggressive new
product. The success of new product launches will have an important bearing on its future
growth and profitability.
9. Monsoon: An untimely monsoon and uneven spread have the potential of adversely impacting
the business especially the tractor business and the automotive business to some extent.
10. Investment in Technology: Growing environmental consciousness among consumers,
government regulations to manage traffic congestion, improvement in public transport
infrastructure are trends that will have a significant impact on the future of the automotive
industry.
11. Price War: Investments in capacity augmentation by most players and industry de-growth over
the previous year could lead to price wars.
12. Increased Competition: Increased competition will lead to more frequent product launches in
all industry segments and raise customer expectations in terms of performance, quality and
technology, leading to higher costs.
References
 Official website of Mahindra and Mahindra Ltd.: www.mahindra.com

17.  For current market price of Mahindra and Mahindra Ltd. Shares:
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www.moneycontrol.com
 Book reference: Financial Accounting for management by N Ramachandran and Ram
Kumar Kakani published by Tata McGraw Hill Education Private Limited
 For company information: en.wikipedia.org
 Hadouts provided in the class by the faculty ( Dr. Pawan Jain)