COPORATE FINANCE

“(FM102)
“Term Group Assignment “
“On”
““MARUTI SUZUKI””

POST GRADUATE DIPLOMA IN MANAGEMENT”

“PGDM GEN (C); Term-II; Batch 2019-21”
“Under the Supervision of”

Prof. NIDHI SINGH

Associate Professor- CORPORATE FINANCE

Submitted by: GROUP No. 12

Name & Roll, No.
1. Aditya pani (pgfc1904)
2. Ruchika singh (pgfc1955)
3. Parth tyagi (pgfc1958)
4. Rashi aggarwal (pgfc1957)
5. Parmarth kapoor (pgfc 1959)

“JAIPURIA INSTITUTE OF MANAGEMENT”

 “Maruti Suzuki India limited is a publicly listed automoter in india. It is
a leading four wheeler automobile manufacture in south Asia”.

 “Suzuki Motor Corporation of japan holds a majority stake in the

company”.

 “It was the first company in India to mass produce and sell more than a
million Car”.

 “Maruti Suzuki is one of the India’s leading automobile manufacturers

and the market leader in the car segment”.

 “Until recently, 18.28% of the company was owned by the Indian

government and 54.2% by Suzuki of japan”.

 “The company annually exports more than 50000 cars and has an
extremely large domestic market in india selling over 730,000 cars
annually”.

 “Maruti 800 till 2004, was the india’s largest compact car ever since it
was launched in 2003”.
 PART-1

RISK AND RETURN OF MARUTI SUZUKI

“Risk and return are highly correlated. Increased potential returns on investment
usually go hand-in-hand with increased risk. Different types of risks include project-
specific risk, industry-specific risk, competitive risk, international risk, and market
risk. Return refers to either gains and losses made from trading a security”.

“The return on an investment is expressed as a percentage and considered a random

variable that takes any value within a given range. Several factors influence the type
of returns that investors can expect from trading in the markets”.

1.DATA ANALYSIS OF MARUTI SUZUKI.

BETA ANALYSIS:
Beta Analysis

Beta value means the difference or deviation of the share price from the current market
scenario. The rankings are done according to the individual stock, deviation from the market
value, generally stock with more deviation have a beta value more than 1 and vice versa.

As the beta value of maruti stock price is 1.07 that means the deviation from the current
market is higher which eventually results in high risk but have a potential oh higher returns.
If the beta value would be less than one than the risk would be comparatively less risk but
also lower returns.

Covariance analysis.
Covariance is a measure of directional relationship between the return on two risky asset. A
positive co variance shows that both the assets returns move together in a same direction
whereas a negative covariance shows that both returns move inversely. Covariance
calculated by analysing return surprises( standard deviations from expected return) or by
multiplying the correlation between the two variables by the standard deviation of each
variable.

 Maruti Suzuki has a positive co variance i.e.7.70314e-06 which is less than 1 which
means that this stock and nifty would move in the similar direction but they won’t be
siginificant growth as such.
 CAPITAL STRUCTURE ANALYSIS OF MARUTI SUZUKI

1. DEBT EQUITY RATIO

“The debt to equity ratio is a financial ratio that compares company’s total debt to total
equity. It shows what percentage of company’s total financing has come from outer
resources like from creditors and investor. A higher debt to equity ratio indicates that there
is more creditor financing (bank loans) rather than investor financing (shareholder).

A very interesting fact about Maruti Suzuki that it doesn’t have any debt to equity ratio
since last five year except from a ratio of 0.01 in 2015 and the same ratio in 2017. This
indicates that Maruti Suzuki doesn’t have any creditor financing and all the financing need
have been covered from the shareholder. This is a good sign for a company of a capital
intensive automobile industry”.

2. INTEREST COVERAGE RATIO

“The interest coverage ratio is a financial ratio that tells u about the company’s ability to
make interest payments on its debts that is taken for a given period of time. It doesn’t have
any relation with the ability of a company to pay its principle payment on loan taken.
Instead it calculates firm’s ability to afford the interest on the debt”.

Generally ICR ranges 1.25 to 2 and if ICR falls in this window then its consider to be good
and satisfactory. higher the ICR ratio higher the chances of a company paying back interest
on its loan. ICR for Maruti Suzuki in the year 2015 was 24.63 which has now rose upto
139.07. higher interest coverage ratio Is a good sign for the investors as well as the company
itself.

3.DIVIDEND POLICY OF MARUTI SUZUKI

SHARE PRICE

“The price that is needed to be paid to buy a single share of ownership from the company’s
total pool of shares is determined by the demand and supply of the stock in the market”.

Year 2019 2018 2017 2016 2015

Share price 7138 4025 5945 3716.3 3644.7
 CLOSING SHARE PRICE
8000

7000

6000

5000
CLOSING SHARE PRICE
4000

3000

2000

1000

0
1 2 3 4 5

It can be seen that there is positive movement in the share prices of Maruti Suzuki and in
the last five year the prices has grown from Rs 3644 to Rs 6675 in 2019 which is 183.17%
growth and is increasing continuously which shows that the stock is doing great and there is
no fluctuation as such.

1. EARNING PER SHARE

“Earning per share means that part of company’s profit that is paid for each
outstanding share of the company its serves as an indicator of the company’s
financial health”.
The formulae for EPS :
EPS= NETPROFIT/ NUMBER OF SHARES OUTSTANDING

“High EPS indicates rise in company’s profit and decrease in the number of
outstanding share, when a company is in loss then the EPS also turn out to be
negative which indicates that the company has loss some money for each no of
share issued and then EPS is also called” net loss per share”. A negative EPS is a bad
signal for the investor”.

“In case of Maruti Suzuki the EPS is continuously increasing and it has increase from
1654.22(2015) to 2847.60(2019) which indicates the signal to the investors of the
company that it is generating profit with a growth every year and this can also be a
reason for the increase in the share price as well. But with the decline in automobile
industry the trade gurus are analyzing that there would be a sharp dip in the net
 profit of the company which can only be revived after the BS VI implementation by
the government next year”.

2. DIVIDEND PER SHARE

“The amount from the profit that the company declares to be distributed among the share
holder after utilizing the total profit for the company is termed as dividend and dividing the
total dividend declared with the total no of outstanding share would give us the value of
dividend per share. A company’s DPS often derived using the dividend paid in the most
recent quarter, which is also used to calculate the dividend yield”.

In Maruti Suzuki data the dividend per share is increasing from 25(2015) to 80(2019) which
indicates that the company has a lot of profit to spare and they are distributing the same
among its shareholder. The profit generation of the company is also increasing continuously
and not only revenue which indicates the expense are well in control.

3. DIVIDEND PAY OUT RATIO

“The percentage of the total net income generated by the company to the dividends
paid to the shareholder is dividend payout ratio. The amount that is not paid to the
shareholder is retained by the company for reinvestment purposes or to pay for
previous debt when the company is not earning anything and is generating losses
but still manages to pay dividend to the shareholder. it has a negative payout ratio is
generally a very bad sign of the company which means company either took a loan
or used its saving to pay the dividend.
In dividend payout ratio chart of Maruti Suzuki there are many fluctuations. It has
been decreasing from 20.33(2015) to 14.38(2017) and it increased in 2018 and 2019
it means that eventually the company is generating extra earning and its distributing
its benefits to the shareholders but as we all know the current scenario of
automobile industry there are chances of decreasing in the payout ratio”.