CAPITAL STRUCTURE ANALYSIS MAHINDRA AND MAHINDRA LTD

PRESENTED BY RAHUL RAJ

FISAT BUSINESS SCHOOLANGAMALY, KERALA(Copy Right protected by Rahul.raj1988)

CONTENTS1. About M & M Ltd2. Financial Highlights3. Form Of Debts Used4. Percentage Of Debt5. Capital structure analysis6. Findings of Analysis

Mahindra embarked on its journey in 1945 by

assembling the Willys Jeep in India and is now a US $6.3 billion

Indian multinational. It enjoys a leadership position in utility

vehicles, tractors and information technology, with a significant

and growing presence in financial services, tourism,

infrastructure development, trade and logistics. The Mahindra

Group today is an embodiment of global excellence and enjoys a

strong corporate brand image.

ABOUT MAHINDRA AND MAHINDRA

Financial Highlights

BALANCE SHEET P & L

NUMBER OF EQUITY SHARES(face value Rs 10)

272615960

TOTAL CAPITAL 9314.84

TOTAL DEBT 2976.21(crs)

INTEREST ON DEBT 134.20(Crs)

EBIT 1071(Crs)

NET PROFIT 867.51(Crs)

Form of Debts Used

BALANCE SHEET P & L

DEBTS 2009 2008

DEBENTURES/BONDS 600.01

205.51

SHORT TERM LOANS 80.00 106.14

OTHER LOANS FROM F.I 634.68 521.13

ZERO COUPON CONVERTIBLE BOND 961.52 802.60

9.25% FULLY AND COMPULSORY CONVERTIBLE DEBENTURES

700.00 -

Percentage of debt on total capital

BALANCE SHEET P & L

YEAR TOTAL CAPITAL TOTAL DEBT CALCULATION PERCENTAGE DEBT

2009 9314.84 4052.76 4052.76 *100 9314.84

43.50%

2008 6993.85 2587.06 2587.06 * 100

6993.85

31.8%

EPS home

Debt equity ratio = 2976.21 / 5262.08 = .56 home

• Long term source provide more than 60% of total debt

Long term debt = 2976.21 Total debt = 4052.26

Cost of equity , Ke (earnings price approach) EPS/MPS = 31.8/1018*100= 3.12%

Cost of Debt ,Kd = I*(1-t)/net proceeds = 134*.65/ 4052.26 = .2.9% home

BALANCE SHEET P & L

WACC = Cost Of Equtity * Weighted Average Equity + Cost Of Debt * Weighted Average Debt

WEIGHTED AVERAGE DEBT = Total Debt/ Total Fund Raised = 4052.76/ 9314.84 = 43.5%

WEIGHTED AVERAGE EQUITY = Total Equity / Total Fund Raised = 5262.08 / 9314.84 = 56.5%

WACC in 2009 = .0321* .435+ .56 * .02149

= 2.6% homeBALANCE SHEET P & L

Interest Coverage ratio = EBIT / Interest on debt 2009 2008 = 1071.5 / 134.12 =1258/87.59 = 7.65 = 14.5

ROI = PAT / NETWORTH 2009 2008 = 867.51/5262 * 100 = 1103/4350*100 = 16.5% = 25%

ROCE = PAT / Total Capital employed 2009 2008 = 867.57/ 9314.8 = 1103/6993.85 = 9.3% = 15.7% home

BALANCE SHEET P & L

CAPITAL STRUCTURE ANALYSIS OF M & M LTD2009 2008

COST OF EQUITY 3.12% 6.46%

COST OF DEBT 2.9% 3.3%

WACC 2.6% 5.33%

COVERAGE RATIO 7.65 14.3

DEBT RATIO 43.50% 37%

DEBT EQUITY RATIO .56 .60

ROCE 9.3% 15.7%

ROI 16.5% 25%

EPS 31.8 46.24

EBIT 1071.5 1258.3

VALUE OF FIRM 41192.30 Crs 23607.8 Crs

FINDINGS OF ANALYSIS

CLICK HERE

The Profit for the year before Depreciation, Interest,

Exceptional items and Taxation was Rs.1,362.97 crores as

against Rs.1,496.94 crores in the previous year, a declineof

8.95%. Profit after tax for the period 1 st February, 2008 to

31stMarch,2008 was Rs.867.51 crores as against Rs.1,103.37

crores in the previous year, a decline of 21.38%

• M & M was first company in India to issue convertible zero-interest bonds

• company raised Rs 961.52 crores in form of ZCB’S it will not pay any interest over its maturity period, and after convertion, equity dividend will be on paid –up capital .

• 9.25% Fully and compulsory Convertible debentures of Rs 700 crores

• Only 44 % of total debt have to be paid back other debts are converted in to equity.

FINDINGS OF ANALYSIS• WACC 09 < WACC 08 , So VALUE FIRM IS MORE IN 09

COMPARED TO 08• More debt in capital structure reduced WACC IN

09(DEBT RATIO 43% IN 2009)• EPS has decreased due to low return in 2009