FUNDAMENTAL ANALYSIS OF

INDIAN AUTOMOBILE INDUSTRY

Fundamental analysis
Fundamental analysis is an approach
to arrive at the correct price of the
security. Its objective is to identify
the underpriced and overpriced
securities in the market place

 There are broadly two main

approaches to fundamental analysis:
(1) TOP- DOWN APPROACH (E-I-C
approach)
Economy (E)-Industry(I)- Company(C)

(2) BOTTOM-UP APPROACH (C-I-E

approach)
Company(C) -Industry (I) - Economy (E)

Objectives
To analyse the performance of selected
companies of Indian automobile
industry.
To estimate the intrinsic value of the
stocks of the selected companies.
To assist the investors in making
investment decisions in automobile
industry.

Research Methodology
secondary data
Sources:
Reserve Bank of India website
society of Indian automobile
manufacturers (SIAM) website
BSE website
Company Annual Reports
planning commission of India

cont
Selected companies for study
Tata Motors
Maruti Suzuki
Hero MotoCrop

Selection Criteria:
market leaders of 3 segments
Maruti Suzuki -Passenger Vehicles- 42%
Tata Motors - Commercial vehicles- 50%
Hero MotoCrop - Two Wheelers 41%

Data Analysis
1. Economy Analysis
I. Gross Domestic Product
II. Inflation
III. Foreign Direct Investments

 Findings of Economy Analysis

inflation rate have declined considerably. This
shows a favourable situation in Indian
economy. In Indian economy GDP has
continuously increased. A huge flow of FDI is
also available in India during this period. This
shows the possibility of significant growth of
Indian economy in future.

2. INDUSTRY ANALYSIS
I.
II.
III.
IV.
V.

Development of Automobile Industry

Segmentation of Industry
Key players in the Industry
Automobile Production Trend
Automobile Export Trend
VI. Automobile Domestic Sale Trend
VII.Life Cycle of Indian automobile industry
VIII.Porters five forces analysis of Automobile Industry
IX. SWOT Analysis of Automobile Industry of India
X. BCG Matrix of Indian industry
XI. FDI in automobile sector of India
XII.Key Statistics of Automobile Industry of India

Findings of Industry
Analysis

automobile industry is one of the growing industries of

India which has a high growth potential. Automobile
industry has also attracted a huge FDI, and hence easy
finance is available. In India there is a huge potential
demand for the car market. Taxation structure also
provides the good opportunity for export or domestic
sales. Increase in infrastructure facility also creates
favourable opportunity for automobile industry in India.

3. Company Analysis
I. Analysis of Earning and Dividend
Level

Return on Equity
Book Value per Share
Earnings Per Share (EPS)
Dividend Per Share (DPS)
Dividend Payout Ratio
Debt Equity Ratio

3. Company Analysis
II. Growth Performance
Compound Annual Growth Rate
Sustainable Growth Rate

III. Risk Exposure

Beta
Volatility

. Estimation of Intrinsic Value

compared their performance using various
ratios for the period under consideration.

COMPARISON OF MARUTI SUZUKI , TATA

MOTORS & HERO MOTOCORP
PARTICULARS

MARUTI
SUZUKI

TATA
MOTORS

HERO
MOTOCORP

return on equity

13.86

30.77

37.40

Book value of
share

621.21

141.27

281.57

Earning per share

94.44

43.47

105.30

Dividend per
share

12

65

Debt- equity ratio

0.08

0.07

0.06

CAGR of sales

10.71

26.17

12.54

CAGR of EPS

0.98

-0.89

-1.48

CAGR of DPS

18.92

-39.57

-12.32

Sustainable
growth rate

13.73%

34.16%

14.47

Beta

0.88

1.06

0.71

Volatility

0.71

0.41

0.52

Estimated

2511.53

399.40

512.27

Value Range Estimation and Decision

Rules for the Investors
Market Price

Maruti Suzuki

Tata Motors

Hero
MotoCrop

Decision

Buy

Hold

Sell

Less then Rs.

2500

400

500

Between Rs.

2500-2600

400-450

500-550

More then Rs

2600

450

550

Conclusions & Suggestions

From the analysis of Indian economy, we have found that
Indian economy is one of the growing economies of the
World.
On the basis of SWOT analysis, we conclude that Indian
automobile industry has cost advantages because in India
due to unemployment cheap labour is available
On the basis of the analysis of BCG matrix, we conclude
that automobile sector has high market growth rate and is
highly competitive indicating that this sector is in the Star
category.
On the basis of analysis of life cycle, we conclude that
automobile industry is at the growth stage and high
potential is available for growth in future.

cont
Because of increase in infrastructural facilities in India,
automobile industry has an opportunity to grow.
growth rate of sales of automobile company is high at
Tata Motors as Compare to Maruti Suzuki and Hero
MotoCrop, and sustainable growth rate of Tata is also
more which is 34.16%.
Maruti Suzukis earning per share is highest between 3.
Compared to Tata Motors and Maruti Suzuki, risk is less
in Hero Motocrop.
The results of fundamental analysis clearly indicate Hero
MotoCrop to be fundamentally stronger than Tata Motors
and Maruti Suzuki and hence it is seems to be more
profitable for the investors to invest in Hero MotoCrop in
order to earn higher returns in the long run.

Limitations
This analysis is fully based on secondary data and hence the
accuracy of data is a major concern. Only three companies are
selected for analysis because of time constraints.
Since the annual reports for 2014-15 for the selected companies
were not available at the time of study, fundamental analysis is
done using the data available till March 2014.
Analysis helps the investor in making investment decisions but
not every investment is entirely dependent on the analysis
alone. Results of Technical Analysis as well as other qualitative
factors related to companys performance must also be
considered while making an investment decision.
A proper analysis helps in reducing the risks on investment in
the share market and helps in choosing less risky and highly
rewarding investment avenue