Financial Analysis

of Eicher Motors
FRA Group Assignment

Saurav Raj
Rashesh Madiraju
(EPGP2023-24, IIM, Indore)
Table of Contents
Foreword ............................................................................................................................................... 3
Acknowledgement ................................................................................................................................ 4
Chapter- 1 .............................................................................................................................................. 5
1.1 About Eicher Motors ............................................................................................................ 6
Chapter- 2 .............................................................................................................................................. 8
2.1 Common Size Income Statements .............................................................................................. 9
2.2 Balance Sheet of Eicher Motors ................................................................................................ 10
2.3 Common Size Balance sheet of Eicher Motors ..................................................................... 12
2.3.1 InterpretaDon: Common Size Balance Sheet ..................................................................... 14
2.4 Common Size Income Statement of Eicher Motors ...................................................................... 23
2.4.1 InterpretaDon: Common Size Income Statement .................................................................. 24
DuPont Analysis ................................................................................................................................... 29
3.1 DuPont Analysis of Eicher Motors Limited ............................................................................... 30
Chapter-04 ........................................................................................................................................... 32
Ra?o Analysis ....................................................................................................................................... 32
4.1 Liquidity Analysis of Eicher Motors: ......................................................................................... 33
4.1.1 Current RaDo: ..................................................................................................................... 34
4.1.2 Quick RaDo: ........................................................................................................................ 35
4.1.3 Super Quick RaDo: .............................................................................................................. 36
4.2 Solvency Analysis of Eicher Motors .......................................................................................... 37
4.2.1 Debt-Equity RaDo: .............................................................................................................. 38
4.2.2 Interest Coverage RaDo: ..................................................................................................... 39
4.2.3 Fixed Assets RaDo: ............................................................................................................. 40
4.3 Profitability PosiDon Analysis: .................................................................................................. 41
4.3.1 Sales Gross Margin ............................................................................................................. 42
4.3.2 Return on Equity (ROE) ...................................................................................................... 44
4.3.3 ROCE (Return on Capital employed) .................................................................................. 45
4.4 Market Efficiency Analysis......................................................................................................... 46
4.4.1 Fixed Asset Turnover RaDo: ............................................................................................... 47
4.4.2 Inventory Turnover:............................................................................................................ 48
4.4.3 Account Receivable Turnover: ........................................................................................... 49
4.4.4 Account Payable Turnover: ................................................................................................ 50
4.5 Economic Value Added: ................................................................................................................ 50
4.6 Market Value Added: ................................................................................................................ 53

pg. 1
4.6 Debt investor perspecDve analysis (Leverage RaDos) .................................................................. 55
4.7 Equity Investor PerspecDve Analysis ........................................................................................ 57
5.0 Comments as CEO/CFO of the company....................................................................................... 61
Peer Comparison ................................................................................................................................. 62
References: .......................................................................................................................................... 63

pg. 2
Foreword

The Assignment “Financial Analysis of Eicher Motors ” has been submitted in fulfilment of
the course “Financial Reporting and Analysis”, Term – I, EPGP IIM – INDORE, by the
following participants:

Name Roll Number

Saurav Raj 2023EPGP030

Radhesh Madiraju 2023EPGP024

pg. 3
Acknowledgement

Dear Professor Vijay Gupta sir,

We wish to take a moment to express our gra;tude for the assignment you gave us on
Financial Reporting and Analysis. It was a thought-provoking and valuable exercise
that allowed us to apply the concepts and ideas we learned in your lectures. Your
assignments consistently challenge and push us to expand our understanding of the
subject. Thank you for your guidance and dedication to our learning.
Regards,
Saurav Raj
Radhesh Madiraju

pg. 4
 Chapter- 1

Introduc*on on Eicher
Motors

pg. 5
1.1 About Eicher Motors

Eicher motors limited is a mul;na;onal automo;ve company which was founded in 1948.
Eicher motors is headquartered in Gurgaon, Haryana, India. Eicher Motors Limited (EML) is
globally acclaimed for consistently raising the bar in fusing world-class engineering with
simplicity of design to produce category defining motorcycles and commercial vehicles.
Through the course of an unpredictable 2021-22, the Company con;nued to maintain razor-
sharp focus on its long-term goals and strategic business objec;ves, as it unveiled several new
products, while keeping its sight firmly fixed on crea;ng value for all its stakeholders.
The world’s oldest motorcycle brand in con;nuous produc;on, Royal Enfield has made
dis;nc;ve motorcycles since 1901. Royal Enfield has pioneered the mid-size motorcycle
market in India, and since EML took over the company in the mid-1990s, Royal Enfield has
manufactured and grown the market for upgraders with a focused range of modern classic
motorcycles across its wide premium distribu;on network globally. Over the years, Royal
Enfield has registered meteoric growth and is a global leader in the mid-size motorcycle
segment with presence in over 60 countries across the world. With modern design and
technical centres in the UK and India, Royal Enfield designs its motorcycles in the UK and rolls
them out of its two, ultra-modern manufacturing facili;es in India, supported by adjunct
facili;es and a global supplier base. Eicher brand of trucks and buses came to life in 1985 as a
challenger to a duopoly in the Indian market. Eicher made huge progress in the Indian CV
market which was further bolstered when Volvo came in as an equity partner in 2008. VE
Commercial Vehicles Limited (VECV) is a joint venture between EML and Sweden’s AB Volvo.
It is majority-owned by EML and equally managed by both partners. With access to global
technology and processes, VECV is now at the forefront of driving modernisa;on in the CV
market in India and other developing countries. The Eicher brand is now the second largest in
the light and medium duty CV market, and is third and gaining in the HD market.

A Few Highlights about Eicher Motors Ltd:

• Eicher motors has more than 2100 retail outlets in India.

• 3 State of the art modern manufacturing facili;es.
• Completely Knocked Down(CKD) assembly lines in Argen;na, Colombia and Thailand.
• 2 technical canters in the UK and in India.
• 840+ retail across 60+ countries.

pg. 6
Financial Performance
Eicher Motors Ltd. has shown significant growth from its incep;on. The consistent strong
performance in the financial results and a significant market capitaliza;on has made Eicher
motors limited a leading automo;ve company across the globe.

Key highlights about the Market share:

• 29.3% market share in India’s light and medium duty CV segment.

• 57,077 commercial vehicles sold in FY 21-22.
• 5,95,474 motorcycles sold in FY 21-22.
• 90% of the market share in India's mid size motorcycle segment.

Key highlights based on financial statements:

• ₹21,172 crores EBITDA in the financial year 2022, up by 22%.

• ₹1677 crores profit ager tax in the financial year 2022, up by 24.5%.
• Net revenue from opera;ons rose from ₹8720 crores FY’ 21 to 10,298 crores FY’ 22.
• Royal Enfield announced ₹20 crores for India's fight against COVID-19.
• Opera;ng margins before share of profit of joint ventures for FY’ 22 is 16.7% compared
to FY’ 21 15.3%.
• Revenue from opera;ons for FY’22 is 10,298 crores.
• Dividends of Eicher motors con;nues to remain promising to its shareholders.
• Other Income declined by 2.7% YoY.
• Net profit margins during the year grew from 15.1% in FY’ 21 to 15.7% in FY’ 22.
• Total assets grew from 12,624 crores to 14,284 crores (YoY).
• Decline in the current Ra;o YoY-3.6(’21) to 1.9(’22)

pg. 7
 Chapter- 2

Common Size
Financial Statements

pg. 8
2.1 Common Size Income Statements

A common size financial statement displays items as a percentage of a common base figure,
total sales revenue, for example. This type of financial statements allows for easy analysis
between companies, or between periods, for the same company.

• A common size financial statement displays entries as a percentage of a common base

figure rather than as absolute numerical figures.

• Common size statements let analysts compare companies of different sizes, in different
industries, or across ;me in an apples-to-apples way.

• Common size financial statements commonly include the income statement, balance
sheet, and cash flow statement.

Common size financial statements reduce all figures to a comparable figure, such as a
percentage of sales or assets. Each financial statement uses a slightly different conven;on in
standardizing figures.

pg. 9
2.2 Balance Sheet of Eicher Motors

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Shareholder's
Funds

Share Capital 27.34 27.33 27.3 27.28 27.26 27.21 27.16 27.1 27.04 27

Ordinary Capital 27.34 27.33 27.3 27.28 27.26 27.21 27.16 27.1 27.04 27
Ordinary A /
DVR Capital 0 0 0 0 0 0 0 0 0 0
Preference
Capital - I 0 0 0 0 0 0 0 0 0 0
Preference
Capital - II 0 0 0 0 0 0 0 0 0 0
Preference
Capital - III 0 0 0 0 0 0 0 0 0 0
Unclassified
Capital 0 0 0 0 0 0 0 0 0 0
Reserves and
Surplus 10,767.23 9,677.67 8,248.04 7,099.17 5,344.97 3,895.38 2,309.25 1,206.56 794.30 602.05
Money received
against Share
Warrants 0 0 0 0 0 0 0 0 0 0
Other
Equity/Employee
Stock Option 0 0 0 0 0 0 0 0 0 0
Total
Shareholder's
Fund 10,794.57 9,705.00 8,275.34 7,126.45 5,372.23 3,922.59 2,336.41 1,233.66 821.34 629.05
Share
Application
Money pending
Allotment 0 0 0 0 0 0 0 0 0 0
Non-Current
Liabilities
Long-Term
Borrowings 0 0 0 0 0 0 0 0 0 0
Deferred Tax
Liabilities (Net) 222.86 221.13 252.04 276.49 142.97 79.22 40.82 20.07 12.63 6.26
Deferred Tax
Liability 277.98 249.49 271.46 297.31 163.33 90.77 50.49 26.82 18.53 10.94
Deferred Tax
Assets 55.12 28.36 19.42 20.82 20.36 11.55 9.67 6.75 5.9 4.68
Other Long Term
Liabilities 315.11 201.54 99.07 73.23 55.72 30.36 15.42 4.52 3.78 3.23
Long-Term
Provisions 38.5 22.56 21.2 23 29.12 26.13 29.67 13.82 10.48 9.26
Total Non
Current
Liabilities 611.11 491.2 448.54 372.72 227.81 135.71 85.91 38.41 26.89 18.75
Current
Liabilities
Short-Term
Borrowings 5.98 0 0 76.38 85.98 67.44 22.57 0.00 4 4

Trade Payables 1,764.46 1,494.79 1,000.93 1,231.10 1,170.47 764.49 721.3 490.24 321.42 177.5
Other Current
Liabilities 714.36 699.08 666.03 471.64 782.96 569.78 431.25 296.56 211.49 132.82
Short-Term
Provisions 381.73 220.61 163.74 199.12 155.22 80.25 26.47 170.02 98.04 62.12

pg. 10
Total Current
Liabilities 2,878.87 2,428.71 1,855.13 1,978.24 2,194.63 1,481.96 1,201.59 956.82 634.95 376.44
Other Equity &
Liabilities 0 0 0 0 0 0 0 0 0 0
TOTAL EQUITY
AND LIABILITIES 14,284.55 12,624.91 10,579.01 9,477.41 7,794.67 5,540.26 3,623.91 2,228.89 1,483.18 1,024.24

ASSETS
Non-Current
Assets

Fixed Assets 2,904.81 2,733.52 2,677.76 2,317.04 1,826.63 1,239.61 882.98 559.92 313.17 198.03

Tangible Assets 1,891.49 1,888.30 1,996.60 1,688.32 1,454.76 832.43 759.46 488.65 287.97 133.83
Intangible
Assets 327.34 338.89 184.83 178.98 38.66 33.41 29.04 11.93 11.28 3.87
Capital Work-in-
Progress 133.38 59.78 26.75 272.14 141.89 265.01 33.31 42.67 8.47 59.37
Intangible assets
under
development 370.8 250.38 285.42 177.6 191.32 108.76 61.17 16.67 5.45 0.96
Non-Current
Investments 5,525.26 968.71 1,416.24 2,581.23 3,236.45 2,662.33 1,490.71 271.49 30.94 10.94
Deferred Tax
Assets (net) 0 0 0 0 0 0 0 0 0 0
Deferred Tax
Assets 55.12 28.36 19.42 20.82 20.36 11.55 9.67 6.75 5.9 4.68
Deferred Tax
Liability 277.98 249.49 271.46 297.31 163.33 90.77 50.49 26.82 18.53 10.94
Long-Term
Loans and
Advances 271.57 150.1 148.41 105.1 117.03 187.41 66.09 139 82.72 61.3
Other Non-
Current Assets 85.11 27.39 0 89.61 90.14 90.55 134.69 29.83 7.09 6.18
Total Non
Current Assets 8,786.75 3,879.72 4,242.41 5,092.98 5,270.25 4,179.90 2,574.47 1,000.24 433.92 276.45

Current Assets
Current
Investments 424.70 1,076.08 2,512.50 468.81 633.40 883.61 582.9 917.09 825.41 638.45

Inventories 898.37 769.13 518.05 605.34 379.23 322.45 300.36 205.13 143.84 75.41
Trade
Receivables 492.87 256.18 133.97 106.61 78.02 48.94 46.13 10.70 12.13 6.20
Cash and Cash
Equivalents 2,698.56 5,798.91 2,926.38 2,940.07 1,208.82 20.61 44.52 20.89 18.71 3.5
Short-Term
Loans and
Advances 868.53 607.49 124.55 164.1 172.79 60.19 67.19 73.91 48.74 23.94
Other Current
Assets 114.77 237.4 121.15 99.5 52.16 24.56 8.34 0.93 0.43 0.29
Total Current
Assets 5,497.80 8,745.19 6,336.60 4,384.43 2,524.42 1,360.36 1,049.44 1,228.65 1,049.26 747.79

Other Assets 0 0 0 0 0 0 0 0 0 0

TOTAL ASSETS 14,284.55 12,624.91 10,579.01 9,477.41 7,794.67 5,540.26 3,623.91 2,228.89 1,483.18 1,024.24
CAPITAL
EMPLOYED 11,405.68 10,196.20 8,723.88 7,499.17 5,600.04 4,058.30 2,422.32 1,272.07 848.23 647.80

Working Capital 2,618.93 6,316.48 4,481.47 2,406.19 329.79 -121.60 -152.15 271.83 414.31 371.35

pg. 11
2.3 Common Size Balance sheet of Eicher Motors

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Shareholder's Funds

Share Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64

Ordinary Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64

Ordinary A / DVR Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Preference Capital - I 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Preference Capital - II 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Preference Capital - III 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Unclassified Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Reserves and Surplus 75.38 76.66 77.97 74.91 68.57 70.31 63.72 54.13 53.55 58.78
Money received against
Share Warrants 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Equity/Employee
Stock Option 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Shareholder's Fund 75.57 76.87 78.22 75.19 68.92 70.80 64.47 55.35 55.38 61.42
Share Application Money
pending Allotment

Non-Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Deferred Tax Liabilities (Net) 1.56 1.75 2.38 2.92 1.83 1.43 1.13 0.90 0.85 0.61

Deferred Tax Liability 1.95 1.98 2.57 3.14 2.10 1.64 1.39 1.20 1.25 1.07

Deferred Tax Assets 0.39 0.22 0.18 0.22 0.26 0.21 0.27 0.30 0.40 0.46

Other Long Term Liabilities 2.21 1.60 0.94 0.77 0.71 0.55 0.43 0.20 0.25 0.32

Long-Term Provisions 0.27 0.18 0.20 0.24 0.37 0.47 0.82 0.62 0.71 0.90

Total Non Current Liabilities 4.28 3.89 4.24 3.93 2.92 2.45 2.37 1.72 1.81 1.83

Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Short-Term Borrowings 0.04 0.00 0.00 0.81 1.10 1.22 0.62 0.00 0.27 0.39

Trade Payables 12.35 11.84 9.46 12.99 15.02 13.80 19.90 21.99 21.67 17.33

Other Current Liabilities 5.00 5.54 6.30 4.98 10.04 10.28 11.90 13.31 14.26 12.97

Short-Term Provisions 2.67 1.75 1.55 2.10 1.99 1.45 0.73 7.63 6.61 6.06

Total Current Liabilities 20.15 19.24 17.54 20.87 28.16 26.75 33.16 42.93 42.81 36.75

Other Equity & Liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL EQUITY AND
LIABILITIES 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

ASSETS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Non-Current Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Assets 20.34 21.65 25.31 24.45 23.43 22.37 24.37 25.12 21.11 19.33

Tangible Assets 13.24 14.96 18.87 17.81 18.66 15.03 20.96 21.92 19.42 13.07

Intangible Assets 2.29 2.68 1.75 1.89 0.50 0.60 0.80 0.54 0.76 0.38

Capital Work-in-Progress 0.93 0.47 0.25 2.87 1.82 4.78 0.92 1.91 0.57 5.80
Intangible assets under
development 2.60 1.98 2.70 1.87 2.45 1.96 1.69 0.75 0.37 0.09

pg. 12
 Non-Current Investments 38.68 7.67 13.39 27.24 41.52 48.05 41.14 12.18 2.09 1.07

Deferred Tax Assets (net) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Deferred Tax Assets 0.39 0.22 0.18 0.22 0.26 0.21 0.27 0.30 0.40 0.46

Deferred Tax Liability 1.95 1.98 2.57 3.14 2.10 1.64 1.39 1.20 1.25 1.07
Long-Term Loans and
Advances 1.90 1.19 1.40 1.11 1.50 3.38 1.82 6.24 5.58 5.98

Other Non-Current Assets 0.60 0.22 0.00 0.95 1.16 1.63 3.72 1.34 0.48 0.60

Total Non Current Assets 61.51 30.73 40.10 53.74 67.61 75.45 71.04 44.88 29.26 26.99

Current Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Current Investments 2.97 8.52 23.75 4.95 8.13 15.95 16.08 41.15 55.65 62.33

Inventories 6.29 6.09 4.90 6.39 4.87 5.82 8.29 9.20 9.70 7.36

Trade Receivables 3.45 2.03 1.27 1.12 1.00 0.88 1.27 0.48 0.82 0.61

Cash and Cash Equivalents 18.89 45.93 27.66 31.02 15.51 0.37 1.23 0.94 1.26 0.34
Short-Term Loans and
Advances 6.08 4.81 1.18 1.73 2.22 1.09 1.85 3.32 3.29 2.34

Other Current Assets 0.80 1.88 1.15 1.05 0.67 0.44 0.23 0.04 0.03 0.03

Total Current Assets 38.49 69.27 59.90 46.26 32.39 24.55 28.96 55.12 70.74 73.01

Other Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL ASSETS 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

CAPITAL EMPLOYED 79.85 80.76 82.46 79.13 71.84 73.25 66.84 57.07 57.19 63.25

Working Capital 18.33 50.03 42.36 25.39 4.23 -2.19 -4.20 12.20 27.93 36.26

pg. 13
2.3.1 Interpreta;on: Common Size Balance Sheet

• Share Capital:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Share Capital 0.19 0.22 0.26 0.29 0.35 0.49 0.75 1.22 1.82 2.64

InterpretaCon:

• For the analysis of Share Capital, we have taken total liabili;es as 100%.
• The Share capital of EML has remained constant over the last 10 years. If we see the
above graph, the por;on of share capital again the total liabili;es has been decreasing
over the last 10 years. Over the last 4 years, the share capital is hovering in the range
of 0.19% to 0.35%.

pg. 14
Reserve and Surplus:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Reserves and Surplus 75.38 76.66 77.97 74.91 68.57 70.31 63.72 54.13 53.55 58.78

InterpretaCon:

• Reserves and surplus are all the cumula;ve amounts of retained earnings recorded as
a part of the Shareholder's Equity.
• Reserves are the funds earmarked for a definite reason or purpose that the business
plans to use in the future and surplus is the profit of a business.
• In the last 10 years, there has been a slight increase in the reserve and surplus funds
as a po;on of total liabili;es of the company. But, it has remained stable and has been
hovering in the range of 68% to 76% against its total liabili;es.

pg. 15
 • Total Non- Current LiabiliCes:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Total Non Current
Liabilities 4.28 3.89 4.24 3.93 2.92 2.45 2.37 1.72 1.81 1.83

Interpretation:

• A non-current liability refers to the financial obligations of a company that are not
expected to be settled within one year. Examples of non-current liabilities include
long-term leases, bonds payable, and deferred tax liabilities.
• The absolute non-current liabilities of the company is increasing year on year. If we
see it in the terms of percentage of total liabilities, a positive trend can be observed,
i.e., the non-current liabilities are on a rise as a proportion of total liabilities YoY.
• While non-current liabilities should not be looked in isolation, it forms a very small
portion of the total liabilities of EML.

pg. 16
 • Total Current Liabilities:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Total Current Liabilities 20.15 19.24 17.54 20.87 28.16 26.75 33.16 42.93 42.81 36.75

InterpretaCon:

• Current liabili;es are a company's short-term financial obliga;ons that are due within
one year or within a normal opera;ng cycle.
• The current liabili;es of the liabili;es of EML have decreased significantly over the last
10 years from 36% to a mere 20% (as a por;on of total liabili;es).
• The decrease in current liabili;es points towards efforts of the EML of being virtually
debt-free.

pg. 17
 • Total LiabiliCes:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
TOTAL
EQUITY AND
LIABILITIES 14,284.55 12,624.91 10,579.01 9,477.41 7,794.67 5,540.26 3,623.91 2,228.89 1,483.18 1,024.24

InterpretaCon:

• Total liabili;es are the aggregate debt and financial obliga;ons owed by a business to
individuals and organiza;ons at any specific period of ;me.
• The total liabili;es of EML have been increasing almost linearly for the last 10 years (a
14X increase can be seen).
• We can’t judge the health of a company by seeing liabili;es in isola;on. It must be
compared with other parameters such as profit and equity to predict the true health
of the company.

pg. 18
 • Fixed Assets:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Fixed Assets 20.34 21.65 25.31 24.45 23.43 22.37 24.37 25.12 21.11 19.33

InterpretaCon:

• Fixed asset refers to a long-term tangible piece of property or equipment that a firm
owns and uses in its opera;ons to generate income.
• Over the past 10 years, the fixed assets of EML have remained constant as a propor;on
of total assets.
• If we see in absolute terms, there has been a 15X increase in the value of fixed assets,
which indicates towards good health of the company.

pg. 19
Capital Work-in-Progress:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Capital Work-in-
Progress 0.93 0.47 0.25 2.87 1.82 4.78 0.92 1.91 0.57 5.80

InterpretaCon:

• Capital Works-in-Progress (CWIP) is the expenditure on fixed assets that are in the
process of construc;on or comple;on i.e. not ready for intended use at the ;me of
incurring of expenditure.
• It includes building under construc;on, machinery under assembly etc., at the ;me of
prepara;on of balance sheet.
• The total propor;on of Capital work-in-progress has been low for EML (the last one
being less than 1% of the total assets in FY2022) which indicated there is a lille spill-
over of building assets and works are being completed during the current financial
year only.

pg. 20
Total Non-Current Assets:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Total Non Current Assets 61.51 30.73 40.10 53.74 67.61 75.45 71.04 44.88 29.26 26.99

InterpretaCon:

• Non-current assets are assets and property owned by a business that are not easily
converted to cash within a year.
• Non-current assets seem to follow a cyclic order in EML. Their propor;on rose from
2012 ;ll 2017 and then halved between 2017 to 2021. It again rose significantly in
2022 (almost doubled).
• The rise in non-current assets point towards a posi;ve health of the company, though
we would need other parameters also to gauge the effec;veness of non-current asset
numbers.

pg. 21
Total Current Assets:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Total Current Assets 38.49 69.27 59.90 46.26 32.39 24.55 28.96 55.12 70.74 73.01

InterpretaCon:

• Current asset is a short-term asset that a company expects to use up, convert into cash,
or sell within one fiscal year or opera;ng cycle.
• The graph of Current assets, more or less is a mirror image non-current assets. It also
follow a cyclic order, their propor;on fell from 2012 ;ll 2017 and then more than
doubled between 2017 to 2021. It again fell significantly in 2022 (almost halved).
• Current assets consists a considerable propor;on of the total assets of EML. This
signifies that a significant por;on of their assets are being are used in the current
opera;ng cycle which is good for the company.

pg. 22
2.4 Common Size Income Statement of Eicher Motors

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

REVENUE
Revenue From
Operations(Gross) 100.0 100.0 100.0 100.0 102.8 112.9 112.9 109.5 112.6 112.4

Less: Excise Duty 0.0 0.0 0.0 0.0 2.8 12.9 12.9 9.5 12.6 12.4
Revenue From
Operations(Net) 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Other Income 4.5 5.2 6.8 5.2 3.7 3.2 4.6 3.8 4.7 4.4

Total Revenue 104.5 105.2 106.8 105.2 103.7 103.2 104.6 103.8 104.7 104.4

EXPENSES:

Cost of Materials Consumed 56.9 58.6 51.3 51.6 50.4 51.4 55.3 60.0 63.4 66.5
Internally Manufactured
Intermediates or
Components Consumed 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Purchases of Stock-in-Trade 2.2 2.4 2.4 2.1 1.7 1.5 1.2 1.0 0.7 0.0
Changes in Inventories of
Finished Goods, Work-in-
Progress and Stock-in-Trade -0.2 -1.8 1.2 -2.0 -0.4 -0.2 -0.9 -1.4 -1.9 -2.0

Employee Benefits Expenses 7.7 9.3 8.4 6.9 6.1 5.8 5.5 5.3 6.5 7.5

Finance Costs /Interest 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.0
Depreciation and
Amortization Expenses 4.4 5.2 4.2 3.1 2.5 2.2 2.2 1.7 1.8 1.6

Other Expenses 12.6 10.7 12.4 11.3 10.2 10.2 11.2 10.9 12.8 14.2

Total Expenses 83.6 84.6 80.0 73.0 70.7 70.9 74.6 77.5 83.4 87.8

EBIDT 25.4 26.0 31.1 35.2 35.6 34.6 32.2 28.0 23.1 18.2

EBIT 21.0 20.8 26.9 32.2 33.1 32.4 30.0 26.4 21.3 16.6

EBT 20.9 20.7 26.8 32.2 33.0 32.4 30.0 26.3 21.3 16.6

Profit before Exceptional and

Extraordinary Items and Tax 20.9 20.7 26.8 32.2 33.0 32.4 30.0 26.3 21.3 16.6

Exceptional Items 0.0 0.0 0.0 -0.2 -3.5 0.0 0.0 0.0 0.0 0.0
Profit before Extraordinary
Items and Tax 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6

Extraordinary Items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profit before Tax 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6

Tax Expenses 5.2 5.3 5.8 11.0 10.4 10.2 8.8 7.9 5.0 2.8

Current Tax 5.1 5.7 6.0 9.6 9.8 9.6 8.5 7.6 4.6 2.8

Deferred Tax 0.0 -0.5 -0.2 1.4 0.6 0.5 0.3 0.2 0.4 0.2

Other Tax Adjustments 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2

Prior Year Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Minimum Alternate Tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2

Others 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profit/(Loss) for the period

from Continuing Operations 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8
Profit/(Loss) from
Discontinuing Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

pg. 23
 Tax expense of Discontinuing
Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Profit/(Loss) from
Discontinuing Operations
(After Tax) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profit/(Loss) for the period 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8

Basic EPS 0.6 0.6 0.8 7.7 7.0 8.2 7.8 6.8 6.1 5.1

Diluted EPS 0.6 0.6 0.8 7.7 7.0 8.1 7.8 6.8 6.0 5.1

Book Value 3.9 4.1 33.4 26.7 22.0 20.5 13.9 15.0 17.8 22.2
Contingent Liabilities &
Commitments 7.7 8.4 4.3 3.2 5.1 7.0 2.2 2.3 8.0 10.7

2.4.1 Interpreta7on: Common Size Income Statement

Total Revenue:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Total
Revenue 10,577.14 9,071.07 9,692.81 10,302.52 9,289.94 7,265.28 6,469.68 3,147.52 1,782.57 1,095.04

Interpretation:

• The total revenue generated by EML has been constantly increasing over the last 10
years.
• It saw a 10.5X growth in revenue during the last 10 years.
• The constant growth in revenue can’t be used to interpret financial health of the
company. We need to account expenses and other parameters to come to the
conclusion.

pg. 24
Depreciation and Amortisation Expenses:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Depreciation and
Amortization Expenses 4.4 5.2 4.2 3.1 2.5 2.2 2.2 1.7 1.8 1.6

InterpretaCon:

• Deprecia;on and amor;za;on forms an important part of the Profit and loss
statement.
• The deprecia;on and amor;za;on expenses as a propor;on of Net revenue is
increasing YoY.
• During the last 10 years, this expense has more than doubled which makes sense. The
accumulated deprecia;on will keep on increasing with each passing year.

pg. 25
EBIDT (Earnings before Interest, DepreciaCon and Tax):

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBIDT 25.4 26.0 31.1 35.2 35.6 34.6 32.2 28.0 23.1 18.2

InterpretaCon:

• During the last 10 years, EBIDT of EML saw a constant rise from 2012 ;ll 2019. It started
dipping from 2019.
• The EBIDT of EML has seen a negligible change during the last 2 years.

pg. 26
EBT (Earnings before Tax)/ PBT (Profit before Tax):

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Profit before Tax/
EBT 20.9 20.7 26.8 32.0 29.6 32.4 30.0 26.3 21.3 16.6

InterpretaCon:

• EBT/PBT shows a similar palern as EBIDT.

• During the last 10 years, EBT of EML saw a constant rise from 2012 ;ll 2019. It started
dipping from 2019.
• The EBT of EML has seen a negligible change during the last 2 years.

pg. 27
Profit/ Loss for the period:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
Proft/
(Loss)
for the
period 15.7 15.4 21.0 21.0 19.1 22.2 21.2 18.4 16.4 13.8

InterpretaCon:

• EML has remained profitable for the last 10 years.

• The consistent profitability of EML shows very highly of its financial health.
• The profitability palern of EML follows closely EBIDT and EBT.
• During the last 10 years, PAT of EML saw a constant rise from 2012 ;ll 2019 (with a
single dip in 2018). It started dipping from 2020
• The PAT of EML has seen a negligible change during the last 2 years.

pg. 28
 Chapter- 03

DuPont Analysis

pg. 29
3.1 DuPont Analysis of Eicher Motors Limited

DuPont Analysis
• DuPont analysis is a framework for analysing fundamental performance originally
popularized by the DuPont Corpora;on, now widely used to compare the opera;onal
efficiency of two similar firms.
• DuPont analysis is a useful technique used to decompose the different drivers of return on
equity (ROE).

• The final Ra*o obtained at the end of DuPont analysis is called ROE
(Return on Equity).
• The DuPont analysis dissects the various factors that drive Return on
Equity (ROE). The DuPont analysis may be used to compare two similar
firms' opera*onal efficiency, as well as define a company's strengths or
weaknesses.
DuPont Model: Eicher Motors
Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212
PBIDT/Sales(%) 25.37 25.97 31.06 35.07 31.2 30.63 28.52 25.6 20.54 16.21
Sales/Net
Assets 0.9 0.86 1.07 1.34 1.66 1.96 2.91 2.65 2.28 1.83
PBDIT/Net
Assets 0.23 0.22 0.33 0.47 0.52 0.6 0.83 0.68 0.47 0.3
PAT/PBIDT(%) 61.77 59.4 67.53 59.81 59.61 64.12 65.73 65.77 70.75 75.71
Net Assets/Net
Worth 1.04 1.03 1.03 1.02 1.03 1.03 1.03 1.01 1.02 1.03
PAT/SALES 0.16 0.15 0.21 0.21 0.19 0.22 0.21 0.18 0.16 0.14
ROE(%) 14.67 13.67 23.11 28.67 32.70 44.75 63.43 49.35 38.06 26.00

pg. 30
ROE Analysis for EML

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

ROE(%) 14.67 13.67 23.11 28.67 32.70 44.75 63.43 49.35 38.06 26.00

InterpretaDons:

• ROE of EML has decreased significantly from 2016 onwards.

• There has been a slight increase of 1% in ROE in FY 2022 as compared to FY2021.

pg. 31
 Chapter-04

Ra9o Analysis

pg. 32
4.1 Liquidity Analysis of Eicher Motors:

Liquidity refers to the ability of an individual, business, or entity to convert its assets into cash
quickly and easily without incurring significant losses. It is a measure of how easily an asset
can be bought or sold in the market, allowing for the settlement of financial obligations.

Maintaining adequate liquidity is crucial for the smooth functioning of businesses and personal
finances. It enables individuals and companies to meet their short-term financial obligations,
such as paying bills, salaries, and suppliers, without disruptions.

The liquidity position of a company can be assessed by using these key financial ratios:

• Current Ratio
• Quick Ratio
• Super Quick Ratio

pg. 33
4.1.1 Current Ra;o:
=Current Assets/ Current Liabili?es

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

CURRENT
1.91 3.60 3.42 2.22 1.15 0.92 0.87 1.28 1.65 1.99
RATIO

InterpretaCon:

Current ra;o for FY 2021 is 3.60 and the current ra;o for FY 22 is 1.91. This deteriora;on of
the current ra;o of the company causes difficulty in the company’s ability to pay short term
and long-term obliga;ons. Current ra;o is an important measure of liquidity. Current assets
like cash, cash equivalents and market securi;es are under decline.

pg. 34
4.1.2 Quick Ra;o:
=Current Assets – Inventory/Current Liability

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

LIQUIDITY RATIO

CURRENT RATIO 1.91 3.60 3.42 2.22 1.15 0.92 0.87 1.28 1.65 1.99
ACID TEST/QUICK ASSET
1.60 3.28 3.14 1.91 0.98 0.70 0.62 1.07 1.43 1.79
RATIO

InterpretaCon:

The company’s quick ra;o for FY 22 is 1.60 compared to FY 21 3.21 this reduc;on of 1.61 gives
us a picture about the working capital management which is needed for the company.
Working capital = Current assets - Current liabili;es
(5497.80-2878.87).

pg. 35
4.1.3 Super Quick Ra;o:
=(Current Assets-Inventory-Account Receivable)/Current Liabili?es

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

SUPER QUICK
1.43 3.18 3.06 1.86 0.94 0.67 0.59 1.06 1.41 1.77
RATIO

InterpretaCon:
The trend of the Super quick ra;o which was high in FY 2020, 2021 is coming down in FY2022.
The FY 2022 super quick ra;o is 1.43.

pg. 36
4.2 Solvency Analysis of Eicher Motors

Solvency is the enterprise’s ability to meet its long-term debt obliga;ons and is used ogen by
prospec;ve business lenders.
A solvency ra;o is one of many metrics used to determine whether a company can stay solvent
in the long term. A solvency ra;o is a comprehensive measure of solvency, as it measures a
firm's actual cash flow, rather than net income, by adding back deprecia;on and other non-
cash expenses to assess a company’s capacity to stay afloat.
It measures this cash flow capacity versus all liabili;es, rather than only short-term debt. This
way, a solvency ra;o assesses a company's long-term health by evalua;ng its repayment
ability for its long-term debt and the interest on that debt.

The notable raCos used to measure solvency of a company are:

• Interest Coverage RaCo

• Debt-Equity RaCo
• Fixed-Asset RaCo

pg. 37
4.2.1 Debt-Equity RaFo:

=(Long term debt+short term Debt+ fixed payments)/Shareholder equity

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

DEBT
EQUITY 0.32 0.30 0.28 0.33 0.45 0.41 0.55 0.81 0.81 0.63
RATIO

InterpretaCon:
The debt-equity ra;o has been constantly going down for EML and stands at a mere 0.3. The
company is virtually debt-free.

pg. 38
4.2.2 Interest Coverage RaFo:
=Earnings Before Interest and Tax (EBIT) / Interest Expense

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

SOLVENCY
RATIO
INTEREST
COVERAGE 207.06 194.84 224.79 1054.68 974.77 817.13 875.06 478.86 1346.00 669.46
RATIO

INTEREST COVERAGE RATIO

1600.00

1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
From the above data it is clear that from FY’ 2020 there is no significant change in the interest
coverage ra;o . This ra;o gives a picture about the firms ability to afford the interest on debt.
Interest coverage ra;o as shown posi;ve signs about the company’s ability to serve interests
to the lenders. This makes the company raise funds at later stages easily.

pg. 39
4.2.3 Fixed Assets Ra;o:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

SOLVENCY
RATIO
INTEREST
COVERAGE 207.06 194.84 224.79 1054.68 974.77 817.13 875.06 478.86 1346.00 669.46
RATIO
DEBT
EQUITY 0.32 0.30 0.28 0.33 0.45 0.41 0.55 0.81 0.81 0.63
RATIO
FIXED
ASSET 0.83 0.94 1.16 0.99 0.75 0.77 0.69 0.56 0.47 0.50
RATIO

FIXED ASSET RATIO

1.40

1.20

1.00

0.80

0.60

0.40

0.20

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
Fixed asset ra;os at the ini;al stages of company has shown a significant growth however
from FY 2020 there is a drop in the Fixed asset ra;o. This measure gives us an understanding
of company’s ability to generate sales from its exis;ng fixed assets.

pg. 40
4.3 Profitability Posi7on Analysis:

Profitability refers to the profits or gains a business makes in rela;on to its expenses.
Therefore, profitability analysis refers to the process of calcula;ng or analysing the profits of
a business. It helps businesses iden;fy their revenue streams and where they can reduce their
expenses to generate maximum gains.
The profitability ra;os assist analysts and investors in assessing the company's profitability.
The ra;os show how effec;vely the business is doing at making money. The compe;;veness
of a company's management and opera;on is also indicated by its profitability. A company's
profitability is a key factor for the shareholders since profits are required for business
development and to pay dividends to its shareholders.

Key profitability analysis are :

1. Return on Equity
2. Gross Margin raCo
3. Return on Equity
4. ROCE
5. Working Capital Efficacy Margin
6. OperaCng Margin

pg. 41
4.3.1 Sales Gross Margin
=EBIDT/Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBIDT/SALES 0.24 0.26 0.31 0.35 0.36 0.35 0.32 0.28 0.23 0.18

(RaCo on Sales): EBT/Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBT/SALES 0.20 0.20 0.25 0.31 0.32 0.31 0.29 0.25 0.20 0.16

EBT/SALES
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

pg. 42
RaCo on Sales: EAT (Earnings a]er Tax)/ Sales

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EAT/SALES 0.15 0.15 0.20 0.20 0.18 0.21 0.20 0.18 0.16 0.13

EAT/SALES
0.25

0.20

0.15

0.10

0.05

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon :
From the above data of the profitability ra;os it is evident that from the last 4 years the ra;o
i.e. Gross margin is declining. These ra;os gives us a picture about business efficiency with
respect to sales. There is stagnancy in comparison to FY’ 21 in FY’ 22.

pg. 43
4.3.2 Return on Equity (ROE)
=PAT/Shareholder Capital

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

PAT/SHARE
0.15 0.14 0.23 0.29 0.32 0.40 0.56 0.45 0.34 0.23
CAPITAL

PAT/SHARE CAPITAL
0.60

0.50

0.40

0.30

0.20

0.10

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
PAT/Share Capital : profit ager tax per share is in a declining trend. The company has not
shown any upward movement from FY 2016. However, the company is maintaining stagnant
profit ager tax per share ra;o in comparison with FY 21 in FY 22.

pg. 44
4.3.3 ROCE (Return on Capital employed)
=EBIT/ Working Capital

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EBIT/WORKING
0.81 0.28 0.54 1.31 8.99 -18.75 -12.19 2.94 0.88 0.47
CAPITAL

EBIT/WORKING CAPITAL
15.00

10.00

5.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203
-5.00

-10.00

-15.00

-20.00

-25.00

InterpretaCon:
EBIT/Working Capital : earnings before interest and taxa;on with respect to working capital
had a dras;c dip from FY 2014 FY 2017, it picked up on the later on stages and showing
consistency in the past few years.

pg. 45
4.4 Market Efficiency Analysis

An efficiency ratio evaluates how effectively a company utilizes its assets to generate income.
Market efficiency is calculated based on the turnover and associated operating ratios and
activity ratios.

The key ratios that assess efficiency are:

• Fixed Asset Turnover

• Inventory Turnover
• Account receivable turnover
• Account Payable Turnover

pg. 46
4.4.1 Fixed Asset Turnover Ra;o:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

MARKET
EFFCIENCY
RATIOS
Fixed
asset 3.48 3.15 3.39 4.23 4.90 5.68 7.01 5.41 5.44 5.30
turnover
Ac
Payable 26.07 45.63 73.00 121.67 121.67 182.50 365.00 365.00 182.50 182.50
turnover

Fixed asset turnover

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
Since there is a decline in the fixed asset turnover ra;o in the last few years and a slight pickup
in FY 22 in comparison with FY 21. It can be interpreted that the companies sales with respect
to fixed assets is not up to the mark.

pg. 47
4.4.2 Inventory Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Inventory
9.42 9.48 14.02 11.81 16.69 15.47 15.37 11.45 9.87 12.22
Turnover

Inventory Turnover
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
Inventory turnover ra;o is an important efficiency ra;o based on inventory management. For
FY 22 the inventory coverage ra;o is 9.42,there is a slight decrease from FY’21.

pg. 48
4.4.3 Account Receivable Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

AC
receivable 23.58 24.68 14.77 11.10 8.86 7.32 6.22 6.71 9.50 17.75
turnover

AC receivable turnover
30.00

25.00

20.00

15.00

10.00

5.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
Account receivables turnover ra;o: The account receivables turnover ra;o is increasing from
past few years. The more the account receivables the beler it is for the company. This metric
has dropped a lille in comparison to FY 21. 23.58 is the account receivables turnover ra;o for
the year FY 22.

pg. 49
4.4.4 Account Payable Turnover:

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Ac
Payable 26.07 45.63 73.00 121.67 121.67 182.50 365.00 365.00 182.50 182.50
turnover

Ac Payable turnover
400.00

350.00

300.00

250.00

200.00

150.00

100.00

50.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon:
This ra;o gives a picture about how many ;mes a company pays off its accounts payable
during a period. This ra;o is showing a decreasing trend. There is a dras;c decrease from
45.63 FY 21 to 26.07 FY 22.

4.5 Economic Value Added:

Economic value added is a key financial performance indicator Which gives a picture about
the capital and the cost of capital. It is a useful metric to gauge shareholder value perspec;ve
and gives an idea about the direc;on of the company. Value crea;on, Strategic decisions,
Shareholders confidence etc. are some of the general understandings based on the economic
value added.

Key RaCos for EVA for Eicher Motors:

pg. 50
Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Cost of
Capital
Employed
Average
Cost of
11405.68 10196.20 8723.88 7499.17 5600.04 4058.30 2422.32 1272.07 848.23 647.80
Capital
Employed
Cost of
0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Equity%
COCE 1140.57 1019.62 872.39 749.92 560.00 405.83 242.23 127.21 84.82 64.78
Economic
Value
Added
Net
Operating
1586.22 1329.70 1903.82 2054.44 1712.91 1560.02 1309.22 558.92 278.62 144.76
Profit
after Tax
Economic
Value 445.65 310.08 1031.43 1304.52 1152.91 1154.19 1066.99 431.71 193.80 79.98
Added

Average Cost of Capital Employed

12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

pg. 51
 Net Operating Profit after Tax
2500.00

2000.00

1500.00

1000.00

500.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

Economic value added is primarily dependent on the cost of capital from the net opera;ng
profit ager tax. A posi;ve economic value added implies the cost of capital is lesser than
companies returns. From the above data though the cost of capital is increasing the net
operaCng profit a]er tax has dropped a]er a certain point i.e. FY 2019 unCl FY 2021. From
FY2022 the company is showing a slight pickup in the direcCon needed.

Economic Value Added

1400.00

1200.00

1000.00

800.00

600.00

400.00

200.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

pg. 52
It is a significant part of the annual report where EML puts forward its inten;ons Of Fair
distribu;on. The economic value added to the stakeholders of the business namely returning
profits to the investors, paying the government taxes, community development, employee
benefits etc. The economic value generated and distributed is a column in the annual report
where the standards of ethical business model and regulatory compliances are men;oned in
detail.

4.6 Market Value Added:

Market value added (MVA) represents the value generated by a company for its stakeholders.
Essentially, it signifies the disparity between the present market value of a company's stock
and the initial capital invested by the company.

• 𝑴𝒂𝒓𝒌𝒆𝒕 𝒄𝒂𝒑𝒊𝒕𝒂𝒍𝒊𝒔𝒂𝒕𝒊𝒐𝒏 = 𝑴𝒂𝒓𝒌𝒆𝒕 𝑷𝒓𝒊𝒄𝒆 ∗ 𝑵𝒐 𝒐𝒇 𝑺𝒉𝒂𝒓𝒆𝒔

• 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 𝑨𝒅𝒅𝒆𝒅 (𝑴𝑽𝑨) = 𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 − 𝑩𝒐𝒐𝒌 𝑽𝒂𝒍𝒖𝒆

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

Market Value
Added
Book value of
394.79 355.06 3030.75 2614.67 1971.06 1441.59 860.24 455.23 303.75 232.98
Share
Market Value
of Share in
Rs. 2,991.29 2,644.50 1,966.82 1,985.39 2,721.67 2,807.19 2,052.23 869.71 344.08 210.47
Face Value of
Share
Total No of
Shares 273428852 273335922 27305473 27283473 27256215 27210249 27161183 27054783 27008983 26998483
Market
Capitalization 81790.50 72283.68 5370.50 5416.83 7418.24 7638.43 5574.10 2352.98 929.33 568.24
(in Rs. crores)
Booked Value
of Shares ( in 10794.70 9705.07 8275.61 7133.73 5372.36 3922.60 2336.51 1231.61 820.40 629.01
Rs. Crores)
Market Value
70995.80 62578.62 -2905.11 -1716.89 2045.88 3715.83 3237.59 1121.37 108.93 -60.77
Added

pg. 53
 Market Capitalization
90000.00

80000.00

70000.00

60000.00

50000.00

40000.00

30000.00

20000.00

10000.00

0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon of Market Value Added:

The market capitaliza;on took a significant up growth in the year 2020 and it con;nues on its
upward journey. Today EML is in top 50 companies of the stock market in India. In the
automobile sector EML is a significant player with a con;nuous growth in market value of
shares on a long term basis. Though there is a downfall for a certain period of ;me, at an
overall level market value of shares is posi;oned at a high level.
FY 13 to 18 can be considered as a crucial phase for EML. With around 31.6 percent CAGR the
company has grown significantly. However due to economic slowdown and rising compe;;on

pg. 54
from FY 18 to 22 the company has a declined growth path. Sales CAGR 14.1%. is observed
during this period. With the global motorcycle market share of Royal Enfield, the company is
looking forward for rapid post pandemic growth. The expansion in the global market has
significantly improved and export share in the total sales is taking place.

4.6 Debt investor perspecFve analysis (Leverage RaFos)

A leverage ra;o is any kind of financial ra;o that indicates the level of debt incurred by a
business en;ty against several other accounts in its balance sheet, income statement, or cash
flow statement.
There are mainly 3 leverage ra;os:

• Opera;ng Leverage
• Interest Leverage
• Combined Leverage

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

LEVERAGE
RATIOS
OPERATING
5.76 5.02 7.46 11.55 14.33 15.87 14.59 16.94 12.95 11.15
LEVERAGE
INTEREST
LEVERAGE 207.06 194.84 224.79 1,054.68 974.77 817.13 875.06 478.86 1,346.00 669.46
COMBINED
5.63 4.92 7.25 11.43 14.13 15.58 14.36 16.40 12.84 10.98
LEVERAGE

Operating Leverage Interest Leverage

20.00 1,500.00
15.00
1,000.00
10.00
5.00 500.00
0.00 0.00
201212
201312
201412
201603
201703
201803
201903
202003
202103
202203

201312
201603
201803
202003
202203

pg. 55
 Combined Leverage
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
201212 201312 201412 201603 201703 201803 201903 202003 202103 202203

InterpretaCon of Leverage raCos:

The main factor of leverage ra;o calcula;on is the debt of the company. It is useful for
assessing the ra;o of debt vs. equity. Debts and the interest burden on the debt with respect
company’s opera;ons gives us a picture about company’ approach towards debts. From the
above data it is evident that Combined leverage falling is a suitable factor for the company
and important for the stakeholders for analysing the direc;on of the company. Though there
is a slight upturn in comparison with FY’21 the direc;on of the company can be broadly
assessed.

pg. 56
4.7 Equity Investor PerspecFve Analysis

These ratios are commonly employed by shareholders or investors to evaluate the valuation
of a company's stocks. They compare the stock price of the company with either its profitability
or overall value, providing insights into whether the stock is trading at a relatively high or low
price. These ratios assist in analysing the perceived value of the company's current share
price.

In simpler terms, valuation ratios compare the cost of owning a security with the benefits
associated with owning the stock. The following ratios are considered:

• EPS Growth %
• Diluted EPS Growth %
• Dividend %
• Dividend Yield%
• PE Ratio
• Price to Book Value
• Pay-out Ratio

Year 202203 202103 202003 201903 201803 201703 201603 201412 201312 201212

EPS 58.01 48.65 697.23 753.00 628.45 573.32 482.02 206.59 103.16 53.62
P/E 51.56 54.36 2.82 2.64 4.33 4.90 4.26 4.21 3.34 3.93
PAYOUT
0.36 0.35 0.18 0.17 0.18 0.17 0.21 0.24 0.29 0.37
RATIO
DPS 21.00 17.00 124.97 124.98 110.02 100.00 100.00 50.08 30.03 20.00
DIVIDEND
0.70 0.64 6.36 6.30 4.04 3.56 4.87 5.75 8.72 9.50
YIELD
DIVIDEND
PER
SHARE 21 17 125 125 110 100 100 50 30 20
DIVIDEND
PAID OUT 574.14 464.61 341.25 341 299.86 272.1 271.6 135.5 81.12 54

pg. 57
1. EPS (Earnings per Share):

Earnings per share (EPS) is a measure of a company's profitability, calculated by dividing

quarterly or annual income (minus dividends) by the number of outstanding stock shares. The
higher a company's EPS, the greater the profit and value perceived by investors.

2. P/E RaCo (Price to Earnings RaCo):

Price to Earnings Ra;o or Price to Earnings Mul;ple is the ra;o of share price of a stock to its
earnings per share (EPS). PE ra;o is one of the most popular valua;on metric of stocks. It
provides indica;on whether a stock at its current market price is expensive or cheap.

pg. 58
3. Payout Ratio:

Pay-out Ra;o refers to the percentage of a company's earnings that is distributed to

shareholders as dividends.

4. Dividend Per Share:

Dividend Per Share (DPS) is the total amount of dividends alributed to each individual share
of a company's outstanding stock.

pg. 59
5. Dividend Yield
The dividend yield ra;o is the ra;o between the current dividend of the company and the
company's current share price – this represents the risk inherently involved in inves;ng in the
company.

pg. 60
5.0 Comments as CEO/CFO of the company

FY’22 FY’21

Net Revenue From OperaCons 10,122.86 8,619.04

Profit before depreciaCon and interest 2,113.56 1,786.51

Profit before other income and tax 1,657.79 1,331.28

Profit before tax 2,112.07 1,783.31

Net profit a]er tax 1,586.22 1,329.70

Due to the COVID-19 pandemic there was a downturn in the financial performance of the
company. However in the road to recovery post COVID-19 EML has shown improvement in
the net revenue from opera;ons of 10,122.86 crores FY 22. A growth of 17.5% is observed
YoY. Net profit ager tax has shown a growth of 19.2% in comparison with FY 21 in the year FY
22 of 1586.22 crores.
The financial health of the company is in the track of recovery. Despite vola;le market,
compe;;on from the peers, uncertainty of the future EML con;nued to retain its market
share. The areas of scope of development which has a bright prospectus is interna;onal
market and rapid growth in commercial vehicle segment. Royal Enfield being a major product
of Eicher motors limited and varie;es of bikes being launched on a ;mely basis makes the
company retain its market share significantly. Heavy duty trucks, buses and other commercial
vehicles are showing a substan;al rise. With improving upon the global manufacturing
capaci;es EML is looking forward to entering new markets. Hero MotoCorp, Ashok Leyland
are the main compe;tors in the Automobile sector in India. The following graphs gives us
insights about the market scenario and Eicher Motor’s Limited Financial performance.

pg. 61
Peer Comparison

Comparison based on revenues of peers Tata Motors and Mahindra and Mahindra.

pg. 62
References:

• Statistics: https://www.statista.com/
• Capitoline website https://awsone.capitaline.com/externalaccess.html
• Money Control website - https://www.moneycontrol.com
• Screener Website - https://www.screener.in/
• Value Research Online – www.valueresearchonline.com

pg. 63