CAPITAL STRUCTURE

ANALYSIS
MAHINDRA AND MAHINDRA LTD

PRESENTED BY
RAHUL RAJ
FISAT BUSINESS SCHOOL
ANGAMALY, KERALA
(Copy Right protected by Rahul.raj1988)
 CONTENTS
1.About M & M Ltd
2.Financial Highlights
3.Form Of Debts Used
4.Percentage Of Debt
5.Capital structure analysis
6.Findings of Analysis



 ABOUT MAHINDRA AND MAHINDRA
 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.


 Financial Highlights
NUMBER OF EQUITY 272615960
SHARES
(face value Rs 10)
TOTAL CAPITAL 9314.84

TOTAL DEBT 2976.21(crs)

INTEREST ON DEBT 134.20(Crs)

EBIT 1071(Crs)

NET PROFIT 867.51(Crs)

BALANCE SHEET P & L

 Form of Debts Used
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 961.52 802.60

BOND

9.25% FULLY AND COMPULSORY 700.00 -

CONVERTIBLE DEBENTURES

BALANCE SHEET P & L

 Percentage of debt on
total capital
YEAR TOTAL CAPITAL TOTAL DEBT CALCULATION PERCENTAGE

DEBT
2009 9314.84 4052.76 4052.76 *100 43.50%

9314.84

2008 6993.85 2587.06 2587.06 * 100 31.8%

6993.85

BALANCE SHEET P & L

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%
BALANCE SHEET home 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

BALANCE SHEET P & L
 2009
2008
 CAPITAL STRUCTURE ANALYSIS OF M & M
LTD
2009 2008
COST OF EQUITY 3.12% 6.46%
COST OF DEBT 2.9% 3.3%
WACC 2.6% 5.33%
COVERAGE RATIO7.65 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
 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 croresin 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
•
