Valuation of Mahindra & Mahindra Ltd.

Topics: Mahindra & Mahindra Limited, Automotive industry, Mahindra Group Pages: 20 (6129 words) Published: October 12, 2010

M& A Assignment
Submitted To: Prof S.P. Srinvasan
Team Members
Pramod ( E12 )
Anshuman Pant (14)
Sharda N (93)
Shradha Patnaik (95)
Wasim Lokhandwala (117)

Mahindra & Mahindra Valuation Report

Title| Page No|
Executive Summary| 3|
EIC Analysis| |
Economy Analysis| 4|
Industry Analysis| 6|
Company Analysis| 11|
Assumptions| 16|
Valuation by Cash Flow Method| 19|
Valuation by Dividend Growth Model| 20|
Valuation by MCAP| 20|
Results| 21|
Other Key Concerns| 21|
Conclusion| 23|
Annexure| 24|


The project comprises of
1. Valuation of Mahindra and Mahindra Ltd. based on the Discounted Cash Flow Model 2. Valuation of the equity based on the Dividend Growth Model.

This report outlines the major approaches along which objective and quantitative valuation of company, although a detailed discussion is far beyond its scope. The report is aimed at creating a direction into the learning of valuation models used in the industry. In the report we have made certain assumptions, as our data collection resources are limited.

Environmental Scan
Indian economic growth recovered strongly and relatively faster from the effects of the global financial crisis. The Government responded quickly to the crisis with a large stimulus package including reduction in indirect taxes and other fiscal and monetary measures to boost demand. As a result, industrial growth made rapid strides, registered a double digit increase in the second half of Financial Year 2010, as compared to nearly zero growth in the comparable period of Financial Year 2009. However, given the poor monsoon and rise in global commodity prices, inflation has risen sharply since November, 2009. Containing inflation is likely to remain a key challenge for the Government and policymakers in the near term. IMF Forecast

IMF World Economic Outlook ProjectionsPercentage Change, Year on Year| | April 2009 Projectionsfor 2009| April 2009 Projectionsfor 2010| World Output| -1.30| 1.90|
Advanced Economies| -3.80| 0.00|
India| 4.50| 5.60|
Source: IMF World Economic Outlook, April 2010

India’s GDP Growth – F10 Projections

Source: India Today, Feb 9, 2009 (For projections)

Pragmatic Fiscal and Monetary Policies
$ Bn
FII Investments into India| F 10| F 09| Change|
| 29.05| (15.02)| 293%|
Figures in brackets indicate outflow Source: RBI

Non Food Credit Growth – F10 – 16.9%

IMF Forecast-Then & Now
Source: IMF World Economic Outlook, April 2010

Industry Structure
The domestic Automotive Industry comprises of Multi Utility Vehicles ("MUVs"), which includes soft tops, hard tops and pick-ups, Light Commercial Vehicles ("LCVs"), three wheelers and C-segment cars. The domestic Tractor Industry is traditionally segmented by horsepower into the low horsepower of 20 hp - 30 hp segment, the middle segment of 30-40 hp and the higher segment of above 40 hp.

Indian Automotive Sector
The global Automobile Industry was one of the worst affected by the financial crisis. Global Automobile production declined by 13.5% in the year 2009, after a 3.7% decline in the year 2008 (Source: OICA). Recognising the importance of the Automobile Industry to their economies and employment, many Governments in developed and emerging markets responded with measures to boost demand for Automobiles, especially through providing incentives for scrapping old vehicles (also known as "cash for clunker" Schemes) and by reducing taxes. Helped by the Indian Government's stimulus package (primarily comprising a 6% point reduction in excise duty) and multiple new product launches by manufacturers, the Indian Automobile...
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