CORPORATE FINANCE

ANALYSIS OF AUTOLINE
INDUSTRIES Ltd.

GUIDED BY
Dr. ASHISH GARG

SECTION D
GROUP NO.6
VISHIT GUPTA
UMANG KATTA
ANKIT PAGARIA
GAURAV AGGARWAL
SOURABH CHANDYOK

FLOW OF PRESENTATION

Brief about company

Competitors
Return and risk analysis
Portfolio analysis
Cost of capital
Dividend analysis
Capital structure analysis
Cash flow analysis
Leverage
Working capital analysis
P/E ratio
Conclusion
References

INTRODUCTION
BSE: 532797
NSE: AUTOND
Market Cap: [Rs.Cr.] 73
Face Value: [Rs.] 10
Industry: Auto Ancillaries
Integrated Design-Engineering-Manufacturing ancillary
company of automobile components and assemblies to the
leading OEMs in the automobile industry
11 manufacturing plants producing more than 400 products.
Design centers at Pune, Chennai, USA and Italy.
Customers include Bajaj Auto Ltd, Tata Motors Ltd, Kinetic
Engineering Ltd, Mahindra & Mahindra Ltd, Walker Exhaust
(India) Pvt Ltd, Cummins USA, American Axle FIAT India
Pvt Ltd and Ashok Leyland

COMPETITORS
BOSCH Ltd(Largest market cap) It is a auto component
manufacturing company headquartered in Bangalore with
manufacturing facilities located at Bangalore, Nashik,
Naganathapura, Jaipur and Goa.
MOTHERSON SUMI-The company is the largest supplier of
EDS to the Indian automotive industry. It has presence in about
20 countries.
RICO AUTO-It manufactures auto components for two-wheelers
rear and front wheel hubs, clutches, brake systems, engine
housings, crank housings, etc. It has also diversified into the
production of gears and oil pumps.

RETURN ANALYSIS
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%

-0.02%
AUTOLINE

0.08%
BOSCH

0.05%
MOTHERSON SUMI

-0.12%
RICO AUTO

-2.00%
-3.00%
-4.00%
-5.00%

Avg + SD
3.74%
Average Daily
Return
-0.02%
Avg - SD

-3.77%

1.94%

3.44%

3.54%

0.08%

0.05%

-0.12%

-1.78%

-3.35%

-3.77%

Motherson Sumi

BOSCH
250

9000
8000
7000
6000
5000
4000
3000
2000
1000
0

200
150
100
BOSCH

Motherson Sumi

50
0

Sensex
25000
20000

15000
Sensex

10000
5000

Rico Auto

0
4/2/2007

4/2/2008

60

4/2/2010

4/2/2011

Autoline

300

50

250

40

200

30
20

4/2/2009

Rico Auto

150

10

100

50
0
4/2/2007

Autoline

4/2/2008

4/2/2009

4/2/2010

4/2/2011

COMPARATIVE ANALYSIS
AUTOLINE

BOSCH

MOTHERSON
SUMI

RICO
AUTO

SENSEX

Average Daily Return

-0.02%

0.08%

0.05%

-0.12%

0.03%

Average Daily Risk

3.75%

1.86%

3.40%

3.66%

1.89%

Annualized Return

-3.80%

19.45%

11.99%

-28.82%

6.69%

Covariance

0.03066%

0.00902%

0.00393%

0.02642%

BETA

0.85

0.25

0.11

0.74

Systematic Risk

0.0259%

0.0022%

0.0004%

0.0195%

Unsystematic Risk

0.1150%

0.0334%

0.1149%

0.1141%

Intercept

-0.0003878 0.000721901

0.000457349

-0.0013732

jasen alpha

-0.0014295 -0.00448664

-0.005723454

-0.0031788

Market Risk

18.6306%

6.5902%

0.3766%

14.6743%

Firm Specific Risk

81.3694%

93.4098%

99.6234%

85.3257%

100%
90%
80%

70%
60%

81.3694%
93.4098%

50%

85.3257%
99.6234%
Firm Specific Risk

40%

Market Risk

30%
20%
10%

18.6306%
6.5902%

0%

AUTOLINE

BOSCH

14.6743%
0.3766%
MOTHERSON
SUMI

RICO AUTO

INVESTMENT PORTFOLIO

TYPES OF PORTFOLIO
EQUAL WEIGHTAGE PORTFOLIO
MINIMUM VARIANCE PORTFOLIO
MAXIMUM RETURN PORTFOLIO

CORRELATION TABLE
AUTOLINE

TATA MOTORS

ITC

HDFC BANK

AUTOLINE

0.106777566

0.102486758

0.0925624

TATA MOTORS

0.10677757

0.043190075

0.118051114

ITC

0.10248676

0.043190075

0.009341425

HDFC BANK

0.0925624

0.118051114

0.009341425

As we can see that the correlation between the

companies is less than 1,sothere is benefit of
diversification.
Lower the correlation, lower the variance(risk).

EQUAL WEIGHTAGE PORTFOLIO

VARIANCE

0.0608%

STANDARD DEVIATION

2.4651%

RETURN

36.14%

25.00%

25.00%
AUTOLINE
TATA MOTORS
ITC
HDFC BANK

25.00%

25.00%

MINIMUM VARIANCE PORTFOLIO

VARIANCE

0.0434%

STANDARD DEVIATION

2.0832%

RETURN

32.93%

13.1%
23.7%

AUTOLINE
TATA MOTORS
ITC
9.9%

53.3%

HDFC BANK

MARKOWITZ(MAXIMUM
RETURN) PORTFOLIO
VARIANCE

0.09%

STANDARD DEVIATION

3.00%

RETURN

50.06%
1.00%

26.66%
AUTOLINE

44.42%

TATA MOTORS
ITC
HDFC BANK

27.92%

GORDON GROWTH MODEL

price of stock(30-3-12)

autoline
162.51

bosch motherson rico auto

8151.22
179.92
179.92

dividend
r
b
G
D1
cost of equity

4
0.14476
0.854174
0.12365
4.494602
0.151308

60
0.171945
0.803408
0.138142
68.28851
0.146519

2.25
0.24868679
0.72426471
0.18011506
2.6552589
0.19487306

*
*
*
*

cost of debt
wacc

0.0822
11.68%

0.01982
14.24%

0.0535058
13.77%

*
*

GORDON'S GROWTH MODEL

16.00%

14.24%

14.00%
12.00%

13.77%

11.68%

10.00%
8.00%

wacc

6.00%
4.00%
2.00%
0.00%

autoline

bosch

motherson

DIVIDEND POLICY
FREE CASH FLOW TO EQUITY=
EAT-(CAPEX-DEPRICIATION)
-WORKING CAPITAL
+(NEW DEBT ISSUED-BORROWING)
D/P RATIO=DIVIDEND PER SHARE/EARNING PER
SHARE

DPR

DIV/FCFE

35.00%
100.00%
30.00%

50.00%

25.00%

0.00%
-50.00%

20.00%

2009

2010

2011

2012

-100.00%
DPR

15.00%

-150.00%

DIV/FCFE

-200.00%

10.00%

-250.00%
5.00%

-300.00%
-350.00%

0.00%
2009

2010

2011

2012

-400.00%

YEAR

EAT

CAPE DEPRECIAT
X
ION

WC

NEW DEBT
ISSUED

FCFE

2009

4.57

(80.79)

8.39

9.15

57.26

(1.42)

2010

13.51

(34.89)

11.03

4.74

15.58

9.97

2011

20.06

(82.64)

23.54

6.53

42.35

9.85

DIV/FCF
DIVIDENDS DPR
E
31.25
1.4279
% -100.61%
21.14
2.8558
%
28.65%
21.28
4.2696
%
43.37%
16.95

AUTOLINE
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

BOSCH
100%
80%

62%

62%
73%

82%

82%

85%

60%

2008

2009

18%

18%

15%

2010

2011

2012

DP RATIO

0%

38%
13%

16%

15%

2008

2009

2010

20%
2011

2012

RICO AUTO

MOTHERSON SUMI
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

RETENTION RATIO

40%
20%

27%

80%

85%

RETENTION RATIO
DP RATIO

38%

87%

84%

100%

80%

31%
63%

63%

63%

60%
72%
RETENTION RATIO
DP RATIO

69%
37%

2009

61%

68%
90%

40%
20%

152%
34%

39%

37%

37%

2010

2011

28%

-20%

10%

2012

2008

2009

2010

RETENTION RATIO
DP RATIO

32%

0%

-40%
2008

66%

2011

2012
-52%

DIVIDEND ANALYSIS
The average dividend payout ratio has been around 20%
The dividend payout ratio is in complete sync with the D/P
ratio of other comparable firms i,e around 29%
With reference to FCFE, in year 2009 and 2012 the company
was not having enough funds, but they still gave dividends.
To sum up average FCFE of four years was 4.22 Cr. and the
amount given in dividend was 3.55 Cr.(84%)
Mega project(Chakan Project) approved by Maharastra
Government.

DIVIDEND-WALTER MODEL

AUTOLINE

BOSCH MOTHERSON SUMI RICO AUTO

EPS

27.43

305.2

8.16

DPS

60

2.25

0.15

EPS-DPS

23.43

245.2

5.91

#VALUE!

COST OF EQUITY

15.7626667 10.51867

9.295066667

14.8012667

RATE OF RETURN

10.7422556 10.23063

7.111566922

12.7260114

PRICE OF EQUITY SHARE 126.67617 2837.676

72.85245947

#VALUE!

CAPITAL STRUCTURE ANALYSIS

Autoline
Bosch
Motherson Sumi

2008
0.81
0.09
1.15

D/E RATIO
2009
0.81
0.08
1.3

2010
0.83
0.07
0.58

2011
0.98
0.06
0.79

2012
1
0.03
0.68

Rico auto

1.38

1.36

1.47

1.42

1.11

Autoline has consistently maintained a D/E ratio close to 1.

The WACC corresponding to the current D/E ratio of 1 is 13.50
Except Bosch, competitor firms are having average D/E ratio close
to 1.15

OPTIMAL D/E RATIO

Assumptions
historical market return
historical risk free rate

19.27
10.53

Risk Premium

8.74

Growth Rate taken to be 5%(GDP of India)

To calculate interest rate on debt ,we have taken
spread over debt.

Formula Used
Interest Coverage Ratio=EBIT/Interest Expense
Increase in value of firm=(Change in cost)(1+g)/WACC-g
Share Price increase=Increase in firm Value/No. of shares issued

Debt ratio

0
10
20
30
40
50
60

DEBT EQUITY Intrest

Intrest
Intrest rate After tax cost levered
Debt
RATIO
expense coverage ratio on debt
of debt
beta

0
46.203
92.406
138.609
184.812
231.015
277.218

0
0.111111111
0.25
0.428571429
0.666666667
1
1.5

infinity

4.0104204 16.58429625
8.1594498 8.151284906
12.5163927 5.313831357
17.2429596 3.857226459
21.5536995 3.085781167
27.2505294 2.440686528

8.68
8.68
8.83
9.03
9.33
9.33
9.83

cost of
equity

Cost of
capital

5.8156

0.512761 12.815202 12.8152021

501
18
8

5.8156

0.550933 13.148827 12.4155048

746
61
5

5.9161

0.598649 13.565859 12.0359075

052
38
1

6.0501

0.659997 14.102043 11.6864601

303
1
7

6.2511

0.741794 14.816954 11.3906128

971
72
3

6.2511

0.856311 15.817830 11.0344654

706
98
9

6.5861

1.028086 17.319145 10.8793181

809
38
5

70

323.421

2.333333333

33.4093893 1.99075773

10.33

6.9211

1.314378 19.821336 10.7911708

647
04
1

80

369.624

38.1821592 1.741913014

10.33

6.9211

1.886962 24.825717 10.5020234

323
37
7

7.7586

3.604713 39.838861 10.9666261

351
36
4

90

415.827

48.1527666 1.381229049

11.58

optimal wacc

10.50202347

optimal debt ratio

80

optimal D/E ratio

Annual cost before

49.98426468

annual cost after

48.52249906

change

1.461765621

increase in firm value

27.89617145

no of outstanding share

1.22

increase in share price

22.86571431

GROWTH RATE=5%(GDP OF INDIA)

VALUATION USING NOI

APPROACH
COMPANY
NET OPERATING PROFIT

AUTOLINE BOSCH
63.17

1349.5

MOTHERSON
SUMI

RICO AUTO

571.4

110.69

CAPITALIZATION RATE

10.7422556 10.23063

7.111566922

12.72601136

TOTAL FIRM VALUE

588.051545 13190.78

8034.797482

869.7933456

867.2

347.29

7167.597482

522.5033456

DEBT
BOOK VALUE OF EQUITY
INTEREST
REQUIRED RETURN ON
EQUITY

230.82

185

357.231545 13005.78
28.46

5.5

69.6

67.87

9.72%

10.33%

7.00%

8.20%

REQUIRED RETURN ON EQUITY

12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%

REQUIRED RETURN ON
EQUITY

SENSITIVITY ANALYSIS
10.80%

10.60%

10.40%

10.20%

10.00%

9.80%

9.60%

9.40%

9.20%
CURRENT

10%

15.00%

20%

CASH FLOW ANALYSIS

AUTOLINE

BOSCH

0.00
(10.00)

(20.00)
(30.00)

Free Cash Flow

(40.00)
(50.00)
(60.00)

400.00
350.00
300.00
250.00
200.00
150.00
100.00
50.00
0.00

Free Cash Flow

Mar '09

(70.00)

MOTHERSON SUMI
200.00
150.00
100.00
50.00
0.00
(50.00)
(100.00)
(150.00)
(200.00)
(250.00)
(300.00)
(350.00)

Mar '10

Mar '11

Mar '12

RICO AUTO
120.00

100.00
80.00
Mar '09 Mar '10 Mar '11 Mar '12

60.00
Free Cash Flow

Free Cash Flow

40.00
20.00
0.00
(20.00)

Mar '09

Mar '10

Mar '11

Mar '12

CASH FLOW ANALYSIS

Autoline
Due to increase in working capital (Inventory and Receivables), there is a
negative impact on cash flow.
A lot of capital investment made 2011.
Bosch
An already settled company so free cashflow over the years is positive.
A steep fall in 2011 can be attributed to an increased investment in working
capital
They also have invested consistently in fixed assets.
Rico Auto
The company has increased there cash flow from investing activity by selling
of there investments.
Motherson Sumi
The company is able to keep there cashflow positive in recent years because
of the increase in net profit of the company.

LEVERAGE-DFL
RICO AUTO

MOTHERSON SUMI

2.5

1.25

1.2
1.15

1.5

1.1

DFL

DFL

1.05
0.5

1
0.95

0
2008

2009

2010

2011

2008

2012

2009

2010

2011

2012

BOSCH

AUTOLINE
1.01

2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

1.008
1.006
1.004
DFL

DOF1.002
1
0.998
0.996
2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

LEVERAGE-DOL
BOSCH

RICO AUTO

1.65

2.5

1.6

1.55

1.5
1.5

1.45

DOL

1.4

DOL

1.35
1.3

0.5

1.25
2008

2009

2010

2011

2012

0
2008

AUTOLINE

2009

2010

2011

2012

MOTHERSON SUMI

3.5

2.5

2.5

1.5

2
DOL

1.5

DOL

1
0.5

0.5
0

0
2008

2009

2010

2011

2012

2008

2009

2010

2011

2012

LEVERAGE-DCL
BOSCH

RICO AUTO
1.7

4
3.5

1.65

1.6

2.5

1.55

1.5

DCL

1.5

DCL

1.45

1.4

0.5

1.35

0
1

1.3

MOTHERSON SUMI
2.5
2
1.5

DCL

1
0.5
0

AUTOLINE

5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0

DCL

WORKING CAPITAL
AUTOLINE
BOSCH

40
2,500.00

30

2,000.00

20
NET WORKING
CAPITAL

10
0

-10

2008

2009

2010

2011

1,500.00

NET WORKING
CAPITAL

1,000.00
500.00

2012

0.00
2008

-20

2009

2010

2011

2012

RICO AUTO

MOTHERSON SUMI

120

350

100

300

80

250
200

NET WORKING
CAPITAL

150
100

60

NET WORKING
CAPITAL

40
20

50

0
2008

2009

2010

2011

2012

-20

2008

2009

2010

2011

2012

WORKING CAPITAL ANALYSIS

Working Capital= Current Assets-Current Liabilities
Current Assets=Cash & Securities+Inventory+Trade
Receivable
Current Liabilities=Trade Payable +Portion of Long Term debt
Working Capital increased drastically because of the increase
in Inventories and Trade Receivables.
All the competitor firms have significantly increased their
working capital.
One reason for Autoline to increase working capital may be to
reduce Liquidity Risk.
Increase in Working Capital has lead to the decrease in Cash
Flows.

INVENTORY OPERATING CYCLE

BOSCH

AUTOLINE

50

60

40

50

30

40
30

Day's inventory

Day's inventory

20

20

10

10
0
2008

2009

2010

2011

2012

MOTHERSON SUMI

RICO AUTO

60
35

50

30

40

25

30

Day's inventory

20
Day's inventory

15

20

10

10

0
1

0
1

P/E RATIO
AUTOLINE

BOSCH

MOTHERSON SUMI

RICO AUTO

NO. OF SHARES ISSUED

1.22

3.13

38.75

13.52

BOOK VALUE OF EQUITY

357.2315449

13005.77737

7167.597482

522.5033456

BOOK VALUE PER SHARE

292.8127417

4155.200436

184.9702576

38.64669716

Share price (as on 30

MARCH 2012)

162.51

8151.22

179.92

10.03

EPS

27.43

305.2

8.16

P/E ratio

5.92453518

26.70779817

22.04901961

UNDERVALUED

OVERVALUED

OVERVALUED

REFERENCES
moneycontrol.com
in.yahoofinance.com