CREDIT RESEARCH (MAHINDRA AND MAHINDRA)

Abstract

The Indian as well as global automobile industry has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. Companies often need capital to finance their operations and investment activities and for such purpose firms raise capital through stock market via stake sale or companies raise debt from bond market or financial institutions depending on their needs. For every penny invested into the business, there is cost of capital which must be low from business point of view and on other hand, investors seek high returns given the risk profile of the company. To raise capital through debt, companies issue long term bonds and debentures with fixed coupon i.e. interest payments and repayment of principal amount on maturity of the bond. Companies add financial risk to their business when they raise debt as timely payment of interest becomes mandatory and affects the credit worthiness of the organization with rising debt levels. Hence, investors tend to measure the riskiness involved while lending money to the companies by following the credit research reports and credit ratings assigned to the companies to ensure timely repayment of interest as principal amount. Through this project report, detailed Credit analysis of Automobile major Mahindra and Mahindra has been done and Credit Rating has been assigned to signify the ability of the company to raise debt and fulfill their obligations. An extensive study of company was done in coherence with economy and industry on EIC(- Company) model to include the effect of macro-economic factors on the operations of the company. Last four years Consolidated financials & annual reports of Mahindra and Mahindra are analyzed and future projections of company’s performance have been made keeping in view the effect of macro-economic factors like demand & supply, inflation, interest rates in economy, Porter five forces & SWOT analyses etc. Given the historical and future projections, financial strength and liquidity position of company was evaluated in addition to measurement of business risk to determine the credit worthiness of the Mahindra and Mahindra and a credit rating has been assigned on a framework similar to credit rating agencies on parameters like profitability, financial risk, business risk, financial policy & accounting quality. At the end conclusion and recommendations have been specified so as to make the project work more meaningful and purposeful.