Mahindra Motors Vs Tata Motors: Is the Indian automotive industry on the path to recovery? The industry has not only suffered the brunt of the covid 19 pandemic but also the subsequent events brought along with it.
From lack of demand to global semiconductor shortage, the companies in the industry have been resilient. In this article, we will take a look at two of the biggest players in the segment, Mahindra Motors Vs Tata Motors.
Table of Contents
Industry Overview
India’s Automotive Industry is worth more than $100 bn and contributes 8% of the country’s total export and accounts for 2.3% of India’s GDP and is set to become the 3rd largest in the world by 2025.
Currently, India holds multiple ranks in the automotive industry. It is the world’s largest tractor manufacturer and second-largest bus manufacturer in the world.
It holds the first rank in manufacturing two-wheelers and three-wheelers in the world. In fact, the sector is expected to account for 65 million new jobs within India by 2026 as companies increase production.
In an attempt to push the industry, the Union Cabinet announced the Production-Linked Incentive (PLI) Scheme worth Rs 25,938 Cr in the Automobile and Auto Components sectors.
About the company
Mahindra & Mahindra Ltd (M&M)
Mahindra & Mahindra Ltd. is the flagship company of the Mahindra Group. Their core business is mobility products and farm solutions.
Their offerings range from SUVs, pickups, commercial vehicles, and tractors, to electric vehicles, two-wheelers, and construction equipment.
Shares of the company are listed on NSE BSE, Bourse de Luxembourg, and London Stock Exchange. It has a market capitalization of Rs 103,620.10 Cr.
Tata Motors Ltd
Formerly known as Tata Engineering and Locomotive Company (TELCO), Tata Motors Limited is an Indian multinational automotive manufacturing company.
The company has a global presence in countries like the UK, South Korea, South Africa, China, Brazil, Austria, and Slovakia through a strong network of subsidiaries.
Shares of the company are listed on NSE, BSE, and New York Stock Exchange. The market capitalization of the company is Rs 148,367.18 Cr.
M&M vs Tata Motors – Revenue
The revenue earned by both companies has declined in the last few years. Supply chain disruption, shortage of semiconductors globally, and lack of demand among others are the key reasons for the decline in the numbers for both companies.
Tata Motors Ltd recorded a revenue of Rs 249,795 Cr in FY21 whereas M&M reported a total of Rs 74,278 Cr in the same year.
| Revenue (Rs in Cr) | |||||
|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| M&M | 83,773 | 92,094 | 104,721 | 75,382 | 74,278 |
| (Revenue growth in %) | 10.46% | 9.93% | 13.71% | -28.02% | -1.46% |
| Tata Motors Ltd | 269,693 | 291,550 | 301,938 | 261,068 | 249,795 |
| (Revenue growth in %) | -1.23% | 8.10% | 3.56% | -13.54% | -4.32% |
M&M vs Tata Motors- Units Sold
Tata Motors recorded the highest-ever annual sales of 3,70,372 units, up 67% over FY21.
M&M’s total sales increased by 35 percent to 54,643 units in March 2022 as compared with 40,403 units in the year-ago period.
| Vehicle | M&M | Tata Motors Ltd |
|---|---|---|
| Passenger Vehicle | 27,603 | 42,293 |
| Commercial Vehicle | 23,880 | 44,425 |
| EV | - | 3357 |
| Tractors | 28,112 | - |
M&M vs Tata Motors – Earnings of Investor
The 3-year average ROE for Tata motors is negative 25.77% because the company has been making losses for the last 3 years. M&M’s ROE has been positive for the last three years with an average of 3.11%.
The three years average ROCE for M&M is 8.17% and that of Tata Motors is -5.93% due to negative earnings.
The TTM EPS of Tata motors is -54 whereas M&M has a ratio of 44.
The net profit margin of M&M is also higher than Tata Motors as the former has a margin of 1.09 and the latter has -6.33%.
| 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|
| Return On Equity (ROE) | |||||
| M&M | 11.28 | 20.74 | 12.19 | -3.43 | 0.57 |
| Tata Motors | 8.85 | 8.88 | -37.19 | -17.94 | -22.17 |
| Return On Capital Employed (ROCE) | |||||
| M&M | 12.42 | 15.43 | 12.31 | 5.68 | 6.52 |
| Tata Motors | 9.51 | 9.87 | -14.61 | -1.92 | -1.27 |
| Earnings Per Share (EPS) | |||||
| M&M | 68.26 | 69.14 | 48.86 | 1.15 | 16.32 |
| Tata Motors | 21.95 | 26.47 | -84.89 | -33.55 | -35.13 |
| Dividend Yield | |||||
| M&M | 1.01 | 1.01 | 1.27 | 0.82 | 1.1 |
| Tata Motors | 0 | 0 | 0 | 0 | 0 |
| Net Profit Margin (%) | |||||
| M&M | 3.54 | 7.35 | 4.44 | -1.43 | 0.26 |
| Tata Motors | 2.21 | 2.33 | -9.58 | -4.2 | -5.21 |
M&M vs Tata Motors- Valuation of the companies
The P/E ratio can be negative if the company has posted a loss for the financial year. That is the reason why Tata motors have had a ratio of 0 over the last 3 years. On the other hand, M&M has a high P/E ratio of 48.71.
The P/B ratio establishes a relationship between the market cap of the company and the value of its total asset. A lower ratio is considered ideal by the investors.
| Valuation Parameter | |||||
|---|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | 2021 | |
| Price to Earnings Ratio (PE) | |||||
| M&M | 18.82 | 10.71 | 13.75 | 248.69 | 48.71 |
| Tata Motors | 21.23 | 12.37 | 0 | 0 | 0 |
| Price to Book Value (P/B) | |||||
| M&M | 2.36 | 2.2 | 1.84 | 0.8 | 2.14 |
| Tata Motors | 2.73 | 1.17 | 0.98 | 0.41 | 2.09 |
| EV/EBITDA | |||||
| M&M | 9.92 | 9.36 | 8.3 | 9.51 | 12.47 |
| Tata Motors | 6.62 | 4.67 | 4.8 | 5.28 | 5.86 |
Mahindra Motors Vs Tata Motors: EV Position
Mahindra was among the pioneering Indian automakers in terms of EVs with its acquisition of a majority stake in homegrown EV maker Reva back in 2010.
It has a subsidiary known as Mahindra Electric Mobility Limited, which is dedicated to designing and manufacturing compact EVs. In 2016, it launched the electric version of its sedan Verito—eVerito, the production of which has now shut down.
Tata Motors is the market leader in the EV segment in India. The Tata group has forged alliances across all the companies under them to create the Tata Uni’EV’erse.
This is also evident in the number of EVs sold by the company in the last year. Some of the famous EVs sold by the company include Tata Nexon EV, Tata Tigor EV, and Tata Altroz EV.
The Road ahead
M&M: In the coming future, M&M will be focused on customer experience by enhancing its design capabilities, building a differentiated brand strategy, leading digital transformation, and driving EV (electric vehicle) technology.
Their long-term automotive strategy is to build a strong, sophisticated, and authentic SUV brand with an unmissable presence and advanced adventure-ready capabilities.
Tata Motors: The EV market leader has several plans for the coming future. Jaguar Land Rover is targeting 100% zero tailpipe emissions for the portfolio it sells by 2036. Jaguar will become fully electric by 2025.
In Closing
In this article, we looked at two of the biggest companies dominating the automobile industry in India. This gives us a comprehensive overview of the business of both companies.
However, their future prospects depend on the road taken by each of them. That’s all for this post on Mahindra Motors Vs Tata Motors.
Which one is your favorite company? Let us know in the comments below.
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Major points missed include sub management prospects,future threats, comparison of fonancial figures of M&M after excluding tractor division and truck divsion of Tata Motors.
Thank You for your input, we will surely add these points in our future articles.
-Team Trade Brains