Indus Motor Company Ltd

(Financial analysis)

Submitted to: Sir Wasim Ullah

MBA 19(A)

1/20/2009
 Indus Motor Company Ltd (Financial analysis)

Table of Contents
Introduction................................................................................................................................3
Company Profile:........................................................................................................................3
Core Value:.................................................................................................................................4
Bankers:......................................................................................................................................4
Auditors......................................................................................................................................4
Legal Advisor.............................................................................................................................5
FINANCIAL ANALYSIS:..........................................................................................................6
Cross Sectional Analysis............................................................................................................8

Graduate School of Management (International Islamic University Islamabad)

 Indus Motor Company Ltd (Financial analysis)

Toyota Indus Motor Company

Driving forward with trust

Introduction
Indus Motor Company is one of the Automobile Companies which formed with the help if
house of Habib, Toyota Motor Corporation, Toyota Tsusho Corporation. It manufactures and
Imports Cars and enjoys a healthy share in the market. It is competing with the Honda,
Nissan, Suzuki and Mitsubishi. To sustain its lead IMC must maintain Strategic Competitive
Advantage which is its Production Strength, Ability to
produce Quality cars with respect to low cost and
Research and Development in Hybrid and Bio Fuel
Cars. But recently Company is in Stabilization mode
trying to improve its functional area, consolidation of
resources and maintaining SCA. In our Opinion it is
the best move made by IMC to Survive the Financial
Holocaust. Indus Motors is the country's second largest
auto manufacturer, after the Pak Suzuki Motors,
located near Bin Qasim Karachi, having an assembling
capacity of 55,000 units per annum. Its core business
is to manufacture and market cars. In addition, the company also sells auto parts and
accessories. Its product line includes 9 variants of Toyota Corolla, 8 variants of Daihatsu
Cuore and 2 variants of Toyota Hilux. The company also offers six different imported
vehicles namely Toyota Camry, Prado, Land Cruiser, RAV, Hilux and Hiace. Major
contributor to the revenue is Corolla, having a contribution of 66.5% in company's sales.

Company Profile:
• Name of the Company: Indus Motor Company Limited.

• Industry Type: Automobile Industry(Cyclical)

• Major Investors:

1. House of Habib.
2. Toyota Motor Corporation Japan (TMC).
3. Toyota Tsusho Corporation Japan.

Graduate School of Management (International Islamic University Islamabad)

 Indus Motor Company Ltd (Financial analysis)

Vision:
To be the most respected and successful enterprise, delighting Achieving market Leadership
by Delivering Value to
customers with a wide range of products and solutions in the Customers by:
automobile industry with the best people and the best technology 1. Following our 밅
ustomer first�philosophy in
manufacturing and providing
Core Value: high quality vehicles and
services that meet the needs of
Pakistani customers.
• Customer satisfaction 2. Enhancing the quality
an reach of our 3S Dealership
• Team Work Network
• Ethics & Practices 3. Employing customer
insight and feedback for
continuous corporate renewal,
including producer
Bankers: development, improving
1. ABN Amro Bank service and customer care.
2. Askari commercial Bank Limited Bringing Toyota quality to
Pakistan
3. Bank Alfalah Limited
1. Maximizing QRD
4. Bank Al-Habib limited (Quality, Reliability and
5. The Bank of Tokyo-Mitsubishi UFJ, limited Durability) by built-in-
6. Citibank N.A. engineering,
7. Habib Bank AG Zurich 2. Transferring
Technology and promoting
8. Habib Bank Limited
Indigenization at IMC and
9. Hong Kong & Shanghai Banking Corporation Vendor.
10. Metropolitan Bank Limited 3. Raising the bar I all
11. MCB Bank Limited corporate functions to meet
12. National Bank Limited Toyota Global Standards.
Optimizing Cost by Kaizen
13. Soneri Bank Limited
1. Fostering a Kaizen
14. Standard Chartered Bank culture and mindset at IMC, its
15. Union Bank Limited Dealers an Vendors.
16. United Bank Limited 2. Implementing Toyota
Production System.
3. Removing waste in
all areas and operating in the
lowest cost quartile of the
industry.

Auditors

Graduate School of Management (International Islamic University Islamabad)

 Indus Motor Company Ltd (Financial analysis)

M/s A.F. Ferguson & Co.

Legal Advisor
M/s A.K. Brohi & Company
M/s Mansoor Ahmed Khan & Co.
M/s Mahmud & Co.
M/s Sayeed & Sayeed Co.

Graduate School of Management (International Islamic University Islamabad)

FINANCIAL ANALYSIS:
All the value from balance sheet and profit & lost account are in Rupees and in billions.

1. Current Ratio = Current Assets = 2.56

Current Liabilities

EXPLANATION:

IMC has comfortable current ratio, thanks to its large cash balance. Company is in position to
meet its current obligations.

2. Quick Ratio = Current Assets – Inventories =1.86

Current Liabilities

EXPLANATION:

IMC acid test ratio showed that it has not sufficient liquid asset to meet is current obligations.

3. Average Collection Period = Accounts Receivable =18 days

Annual Credit Sales / 365

EXPLANATION:

Average collection period is satisfactory; it recovers its receivables in 5 Days

4. Fixed Assets Turnover = Total Sales =10.27

Total fixed Assets

EXPLANATION:

Asset turnover ratio shows the level of sales generated with respect to productive capacity. The
level and trend of sales is growing with respect to its investment in assets

5. Debt Ratio = Total Debt =27.5%

Total Assets
EXPLANATION:

Indus Motor Company has sufficient assets to cover its debts.

6. Debt-to-Equity Ratio = Total Debt = 0.4005

Total Equity

EXPLANATION:

IMC is less leverage compare to other companies to finance there assets. The risk born by IMC is
lower as compared to other companies

7. Gross Profit Ratio = Gross Profit = 9.29%

Sales
EXPLANATION:

Gross profit ratio of IMC shows that the firm’s production and procurement efficiency is better
than the industry Competitors.

8. Net Profit Margin = Net Income =5.53%

Sales
EXPLANATION:

The Profit Margin Ratio is used as a Measure of Profitability. Ratio shows that company earned
2.25 % on its sales.

9. Return on Assets (ROA) = EBIT = 25.76%

Total Assets

EXPLANATION:

10. Return on Equity (ROE) = Net Income = 6.12%

Stockholders' Equity

EXPLANATION:

The Return On Equity measures the profits after taxes, IMC ROE ratio shows that it has
sufficient assets relative to shareholders investment.
Cross Sectional Analysis
RATIOS TOYOTA HONDA PAK-SUZUKI
Current Ratio 2.56 1.21 0.95
Quick Ratio 1.86 0.93 0.63
Average Collection 18 8 9
Period
Fixed Assets 20.28 0.81 1.23
Turnover Ratio
Debt Ratio 27.5% 55.0 44.0
Debt-to-Equity 0.4005 0.80 0.75
Ratio
Gross Profit Ratio 9.29% 5.21 4.24
Net Profit Margin 5.53% 2.21 2.22
Return on Assets 25.76% 5.2 2.3
(ROA)
Return on Equity 6.12% 26.0 28.2
(ROE)

IMC ratio shows that it has more returns on equity as compared to Toyota and also very closes to
Mitsubishi. means it has sufficient assets relative to shareholders investment
Cross sectional analysis of ROA shows that toyota generates 6.30% on its investment in assets as
compared to competitors

This analysis shows that company earned 2.25 % on its sales. Honda and Mitsubishi’s earnings
are also very close to each other.
Firm’s production and procurement efficiency is better than the industry Competitors.

Toyota is highly leverage and risk born by the company is higher as compared to other
companies

Company can easily cover its debts as compared to its competitors.

Asset turnover ratio shows the level of sales generated with respect to productive capacity. The
level and trend of sales is growing with respect to its investment in assets

Quick ratio analysis shows that it has sufficient liquid asset to meet are current obligations.

Average collection period is satisfactory; it recovers its receivables in 18 Days

Company is in position to meet its current obligations as compared to its competitors.

EXPLAINATION:

IMC financial analysis reflects that sufficient financial resources to meet its obligations. The
financial managers
of the company are doing a prudent and efficient job. The Asset management activities, investing
activities,
Financing activities and cash flows are well managed. Despite electricity shortage and liquidity
crunch are on the reasons which affects the industry of Pakistan but IMC has managed this
problem with surprising efficiency.