Impact Of Efficiency And Liquidity On Profitability Of Selected Automobile Companies In India

Abstract

India has become the fourth largest automobile market beyond Germany in 2019 and is expected to surpass the Japanese auto market in 2021. This will make India the third largest automobile sector in the world. For India, the automotive sector is very important as it contributes 49% of the gross domestic product (GDP) and 7.5% of the total GDP.The Indian automotive sector is divided into two-wheelers, three-wheelers, passenger vehicles and commercial vehicles. India is the world's largest two-wheeler manufacturer and the seventh largest commercial vehicle in the world. The Indian auto industry employs 32 million individuals. Considering the importance of the industry in contributing GDP, an attempt has been made to examine the impact of working capital ratios and liquidity ratios (GWCR, NWCR, GWCTR, NWCTR, CR, LR, ITR and DTR) on the profitability of (NPM, ROI and ROE) of the selected automobile companies using the regression technique. The study finds from the regressionanalysis that CRis statistically significant in determining NPM measure of profitability both in MML and TML under study. Likewise, NWCR, DTR in MML and GWCR, NWCTR, DTR and CR in TMLare found to haveimpact on ROI measure of profitability. Moreover, to the extent of all four regression modelsare concerned, GWCR, NWCTR, DTR and CR in TML and GWCR, NWCR and GWCTR in MML are identified to be statistically significant in determining the profitability measure of ROE under the study.