Factors influencing the financial performance of automobile companies in India using Du pont model

The factors affecting the performance of the company in terms of profitability, turnover and leverage is illustrated by Du Pont Model. The study focuses on the constituents of Du Pont model in the Automobile sector in India. The automobile sector which constitutes around fifty percent of the manufacturing GDP in India is going through a rough phase with differences in effectiveness across the companies in the sector. The Du Pont Analysis distributes the Return on Equity (ROE) into two components -Return on Assets (ROA) and Equity Multiplier (EM). ROA can be further decomposed into Net profit margin (NPM) and Asset Turnover (AT) which are the important financial indicators of the performance of the company. The study exhibits the indicators and calculates the ROE using Du Pont Analysis for a time horizon of 10 years (2010-2019) to determine the effects of these indicators on ROE, PAT and Total sales in the model. Top eight Automobiles companies in India on the basis of their market capitalization are considered into study. The detailed analysis indicating the causal factors influencing the ROE, PAT and the Total sales by using Pearson correlation coefficients is presented in the study.