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Ecoziee Marketing Finance Profile Economic, Industry and Company Analysis

Macroeconomic Outlook:
With Indias GDP growth being below 5% in the last fiscal year with high interest and inflation
rate the growth in the industrial territory including the auto industry remained negative. With a
decline by 4.7% and 22.4% in passenger and commercial vehicles segment respectively.
Though with reduction of excise duty and partial lifting of mining bans did help the industry to
recover but that was limited. This limitation was majorly because of high interest rates and
inflation rates. But, with RBIs announcement about the rate cut of REPO by 0.25 basis points
and inflation rate being at its decadal lowest point. Also with the reduction of red tapes to foster
industrial growth and uniform taxation by GST introduction, along with a positive hope for
improvement because of Modi Factor and positive expectations about the growth of Indian
Economy by all the top agencies like IMF, World Bank, etc. has created positive sentiments
about India and its growth in industrial sector all this leading to SENSEX touching its life time
high.
Thus, the sales of commercial and passenger cars are expected to see an upward trend in future
with growing competition and increased income and thus spending by people because of the
above mentioned factors including the decline in the price of crude oil and thus petrol and diesel
inspite of increased taxation on the same. The same has been accredited by rating agency FITCH
in its report issued on 29th Jan, 2015 about Tata Motors ranking improvement.
Industry Comparison & SWOT analysis:
Last months return on TATA MOTORS share is around 18% second after Ashok Leyland
27.89% in the LCV sector. Also, with Ashok Leyland registering more than expected profits the
same is being expected by TATA MOTORS as well.
Strengths:
Strong Domestic player (Indian market): Tata has a strong presence in India and is a key
manufacturer of commercial vehicles. It is a market share of ~64% which has almost
remained constant. Tata Motors is Indias largest automobile manufacturer by revenue.
Diversified portfolio and synergy benefits with global presence and very strong R&D
department for continuous improvement.
Weaknesses:
ROI on TATA NANO.
Low customer base for passenger cars and image is maintained as economical and not
luxurious.

Tata Motors Analysis as for the fiscal year 2013- 2014

Ecoziee Marketing Finance Profile Economic, Industry and Company Analysis

Opportunities:
The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly
engines. The bus has optional organic clutch with booster assist and better air intakes that
will reduce fuel consumption by up to 10%.
The new global track platform is about to be launched from its Korean (previously Daewoo)
plant. Again, at a time when the World is looking for environmentally friendly transport
alternatives, is now the right time to move into this segment? The answer to this question
(and the one above) is that new and emerging industrial nations such as India, South Korea
and China will have a thirst for low-cost passenger and commercial vehicles. These are the
opportunities.
Nano is the cheapest car in the World - retailing at little more than a motorbike. Whilst the
World is getting ready for greener alternatives to gas-guzzlers, is the Nano the answer in
terms of concept or brand? Incidentally, the new Land Rover and Jaguar models will cost up
to 85 times more than a standard Nano!
Threats:
Combating competition is the major threat as the other competitors are in the industry
especially in passenger cars for many more years than TATA Motors like Ford, Fiat, Maruti
Suzuki, Honda, General motors, etc.
Apart from this managing of cost with increasing cost of manufacturing and environmental
regulations are major threats (As in case of NANO).
Company Profile:
Tata Motors Limited is Indias largest automobile company, with consolidated total revenues
of ` 2,33,662 cr (USD 38.6 billion) in 2013-14.Tata Motors Limited (formerly TELCO, short
for Tata Engineering and Locomotive Company) is an Indian multinational automotive
manufacturing company headquartered in Mumbai, Maharashtra, India and a subsidiary of the
Tata Group. Its products include passenger cars, trucks, vans, coaches, buses, construction
equipment and military vehicles. It is the world's 17th-largest motor vehicle manufacturing
company, fourth-largest truck manufacturer, and second-largest bus manufacturer by volume.
The company had also undergone a stock-split in 13th September, 2011 with its new FV being
Rs. 2 (previously it was Rs. 10 i.e. 5 for 1 stock) as the share price of the stock was high and to
make it affordable for the investors to invest in Tata Motors, the step was taken after a week Tata
Power announced stock spilt of 10 stock for 1. 4
After having an insight about the economy and industry lets now analyze the performance of
Tata Motors, as per the Annual report of Tata Motors 2013 -14, the different ratios from money
control website are used to analyze the performance.

Tata Motors Analysis as for the fiscal year 2013- 2014

Ecoziee Marketing Finance Profile Economic, Industry and Company Analysis

Profitability: The Gross profitability of the company has gone negative because of the adverse
economic scenario and low spending by people because of increased inflation. Although the cash
profit margin of the company has improved and has been 7.72% (Mar-14) from 5.43% (Mar-13)
also the companys Net Profit Margin has improved by 35% from the previous fiscal year. Thus
the companys operating expenses have increased leading to reduced gross profits.
The ROCE has declined 57% (approx.) but the returns on Net Worth has improved around 11%
this shows that the company is taking advantage of leveraging for increasing the returns to its
shareholders the same is being also reflected by its improved Debt Equity ratio. But the ROE is
still much less than the peer as the industry average is 12.05% 1.
Liquidity & Solvency: The companys Current and quick ratio indicated that the company is
going for more of short term financing for meeting its Working Capital requirements and its
going for reduced inventories leading to reduction in Working capital requirements and Current
Assets and its financing its Working and long term capital requirements from long-term sources.
Thus improving on its liquidity and also improving its profitability which is a great balance it has
been able to achieve.
Debt Coverage Capacity: The Companys increased dependence on long term sources for
financing has increased its interest obligation thus its Debt Coverage Ratio has declined
indicating increased financial risk of not being able to meet its interest obligation.
Management Efficiency Ratios: Companys improved cash margin indicates its improved
efficiency, with its improved Debtors Turnover ratio by about 17%. Although the reduced sales
has led to decline in other assets turnover ratio as well but as mentioned earlier the Working
capital management of the company has improved as its average raw material and finished goods
is nearly zero.
The improved Earnings Retention Ratio indicates that the company is having growth
opportunities and feels that the shareholders wealth can be increased by retaining the profits and
by giving them the capital gains. The same can be seen from the stock returns in intra-day and
weekly segment. But, Ashok Leyland has given better returns in monthly, quarterly and yearly
segment2. So the Tata motors has to improve its performance by improving on its Gross margins
and efficiency by getting more sales in-house as the Exports segment of its better than its peers.
Latest News:
20th Jan, 2015: Tata Motors announced season two of the T1 PRIMA truck Racing
Championship. Inscribed on the calendars of FIA (Federation Internationale de l'Automobile)
and FMSCI (the Federation of Motor Sports Clubs of India) the championship will be hosted
at India's F1 race track - the Buddh International Circuit. The race is scheduled for the 15th
of March 2015. The news was announced on the day when it started online booking of its
new Car TATA BOLT. Tata Motor's Passenger Vehicle Head Mayank Pareek told media that
Tata Motors Analysis as for the fiscal year 2013- 2014

Ecoziee Marketing Finance Profile Economic, Industry and Company Analysis

the company had already received over 50,000 bookings for the car so far and with this car Bolt the company's re-entry into the hatchback segment.3 This led to an increase in the stock
price of the stock by around 3.9%.
23th Jan, 2015: To combat the competition faced in the Small car segment Tata motors is
planning to launch 2 new cars every car and in its plan it has included Kites a complete
new offering from TATAs along with Pelican an upgrade of NANO to give competition
to Maruti Suzuki Alto K10 and the Hyundai Eon.
28th Jan, 2015: Tata Motors is planning to raise Rs 7,500 crore via rights issue. The
company's board has approved seeking shareholders' approval through a postal ballot for
raising funds up to Rs 7,500 crore through a rights issue of ordinary shares for meeting the
company's growth plans as well as for reducing the debt on its balance sheet. This will
further improve its financial profile apart from robust performance from the Jaguar Land
Rover along with its sound operational cash flow is likely to improve its overall competitive
position and profitability.
The next board meeting of Tata Motors is to be held on February 5, 2015 for Quarterly
Results as the results are expected to be positive and approximately to the expected ones the
share prices are expected to see an upward trend very soon. Though, the share lost around
1.8% approximately on 30th Jan, 2015.
So finally with Indian Stock Markets touching their life time peak levels and SENSEX
nearing 30,000 benchmark with all positive news and sentiments about economy at large and
automobile in specific, TATA MOTORS is likely to get momentum and thus the position
suggested to the investors would be to BUY them with a target of Rs. 650-670 and if
presently an investor of TATA MOTORS than HOLD.
References:
1,2- (http://economictimes.indiatimes.com/tata-motors-ltd/stocks/companyid-12934.cms)
3- www.moneycontrol.com
4- http://www.telegraphindia.com/1110527/jsp/business/story_14035880.jsp

Tata Motors Analysis as for the fiscal year 2013- 2014