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Capital Structure

of Tata Motors

MBA- B Section - Previous

Vineeth N (Roll No.260)

Vijay (Roll No.259)

Shariff (Retail Management, Roll No
103)

with the Xenon having been launched in Thailand at the Bangkok Motor Show 2008. for manufacture of medium commercial vehicles. Today two-thirds of heavy commercial vehicle exports out of South Korea are from Tata Daewoo. midsize car and utility vehicle segments. with revenues of Rs. South Korea’s second largest truck maker. • Over 4 million Tata vehicles ply on Indian roads. was established to manufacture locomotives and other engineering products.000 employees are guided by the vision to be “best in the manner in which we operate best in the products we deliver and best in our value system and ethics. West Germany. since the first rolled out in 1954. The first vehicle rolled out within 6 months of the contract. Introduction Profile • Tata Motors Limited is India’s largest automobile company. 1986 • Production of first light commercial vehicle. 1948 • Steam road roller introduced in collaboration with Marshall Sons (UK).48 crores (USD 8. • Among them is Jaguar Land Rover. Tata Motors’ presence indeed cuts across the length and breadth of India. it acquired the Daewoo Commercial Vehicles Company. 1977 • First commercial vehicle manufactured in Pune. 1991 • Launch of the 1st indigenous passenger car Tata Sierra. while also exporting these products to several international markets.8 billion) in 2007-08. • In 2006.” • Established in 1945. • One millionth vehicle rolled out. Tata 407. followed by Tata 608. Pune (Maharashtra). • The company is the world’s fourth largest truck manufacturer. 1954 • Collaboration with Daimler Benz AG. a business comprising the two iconic British brands that was acquired in 2008. . Tata Motors entered into joint venture with Thonburi Automotive Assembly Plant Company of Thailand to manufacture and market the company’s pickup vehicles in Thailand. and among the top three in passenger vehicles with winning products in the compact. Milestones 1945 • Tata Engineering and Locomotive Co. Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand). 1959 • Research and Development Centre set up at Jamshedpur. and the world’s second largest bus manufacturer. • In 2004. 1983 • Manufacture of Heavy Commercial Vehicle commences. Ltd. indigenously designed. The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in the Korean market. • It is the leader in commercial vehicles in each segment. • The company’s 23. 1985 • First hydraulic excavator produced with Hitachi collaboration. 35651. The new plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck. • The company’s manufacturing base in India is spread across Jamshedpur (Jharkhand).

1998 • Tata Safari .India's first sports utility vehicle launched. • Launch of the Tata Sumo'+' Series • Launch of the Tata Indigo. 2001 • Indica V2 launched . in Korea • Sumo Victa launched • Indigo Marina launched • Tata Motors lists on the NYSE 2005 • Tata Motors rolls out the 500. Tata's birth anniversary. 1996 • Tata Sumo deluxe launched. 2003 • On 29th July. Tata Engineering becomes Tata Motors Limited. • Launch of the Tata Safari EX 2002 • 2.Starbus and Globus . sign investment agreement and completes acquisition of Daewoo Commercial Vehicle Company • Tata Daewoo Commercial Vehicle Co.000th Indica rolled out. • 3 millionth vehicle produced.2nd generation Indica.00.000th Indica wheeled out. • 100. India's first fully indigenous passenger car launched. (TDCV) launches the heavy duty truck 'NOVUS' . India's first mini truck launched • The power packed Safari Dicor is launched • Tata Motors launches Indica V2 Turbo Diesel.1994 • Launch of Tata Sumo . • Indica. by Tata Daewoo Commercial Vehicle Co. Ltd. R.launched • Tata Ace. Ltd. 1997 • Tata Sierra Turbo launched. • One millionth passenger car produced and sold • Inauguration of new factory at Jamshedpur for Novus • Launch of Tata Novus • Launch of Novus range of medium trucks in Korea.the multi utility vehicle. • First CityRover rolled out 2004 • Tata Motors and Daewoo Commercial Vehicle Co. D.000th Passenger Car from its Car Plant Facility in Pune • The Tata Xover unveiled at the 75th Geneva Motor Show • Branded buses and coaches . (TDCV) 2006 • Tata Motors vehicle sales in India cross four million mark • Indica V2 Xeta launched • Passenger Vehicle sales in India cross one-million mark • Tata Motors first plant for small car to come up in West Bengal • Tata Motors and Fiat Group announce three additional cooperation agreements . J. • 2 millionth vehicle rolled out. 1995 • Mercedes Benz car E220 launched. • Tata Engineering signed a product agreement with MG Rover of the UK.

• Launch of Magic. the Sumo Spacio • Tata Motors launches Indica V2 Turbo with dual airbags and ABS • Launch of new Safari DICOR 2. • Tata Motors is Official Vehicle Provider to Youth Baton Relay for The III Commonwealth Youth Games Pune 2008. world’s first sub four-metre sedan. is launched. • Xenon. • Rollout of the one millionth passenger car off the Indica platform. which combines the looks of an SUV with the comforts of a family car.2 VTT range.R. • Tata Motors signs definitive agreement with Ford Motor Company to purchase Jaguar and Land Rover.2007 • Construction of Small Car plant at Singur. • Roll out of 100. • Indica Vista – the second generation Indica. . 1-tonne pick-up truck. • Tata Motors unveils its People's Car.2 L Direct Injection Common Rail (DICOR) engine. a comfortable. • Launch of the new Sumo -. begins on January 21 • New 2007 Indica V2 range is launched • Tata Motors and Thonburi Automotive Assembly Plant Co. West Bengal. the Tata Spacio. powered by a new 2. • Tata Motors launches passenger cars and the new pick-up in D. launched in Thailand. developed on the Ace platform • Launch of Winger.Sumo Grande. assemble and market pickup trucks. Congo. the new upgraded range of its entry-level utility vehicle. at the ninth Auto Expo. announce formation of a joint venture company in Thailand to manufacture.000th Ace • Tata-Fiat plant at Ranjangaon inaugurated • Launch of a new Upgraded range of its entry level utility vehicle offering. (Thonburi). India’s only maxi-van • Fiat Group and Tata Motors announce establishment of Joint Venture in India • Launch of the Sumo Victa Turbo DI. 2008 • Latest common rail diesel offering. • Indigo CS (Compact Sedan). launched.the Indica V2 DICOR. Nano. • Tata Motors introduces new Super Milo range of buses. safe. • Tata Motors completes acquisition of Jaguar Land Rover. launched. four-wheeler public transportation mode.

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053.9 Employee Cost 1 0 8 3 879.4 1.380. 20.527.95 510.251.4 Capitalised 0 577.3 1.841.4 2.77 -29.212.534.13 386 190.55 2.4 3.361.847.017.29 427.383.5 Raw Materials 19 93 86 48 9 8 Power & Fuel Cost 325.42 24.51 293.5 Depreciation 652.4 2.74 29.49 217.185.102.4 1. 11.98 119.49 720.103.063.65 Stock Adjustments -40.190.29 295.131.51 1.56 673.93 574. Total Income .39 Selling and Administration 1.79 323. 10.9 1.3 5.303.29 520.8 1.574.15 51.651.36 03 EXPENDITURE : 20. 15.6 362.528. 17. 14.92 560.71 0 Statutory Appropriations 0 0 0 0 0 0 .037.05 308.88 .46 25.5 Miscellaneous Expenses 3 3 784.1 3.6 4.807.31 586.236.9 Gross Profit 8 7 2 6 4 872.76 585.37 1. 12.35 363.576.9 2.85 218.270.95 4.8 P & L Balance brought forward 3 776. 19.54 177. 20.8 Expenses 1 8 985.285. 18.4 1.585.792 13.89 156.743.674.319.51 237.37 Tax 139.2 1.4 1.322.29 3.68 256.293.3 3.81 214. below Net Profit 0 0 0 0 0 0 1.885.3 2.529.109 21.292.9 1.4 1.0 1.7 Excise Duty 3 4 3 4 0 9 28.6 Net Sales 40 77 30 59 55 4 Other Income 972.71 Deferred Tax 401.152.85 .699.13 . 23.929.6 365.165. 15.877.7 1.473.895.355.573.94 450.867.52 193.088.141.48 309.81 202.74 795.7 3.1 Other Manufacturing Expenses 3 8 2 1 722.673.25 1.4 1.41 258.9 1.374.425.4 1.3 1.879.16 382. 31.181.013.244 17.618.91 144 -141.03 645.82 96 19.19 327.581.73 606.913.611.159.1 2.6 Less: Pre-operative Expenses 1.78 644.2 Total Expenditure 46 58 32 01 94 4 3.11 693. 27.94 1.11 Extraordinary Items 149. 24. 8.442.376.1 Adjusted Net Profit 3 6 6 8 840.9 Reported Net Profit 2 6 8 5 810.263.153.48 349.4 2.61 368.0 1.3 Profit Before Tax 7 8 8 0 4 510.56 .7 Operating Profit 9 8 1 7 2 9 Interest 425.Profit And Loss Account (Rs in Crs) Mar Mar Mar Mar Mar Mar Year 08(12) 07(12) 06(12) 05(12) 04(12) 03(12) INCOME : 32.228.0 1. Sales Turnover 03 21 43 03 85 43 4.181 9.8 2.4 145.028.75 529.17 Adjst. 8.34 300.654.49 37.598.13 2.6 1. 11.8 1.8 123.341. 8.22 142.461 28.876.01 476 363.13 144.

59 32.07 497.443.7 Total Debt 52 14 84 42 7 14. Net Block 1 6 04 67 2.120 10.0 Secured Loans 9 4 822.com Balance Sheet (Rs in Crs) Mar Mar Year Mar 08 Mar 07 06 05 Mar 04 SOURCES OF FUNDS : Share Capital 385.5 4.513.12 6.775. 3.749. 4.337.76 585.84 286.2 3.81 942.89 91 81 4 APPLICATION OF FUNDS : 10.589. 2.1 37. 4.987.2 http://www.017.236.611.154.3 Capital Work in Progress 6 2 951.570.936.383. Unsecured Loans 3 0 08 61 317.91 Preference Dividend 0 0 19. 4.894.2 2.387.985. 3.5 4.41 382.849.77 7.43 578. 6.830.818.912.9 6.7 Total Shareholders Funds 50 75 07 39 7 2.881.44 21. 2.0 1. 3.473.71 Dividend 578.454.11 127.93 8. 5.19 538.111.09 4.4 1.961. 6. 2.19 282.015.606.8 P & L Balance carried down 7 3 776.9 2.9 2.65 3.477.022.259.0 2. Gross Block 83 0 55 95 5. Investments 7 0 15 06 3.02 .5 Total Liabilities .013.484.453.94 0 0 0 Equity Dividend % 150 150 130 125 80 40 Earnings Per Share-Unit Curr 50. 2.93 113.52 47.54 385.7 1.971. Depreciation 2 4 51 28 3. 8. 3.157. Loans & Advances .94 452.114.64 101. 6.79 353 7.8 7.537.056.5 1.495.910.69 5. 1.6 1.3 1.1 2.25 176.3 5.57 143.87 Book Value-Unit Curr 202. 1.6 365.8 123.280.76 489.461.878 8.1 Appropriations 8 9 2 5 568.40 Less : Accumulated 5. Reserves Total 6 4 20 60 3.869.023.676.71 Lease Adjustment 0 0 0 0 0 5.3 3.68 177.69 81.87 361.capitaline.659.401.009.064.77 Current Assets.005.839.

2.667.784.695.21 .85 5 95 545.102.97 649. 1. Inventories 3 5 24 36 1. 1.1 Deferred Tax Liability 7 963. 9.228.5 2. Contingent Liabilities 7 8 65 68 839.402.70 Less : Current Liabilities and Provisions 8.364.15 14. 7. 2.433.512.540.5 Total Assets . Cash and Bank 1 826.363.9 6.487.18 716. 6.656.601.12 18.0 2.76 43 04 770. - Net Deferred Tax -975.126.086. 2.414.78 10.83 622.658.500.989.130.02 .13 1. 1.19 Deferred Tax Assets 397.45 http://www.120 10.54 565.728.558.6 5. 10.09 14. Loans and Advances 1 6 54 05 1.58 614.36 -963.953.69 135.162. 4.99 2.397.4 1.473.29 667.6 150.639.3 1.capitaline.421.43 773.119. Provisions 3 2 04 06 430.72 -786.0 6.527.2 6.8 2.3 1.6 798.373.1 5.9 2.44 1.49 4.05 10.89 91 81 4 2.147. 6.005.16 22. Total Current Assets 78 05 81 03 3.726.06 1.681.545.849.com .606.07 Miscellaneous Expenses not written off 6.7 Sundry Debtors 3 782.7 1.878 8.45 176. 5.64 10. Current Liabilities 0 8 82 61 4.77 2. Net Current Assets -272.28 -514.012.383.75 102. 7. Total Current Liabilities 63 0 86 67 4.215.941.

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If ROI is greater than WACC. Vice Versa.00 OBJECTIVE • To calculate Weighted Average Cost of Capital (WACC) • To calculate Return on Investment(ROI) • Compare WACC and ROI. then the company is getting returns more than the capital employed.50 2005-06 13.00 2007-08 15. .Year Dividend Per Share(DPS) in Rs.00 2006-07 15. 2003-04 8 2004-05 12.

Capital Structure .

84 2495.76 30.05 Interest 425.81 202.69 Payout(%) 29.41 382.78 28.34 Tax 139.) 202.9 1292.22 21.33 Growth Rate(%) 21.08 1196.99 8.654 0.44 Retention Ratio 0.6 38.77 P & L Account(Dr Balance) 0 0 0 0 0 Equity Shareholder Fund 7839.96 6484.18 1690.5 6869.18 2053.6134 0.42 1259.80 19.85 34.18 Cost of Equity(%) 29.07 4111.82 .6356 PBT 2576.07 PBIT 3002.73 19.47 2573.57 143.66 36.79 353 Reserves 7453.73 16.25 28.78 9.30 27.51 293.68 177.71 1494.6 3236.64 101.46 2097.703 0.03 1288.31 0.75 5537.93 113.38 1651.19 9.94 8447.35 363.7 31.01 476 363.77 Cost of Debt(%) 6.82 96 PAT 2437.86 20.08 2941.22 29.52 6606.77 ROE 0.69 2346.30 0.61 368.54 ROI(%) 21.14 2936.87 1869.2 3749.31 0.30 30.39 3589.87 361.34 5154.6815 0.48 Total Debt 6280.31 0.11 27.49 217.82 Capital Employeed 14094.34 Preference Divident 0 0 19.94 0 0 Equity 385.52 4009.81 4849.51 10852.5 8 Book Value(Rs.54 385.Rs in Crs Year 2008 2007 2006 2005 2004 DPS(Rs) 15 15 13 12.26 29.

Weighted Average Cost of Capital .

Year 2008 Weight ed Proportio Cost(% Cost(% Source Amount n(%) ) ) Equity 385.38 Debt 2495.79 14.36 8.80 Debt 6280.69 .50 12.14 91.13 20.84 11.14 Debt 1259.54 6.05 8.78 6.61 29.47 9.73 7.20 Year 2006 Weight ed Proportio Cost(% Cost(% Source Amount n(%) ) ) Equity 382.23 9.22 6.71 101.02 29.99 8.77 106.59 Year 2005 Weight ed Proportio Cost(% Cost(% Source Amount n(%) ) ) Equity 361.41 9.18 Year 2007 Weight ed Proportio Cost(% Cost(% Source Amount n(%) ) ) Equity 385.04 28.14 29.84 3319.11 16.21 101.52 94.19 8.62 2857.07 12.76 3.22 4.38 6666.39 4394.75 Debt 2936.81 Debt 4009.87 13.55 100.77 78.00 Year 2004 Weight ed Proportio Cost(% Cost(% Source Amount n(%) ) ) Equity 353 28.06 100.25 2.42 87.26 1.50 30.55 1612.84 12.84 88.34 8.

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the Company recorded its highest ever sale of 5. and amortization ) margin at 10. the domestic passenger vehicle industry was able to grow by 11. Note: Amortization = non-cash expense of writing off intangible assets over their useful lives.80:1. The Indian economy remained in high growth phase but witnessed moderation in GDP growth to 90/ in FY 07-08 as compared to over 9% growth achieved in the previous two years. was 6. Growth was primarily driven by new launches and discounts on existing volume models.52 crores at a Debt: Equity ratio of 0.000 vehicles and were immune to the slowing market conditions. The Profit Before-Tax at Rs. 2008. The Company's margins were under pressure during the year due to rising interest rates.094 crores to remain as India's largest automobile company by revenue.649 vehicles and grew its turnover to Rs. During the year. Amidst moderation in economic growth.1% growth this fiscal. entry level cars (price point below Rs 3 lacs) declined by 2%. the overall borrowings of the Company stood at Rs. Financial Performance The year 2007-08 was a historic year for the Company marked with two significant events viz. The commercial vehicle industry which grew by over 33% in FY 06-07 was impacted by moderation in economic growth as wet as substantial reduction in vehicle financing and posted a 8. The Profit after Tax at Rs. launching new models and due to reduction in excise duty announced by the government in Budget during February'08. constraints in availability of vehicle financing from outside sources and unprecedented increase in prices of raw materials. Of over 90 models in the industry the top 10 constitute 65% of the industry sales. The Industry's growth rate in fact fell to single digit in the last four months of the fiscal. which has since been completed on June 2. The EBIDTA (earnings before interest.1 % higher than last year.1 % by increasing discounts on mature products. a high interest rate regime and tightening of the liquidity position.8% witnessed in the previous year. The passenger vehicle industry also witnessed a slowdown but managed to grow by 11. . albeit at a lower growth rate than 21% of the last fiscal.5 million vehicles.The luxury segment however doubled in size to over 5.2. albeit at a slightly lower rate of 11. Vehicle exports also grew. 280. depreciation.. 576 crores was 0. 85. the unveiling of Tata Nano -the world's least expensive car and the signing of the definitive agreement with Ford Motor Company for purchase of Jaguar and Land Rover. 029 crores.8% was lower than last year as increase in input costs could only be partially absorbed by the market. Along with two wheelers.1 % higher than last year. 33.3% to an all time high of over 1.2. taxes. With significant increase in the Company's capital expenditure program’s and the growing business requirement.9% as compared to 14.6.

659 units in FY 2007-08 from 53. 1. increase in inflation.83 crores in FY 2007-08 from Rs. 3.5% to 2.9% to 585.19.31 crores in FY 2006-07 on account of increase in fixed assets. Depreciation (including product development expenditure) for 2007-08 increased by 6. the margins were under pressure mainly due to the rising input costs and lower volume growth. 1.940. copper and natural rubber.9% during the year to Rs. the Company has been able to marginally grow its revenues and profits.2%to Rs. Fiscal 2007-08.313.2% share in the passenger vehicle market between TATA and Fiat branded vehicles.5% of net turnover as compared to 2.028. Net Raw Material consumption inclusive of processing charges increased by 6.66 crores from Rs. Material Cost as a % of net turnover has increased to 73.7% for the previous year.230 from 22. This was largely a result of increase in prices of steel.055 vehicles (including 3. the Company managed to lower the impact through its on going cost reduction program with initiatives like global sourcing. 470.990 units from 526.575.22% to 54. 716.913.04 crores in FY 2006-07.The margin decreased to 12.8% to 530.53 crores in FY 2006-07. 28.649 units from 580.3% for the last year.3. the commercial and passenger vehicle industry has a challenging year ahead.849.46crores in the previous year.37 crores in FY 2007-08 from Rs.The total number of vehicles sold during the year increased by 0. the first year of 11th Five Year Plan saw a marginal fall in GDP growth rate of 9%. aluminum.92 crores from Rs. Employee Cost increased by 12. Financial Performance as a measure of Operational Performance In a challenging environment. 282.368.730.3.09 crores registered in the previous year mainly inline with trends in industry and economy.557. with pressure on volumes and margins.10 crores in FY 2007-08. vendor rationalization and value engineering.5% to Rs.82 crores from Rs.2. However.6% to another record high of Rs.These were 10.349 with increases also in flexible manpower. 082.The domestic volumes increased by 0. Whilst the Company's profit after tax improved to Rs.57 crores from Rs. Net interest cost decreased to Rs. Turnover.4% for FY 2006-07.4% to Rs. Profit before depreciation.2. hardening of interest rates. Manufacturing and Other Expenses increased by 2. poor credit availability.07 crores in FY .1. In view of the slow down in economy.011.03 crores in FY 2006-07.4% from 13% in FY 2006-07.544.After six years of consecutive growth. The manpower increased marginally to 23.671.56 crores in FY 2006-07.27. 18.5% of net turnover for the year as compared to 10. from Rs.474 units in FY 2006-07. interest and tax increased by 0.21.806 units in FY 2006-07. proposed increase in fuel prices and volatility in foreign exchange rates. It represents 2.50 crores from Rs.4% from 72.280 units in FY 2006-07.8% to Rs. net of excise duties increased by 4. nickel. the Company's passenger vehicle sales decreased marginally by 4. rise in prices of input materials.297 Fiat branded vehicles) and the Company had a 14. while export volumes increased by 2.

2006-07.76 last year. which is subject to a lower tax rate. Profit after Tax (PAT) increased by 6.46 crores in FY 2006-07. Despite increase in interest rates and increase in capital expenditure.47 crores from Rs.27 crores in FY 2007-08 from Rs.576. interest earnings and larger capitalization of interest in line with the increase in capital expenditure.2. Basic Earning Per Share (EPS) increased by 5. Profit before Tax (PBT) of the Company increased by 0.1.4. better working capital management.13% to Rs.573. the reduction was mainly on account of significant reduction in the Company's vehicle financing portfolio (on account of securitization). Investments increased to Rs. 913. 2. 910. 2.64 as compared to Rs. 2. This was mainly on account of a lower tax provision owing to the increase in spends on Research and Development and income from capital gains. 477. .49.18 crores in FY 2006-07.03% to Rs.028.79% to Rs.00 crores in FY 2006-07.52.92 crores from Rs.