Financial Ratio Analysis of Tata Motors Limited

(Financial Management Assignment)

Submitted to:- Submitted by:-

Mr. Mayank Upadhyay Abhishek Kapoor

Asher Ben
Jainik Shah
Neha Bhardwaj

Punit Ahir

Siddhartha Jajodia
Profile of Indian Automobile Industry

 It contributes about 4% in India`s Gross Domestic Product (GDP).

 It accounts for 5% of India`s Industrial Production.

 Indian automobile industry stands at 11 million vehicles at present.

 India is largest manufacturer of two- wheeler in the world and is the second
largest two wheeler market in the world.

 It ranks fourth in the commercial market vehicle in the world

 Car production in India is ninth in the world with annual production of 2.3
million in 2008.

 In 2009, India emerged as 4th largest exporter of automobile.

 Indian automobile industry has also become an out sourcing hub for
automobile companies worldwide, as indicated by the zooming automobile
exports from the country.
A Glance at production growth in India

Share of automotive segments (2008-09)

5-year
Segment Share in
CAGR*
total
Two-wheelers 75.4% 8.8 %
Passenger 16.4% 16.7 %
vehicles
Three-wheelers 4.5 10.4 %
%
Commercial 3.7 12.6 %
vehicles %

• Tata motors at large deals with wide range of Passenger and commercial
vehicles.

Passenger Vehicles (PVs) segment is dominated by cars….

 The domestic Indian passenger vehicles market has grown at a

CAGR of 12.6 per cent over the last seven years to reach 1.55 million
 units in 2008-09.

 Passenger cars, which accounted for 78.6 per cent of volumes, grew at a CAGR of 15 per
cent.

 Domestic sales in 2008-09 did not increase significantly over sales in 2007–08; however,
sales did not drop either.

Production trend in India (Numbers of vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
Passenger 723,330 989,560 1,209,87 1,309,300 1,545,223 1,777,583 1,838,697
Vehicles 6

 Passenger car constitute more than

3/4th of domestic market of PVs.

 Remaining are multi-utility vehicles

and sports-utility vehicles.
Commercial Vehicles (CVs) segment is dominated by Indian players

 Production trend (Number of vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Commercial 203,697 275,040 353,703 391,083 519,982 549,006 417,126
Vehicles

 Break up of Industry by segment (2008-09)

 Market share of Key-players (2008-09)

 Tata Motors Ltd.: The Company is the largest commercial vehicle manufacturer in

the country.

 It is market leader in goods and passenger vehicle market.

 LCV segment is dominated by Tata motors

 Its major acquisitions include:-

• Daewoo Commercial Vehicle Company, South Korea,2004.

• Hispano Carrocera,Europe,2005

• Jaguar Cars and Land Rover (27 March 2008).

 It has major Joint Ventures with:-

• Marcopolo, Brazil for bus body building

• Fiat for diesel Engine .

 Important Developments include launch of Tata Nano (2008), Tata Ace (2005),

Compressed air car in France and Electric Vehicles in Norway.

 Tata motors accounts for 62% of commercial vehicles exports.

FINANCAL ANALSIS:- TATA MOTORS LIMITED

Directors Report

2006- 2007- 2008-

07 08 09

1 Gross Revenue 31884. 33093. 28599.

69 93 27
2 Net Revenue(excluding excise 27535. 28730. 25660.
duty) 24 82 79
3 Total Expenditure (net) 24221. 25638. 23908.
52 5 35
4 Operating 3313.7 3092.3 1752.4
Profit 2 2 4
5 Other Income 245.19 483.18 925.97
6 Profit before Interest, Depreciation, Exceptional 3558.9 3575.5 2678.7
Items & tax 1 1
7 Intere
st
(a) Gross 389.86 541.56 1073.1
Interest
(b) Transfer to capital Account/Interest -76.79 - -
Received 259.19 399.42
© Net Interest 313.07 282.37 673.68
8 Profit before, Depreciation, Exceptional Items & 3245.8
tax 4
9 Product Development Expenses 85.02 64.35 51.17
1 Depreciation 586.29 652.31 874.54
0
1 Profit before, Exceptional Items 2574.5
1 & tax 3
1 Exceptional 1.35 -65.26
2 Items
1 Profit Before 2573.1 2576.4 1013.7
3 Tax 8 7 6
1 Tax Expenses 659.46 547.55 12.5
4
1 Profit after Tax for the 1913.4 2028.9 1001.2
5 year 6 2 6
1 Balance Brought Forward from Previous 776.76 1013.8 1383.0
6 Year 3 7
1 Credit taken from Dividend Distribution Tax from 15.29
7 previous year
1 Amount available for 2690.2 3042.7 2399.6
8 Appropriation 2 5 2

Balance Sheet
2006- 2007- 2008-
07 08 09
Rs. In
crores
1 Shareholder`s
Fund
(a) Share 385.41 385.54 514.05
Capital
(b) Reserves and 6484.3 7453.9 11716.1
surplus 4 6
6869.7 7839.5 12230.1
5 5
2 Loan Funds
(a) Secured 2022.0 2461.9 5251.65
4 9
 (b) Unsecured 1987.1 3818.5 7913.91
3
4009.1 6280.5 13165.5
4 2 6
3 Foreign Currency Monetary Item
Translation difference Account 164.12
(Net)

4 Deferred Tax Liability 786.83 975.72 865.81

(Net)
5 Total funds employed 11665. 15095. 26425.6
72 74 4

Application of funds
6 Fixed Assets
(a) Gross Block 8775.8 10830. 13905.1
83 7
(b) Less- Depreciation 4894.5 5443.5 6259.9
4 2
© Net Block 3881.2 5387.3 7645.27
6 1
(d) Capital Work-in- 2513.5 5064.9 6954.04
progress 8 6
6394.5 10452. 14599.3
8 27 1
7 Investments
8 Current assets, loans and 5.94 0.86 0.11
advances
(a) Interest accrued on 2500.9 2421.8 2229.81
investments 5 3
(b) Inventories 782.18 1130.7 1555.2
3
© Sundry 826.76 2397.3 1141.82
Debtors 1
(d) Cash and Bank 6025.9 4433.7 4764.75
Balances 9 8
(e) Loans and Advances 10141. 10383. 9691.69
82 78

9 current Liabilities and Provisions

(a) Current Liabilities 5993.4 8667.2 8958.25
5
(b) Provisions 1364.3 1989.4 1877.26
2 3
7357.7 10656. 10835.5
7 63 1
1 Net Current 2784.0 - -
0 Assets 5 272.85 1143.82
1 Miscellaneous 10.09 6.05 2.02
1 Expenditure
 (to the extent not written off or adjusted)

1 Total Assets 11665. 15095. 26425.6

2 (Net) 72 74 4
Profit and Loss Account

2006- 2007- 2008-

07 08 09
Rs. In
crores
Incom
e
1 Sales of product and other income from 31884. 33093. 28599.
operations 69 93 27
Less - Excise 4349.9 4363.1 2938.4
Duty 5 1 8
27535. 28730. 25660.
24 82 79
2 Dividend of other 245.19 483.18 925.97
income
27780. 29214 26586.
43 76
Expenditure

3 Manufacturing of other 24798. 26769. 24824.

expenses 57 9 37
4 Expenditure transferred to capital & other Accounts - - -
577.05 1131.4 916.02
24221. 25638. 23908.
52 5 35

Profit before Interest, Depreciation, Exceptional 3558.9 3575.5 2678.4

Items & tax 1 1

5 Product Development 85.02 64.35 51.17

Expenditure
6 Depreciation 586.29 652.31 874.54
7 Interest of discounting charges 313.07 282.37 673.68
Profit before, Exceptional Items 2574.5 2576.4 1079.0
& tax 3 7 2
8 National Exchange loss/gain -65.26
(net)
Provision for diminution in value of 1.09
investment
Employee Separation 0.26
Cost

Profit Before 2573.1 2576.4 1013.7

 Tax 8 7 6
9 Tax Expenses - - -12.5
659.72 547.55
Profit After Tax 1913.4 2028.9 1001.2
6 2 6
10 Balance Brought Forward from Previous 776.76 1013.8 1383.0
Year 3 7
Credit taken from Dividend Distribution Tax from 15.29
previous year
Amount for 2690.2 3042.7 2399.6
Appropriations 2 5 2

Share 38.454 38.543 44.048

s 4 8 1

Financial Ratios

2006- 2007- 2008-

07 08 09

1 Current Ratio 1.38 0.97 0.89

2 Quick Ratio 1.27 0.87 0.75

3 Inventory Turnover Ratio 8.05 10.51 10.31

4 Debt-to-Equity Ratio 0.58 0.80 1.08

 5 Operating Profit Margin 12.03 10.76 6.83

6 Net Profit Margin 6.95 7.06 3.90

7 Earnings Per Basic 49.76 52.64 22.73

Share

Calculating Ratios for 2008-09

1)

2)

3)

4)

5)

6)

7)
 Interpretation of financial Ratios

Current Asset Ratio (CAR)

The current asset ratio came down from .97 in 2008 to .89
for 2009. This can be directly related to decrease in cash and
bank balance from 2397.31 (08) to 1141.82 (09) and also on
account of the increased current liabilities from 8643.67 (08) to
8958.25 (09). The company has chosen not to keep ideal cash
and manage their stock with the increase in their debt
receivables. In the year 2007 the company’s debtor were
comparatively 50% lower than 2009. This means the company is
doing push marketing and they want their product to be sold
anyhow. They also were able to manage an increase in their
credits as the figures have been increasing every year.

Inventory Turnover Ratio (ITR)

The value has not changed much from 10.51 (‘08) to 10.31 (‘09). This
shows that the company has been able to meet its sales even during tough
times of 08 recessions. They were able to manage this ratio in-spite of heavy
decline in their revenue from net sales. We observe that the company has
very well reduced their inventory with the decline in the sales in the
respective year.

Quick Ratio (QR)

 This clearly shows that the reduction in CAR and QR from 0.87 (08) to
0.75 (09) has been due to short term loans acquired for working capital
which increased the current liability. Cash used to finance acquisitions
(Jaguar and Land Rover), also played the role in reducing current assets. The
total amount paid in cash by Tata for Jaguar and Land Rover upon closing is
approximately $2.3 billion.

Debt Equity Ratio (D/E) (Considering equity = share capital + reserve and
surplus)

The value increased from 0.80 to 1.80 for 2009. The loans have
increased from 6280.52 Cr to 13165.56 Cr (almost double) whereas equity
rose only by around 70%. Again reflecting on the Capital raised for
acquisitions.

Operating Profit Margin

 As mentioned earlier the net sales of the company has declines and for this
reason the scale of operation has also come down giving negative effect on the
economies of scale. The overall effect showed a decline in 10% sales decline but the
operating profit reduced by 40%. Whereas between the year 2007-08 there was not
much of a difference in the ratio as their sales number was more or less equal.
There was considerable increase in the input price of material when they were at
the peak in the year 2008. Hence their operating profit was very low.

Net profit margin

The company had taken a huge amount of loan in the year 2008. The interest
that has to be paid for the loan amount has increased 3 folds in a single year. This
activity brought a huge change in their PAT. The reports also mention that there
was a loss due to revaluation of foreign currency.
Earnings per share

The earnings per share have also decreased over the period of time due to
bad times in the automobile sector in the recent times. EPS has direct effect
on the market value of share. Hence, we can see that the market value of
each share of Tata Motors came down to 136 from around Rs. 800 in the
starting of the year.

Tata Stands Way ahead of its competitors!!!

Balance Sheet

Automobile companies Tata Ashok Eicher Force Swaraj

Motors Leyland Motors Motors Mazda

Mar '09 Mar '09 Dec '08 Mar '09 Mar '09

Sources Of Funds
Total Share Capital 514.05 133.03 28.09 13.18 10.49
Equity Share Capital 514.05 133.03 28.09 13.18 10.49
Share Application Money 0 0 0 0 0
Preference Share Capital 0 0 0 0 0
Reserves 11,855.15 1,976.00 452.8 214.34 86.03
Revaluation Reserves 25.07 1,364.86 0 0 0
Networth 12,394.27 3,473.89 480.89 227.52 96.52
Secured Loans 5,251.65 304.41 3.37 94.08 151.29
Unsecured Loans 7,913.91 1,657.57 3.14 66.84 69
Total Debt 13,165.56 1,961.98 6.51 160.92 220.29
25,559.83 5,435.87 487.4 388.44 316.81
Total Liabilities

Application Of Funds
Gross Block 13,905.17 4,953.27 135.73 901.2 134.99
Less: Accum. Depreciation 6,259.90 1,554.16 73.86 611.95 35.54
Net Block 7,645.27 3,399.11 61.87 289.25 99.45
Capital Work in Progress 6,954.04 1,043.19 1.95 20.15 28.4
Investments 12,968.13 263.56 11.68 57.16 0
Inventories 2,229.81 1,330.01 19.37 196.03 149.29
Sundry Debtors 1,555.20 957.97 5.08 122.89 146.33
Cash and Bank Balance 638.17 86.93 33.25 16.63 5.74
Total Current Assets 4,423.18 2,374.91 57.7 335.55 301.36
Loans and Advances 5,909.75 819.63 22.96 71.04 46.49
Fixed Deposits 503.65 1.15 449.56 0 1.27
Total CA, Loans & Advances 10,836.58 3,195.69 530.22 406.59 349.12
Deffered Credit 0 0 0 0 0
Current Liabilities 10,968.95 2,207.29 91.54 343.53 144.96
Provisions 1,877.26 268.08 26.78 41.18 15.2
Total CL & Provisions 12,846.21 2,475.37 118.32 384.71 160.16
Net Current Assets -2,009.63 720.32 411.9 21.88 188.96
Miscellaneous Expenses 2.02 9.69 0 0 0
25,559.83 5,435.87 487.4 388.44 316.81
Total Assets

Contingent Liabilities 5,433.07 754.37 128.68 37.39 10.86

Book Value (Rs) 240.64 15.85 171.17 172.67 92.05
Profit and Loss Account

Tata Motors Ashok Eicher Force Swaraj

Automobile companies Leyland Motors Motors Mazda
Mar '09 Mar '09 Dec '08 Mar '09 Mar '09

Income
Sales Turnover 28,538.20 6,709.61 777.55 866.72 604.04
Excise Duty 2,877.53 657.97 81.18 116.22 59.33
Net Sales 25,660.67 6,051.64 696.37 750.50 544.71
Other Income 921.29 71.07 38.21 366.94 0.81
Stock Adjustments -238.04 1.05 -15.58 -31.10 18.42
Total Income 26,343.92 6,123.76 719.00 1,086.34 563.94
Expenditure
Raw Materials 18,801.37 4,554.36 513.45 606.25 466.79
Power & Fuel Cost 304.94 38.42 5.48 14.70 3.34
Employee Cost 1,551.39 566.26 48.18 120.55 35.46
Other Manufacturing Expenses 866.65 50.30 3.19 8.52 0.17

Selling and Admin Expenses 1,652.31 381.48 90.82 1.44 28.51

Miscellaneous Expenses 1,438.89 0.00 5.42 74.94 1.83
Preoperative Exp Capitalized -916.02 -8.20 -0.12 -7.22 -0.01
23,699.53 5,582.62 666.42 819.18 536.09
Total Expenses

Operating Profit 1,723.10 470.07 14.37 -99.78 27.04

PBDIT 2,644.39 541.14 52.58 267.16 27.85
Interest 704.92 154.27 3.59 35.21 19.02
PBDT 1,939.47 386.87 48.99 231.95 8.83
Depreciation 874.54 178.41 15.20 41.83 5.84
Other Written Off 51.17 0.00 0.00 0.00 0.00
Profit Before Tax 1,013.76 208.46 33.79 190.12 2.99
Extra-ordinary items 15.29 0.26 -0.05 -0.26 1.16
PBT (Post Extra-ord Items) 1,029.05 208.72 33.74 189.86 4.15
Tax 12.50 18.45 -5.31 65.29 -0.65
Reported Net Profit 1,001.26 190.00 39.00 124.56 4.79
Total Value Addition 4,898.16 1,028.26 152.97 212.94 69.31
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 311.61 133.03 14.05 0.00 1.57
Corporate Dividend Tax 34.09 22.61 2.39 0.00 0.27
Per share data (annualised)
Shares in issue (lakhs) 5,140.08 13,303.38 280.94 131.76 104.87
Earnings Per Share (Rs) 19.48 1.43 13.88 94.54 4.57

Equity Dividend (%) 125.00 100.00 50.00 0.00 15.00

Book Value (Rs) 240.64 15.85 171.17 172.67 92.05

Comparing Ratios

Automobile companies Tata Motors Ashok Swaraj

Leyland Mazda

Mar '09 Mar '09 Mar '09

Current Asset Ratio 0.84 1.29 2.18

Quick Ratio 0.67 0.75 1.25

Inventory Turnover Ratio 9.25 4.08 3.71

Average Inventory Period (days) 38.90 88.25 97.09

Debtor Turnover Ratio 19.11 9.07 3.28

Average Payment Period (days) 18.84 39.67 109.69

Debt Equity Ratio 25.61 14.75 21.00

EPS 19.48 1.43 4.57

P/E Ratio 40.03 34.97 66.78

Total debt to owners fund 25.61 14.75 21.00