CHAPTER 1

INTRODUCTION

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1. INTRODUCTION TO FINANCIAL PERFORMANCE:
Finance is an integral aspect of every business. The success of an organization depends on how
competently the firm is managing the funds available to them. The topic for the project is “a study on
the financial performance of Tata Motors Limited”. There are many stakeholders in a company,
including trade creditors, bondholders, investors, employees, and management. Each group has its
own interest in tracking the financial performance of a company. Understanding financial
performance is essential for every organization because most of the organization’s crucial decisions
depend on the financials. Understanding financial performance is necessary because they help in the
decision-making process of the company.

Financial performance analysis is the process of determining the operating and financial
characteristics of a firm from accounting and financial statements. The goal of such analysis is to
determine the efficiency and performance of firm’s management, as reflected in the financial records
and reports.

The study on financial performance of the company is by using ratio analysis to assess the solvency,
liquidity, and profitability of the selected company. Ratio analysis is a quantitative method of gaining
insight into a company's liquidity, operational efficiency, and profitability by studying its financial
statements such as the balance sheet and income statement.

The effectiveness of the financial performance involves decision making in the organization with the
help of various analytical tools to recognize the profitability, solvency and liquidity position and to
check whether the organization is in a position to meet their obligations in properly and timely
manner.

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The primary objective of the Tata Motors is to earn profit for the surviving and growth of the
company. The profit is earned with the help of money invested in the business. It is essential to
observe how much profit has been earned. This is possible by using Profitability ratios. These ratios
are the most important and reliable indicators to measure the financial performance of Tata Motors.
These ratios check the current operating performance of the Tata Motors, and are very helpful for the
management to take remedial measures if there is a declining trend.

Financial ratios are conventional yet powerful tool of analyzing the financial performance of the
company. It facilitates the Investors, Creditors and Marketers to have insights on firm’s performance.
They are used to make predictions about the company’s ongoing run and future growth.

Primarily ratios are being used by the investors to make inter firm comparisons in order to maximize
returns. The ratios are calculated by taking figures from the company’s financials. Multiple ratios are
calculated to ascertain the ability of an entity to pay debts, generate profits and maximize
shareholders wealth.

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 CHAPTER 2

LITERATURE REVIEW

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INTRODUCTION:
This chapter presents the review of literature relating to the study undertaken. The collection of
reviews has been made from various studies undertaken by the academicians, practitioners,
researchers, etc., from time to time. These reviews will enlighten the existing knowledge of the
researcher. In order to understand the research problem the earlier attempts made by the
academicians, economist, socialist, etc., are needed to be studied. The review of literature guides the
researchers for getting better understanding of methodology used, limitations of various available
estimation procedures, database, lucid interpretation and reconciliation of the conflicting results. In
case of conflicting and unexpected results, the researcher can take the advantage of knowledge of
other researchers simply through the medium of their published works.

Rajmanohar T P (2008): wrote a novel entitled "Indian Automotive Industry." The Indian
Automotive Industry Growth; the Indian Automotive Industry-Exploring New Avenues and
Horizons; Passenger Cars: On Top Gear; Commercial Vehicles Sitting Pretty; Indian Automotive
Industry Catalysts for Growth, Automotive Sector: Speeding Ahead; 2006 KPMG Global Auto
Executive Survey; 2006 to 16 Indian Automotive Mission Plan; 2006 to 16 Indian Automotive
Industry R and D; India; Hyundai in India; Maruti Udyog Ltd.; Ashok Leyland Ltd.; Tata Motors
Low-Cost Car.

Singh Amarjit & Gupta Vinod (2012): studied the automotive industry summary. Indian
automotive industry itself has been set up as a production centre and many joint ventures with
overseas cooperation have been set up in India. SWOT assessment made there are some difficulties
the virtue of which automotive sector encounters many issues and some creative main characteristics
are keyless entrance, electrically regulated systems improved riding power, smooth touch designs
and also need to concentrate in the future on like energy effectiveness, pollution decrease security
and durability.

Daniel A. Moses Joshunar (2013): the research was performed to determine the economic power
and failure of Tata Motors Ltd. using the financial statements of the last 5 years. Analysis of trend &
proportion used to report on the company's economic position. Company financial performance is
satisfactory and also suggested for improved performance to increase company loan levels.

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Agarwal Nidhi (2015): the research focuses on Tata Motors Ltd. relative economic efficiency. The
economic data and information needed for the research are derived from the different company
quarterly accounts. Both companies ' analyzes of liquidity and property are performed. Four
measures, namely equity gearing, debt-equity, complete equity and proprietary proportion, are
regarded to evaluate the leverage situation. The outcome indicates that in order to enhance the long-
term solvency situation, Tata engines ltd must boost the part of the proprietor's investment in
company.

Shinde Govind P. & Dubey Manisha (2011): the research examined main player output sectors
such as passenger vehicles, business vehicles, service vehicles, two- and three-wheeler vehicles and
also analyzed SWOT analyzes and important variables affecting automotive development.

Daniel A. Moses Joshunar (2013): the research was performed to define Tata Motors Ltd.’s
economic power and weakness using the previous 5 years of financial statements. Analysis of 45
trend & proportion used to report on the company's economic position. Company financial output is
adequate and also suggested for improved results to boost business credit rates.

Roger M. Shelor & et al. (2015): this research examines adjustments to the Initial Public Offering
(IPO) "Operating Performance among Real Estate Investment Trusts." The aim is to determine if the
valuation of the underlying asset linked to the IPO is enhanced. Separately, they evaluate equity,
mortgage and REIT diversification. They also match latest IPOs ' running efficiency with previous
years to resolve the effect of the Revenue Reconciliation Act of 1993 on the supply for REIT
inventory by institutional investors. REITs were discovered to have important rises in exchange on
assets and chosen economic efficiency interventions, unlike past analyzes by manufacturing
companies. The post-IPO cumulative stock price decline and recovery is illustrated.

Gangadhar (2009) : the aim of the research was "Financial Analysis of Companies in Criteria: A
Profitability and Efficiency Focus" to evaluate the liquidity situation of the Companies and to
highlight the variables accountable for this situation. It is found that the situation of liquidity was
quite alarming as they face issues of acute liquidity. Their current assets are very small relative to the
current liabilities. 23 It is suggested that they can be enhanced by decreasing the unnecessary strain
of existing liabilities or by raising the amount of current assets as required.

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Mahes Chand Garg and Chander Shekhar (2002): the asset structure was discovered to be
considerably badly linked to complete debt equity in cement sectors and long-term debt equity.
Value of the company's wealth and existence was substantially linked to complete bond earnings.
The 24 company's life was considerably linked in the cement sectors to long-term debt equity. The
asset collateral price regression coefficient was important at a rate of 10 percent and was favorably
linked with complete debt equity.

Moses Joshuva Daniel (2013): the primary goals of the research "A Study on the Financial Status of
TATA Motors Ltd" were to analyze TATA Motors Ltd general economic status using multiple
financial instruments. Different billing proportions were used to evaluate economic position in
aspects of profitability, Solvency, Activity and Financial Stability. From the research it is clear that
the economic output of 37 of the company is adequate. The company's development is steady and
demonstrates a higher position in all the fields it operates. It was suggested that the business decrease
the spending as it rises each year. Reducing expenditure will boost profitability.

S S VERMA (2013): the author explains in this paper about the concept of Compressed Air
Vehicles, the challenges facing such vehicle technology and the solutions for the same. Engine
technology, energy density, air storage and refuelling, temperature control, etc. are the challenges
facing such vehicles when they are manufactured and put into operation. Tata Motors took an
initiative to manufacture such vehicles by joining forces with French Company Motor Development
International (MDI) and was made with the "Proof of Technical Concept" but is still in progress /
work condition. Thus, in attempt to render it a good Greener Vehicle Concept, it is necessary to
create attempts to store the Compressed Air supply of High Energy Density, no Heating etc.

Morris and Shin (2010): describes the liquidity percentage conceptually as "realizable money on
the equilibrium chart to short-term liabilities." In effect, "realizable money" is described as fluid
resources alongside other resources to which a haircut was implemented. Ration assessment is one of
the standard ways of evaluating the business using economic reports and creating norms that merely
interpret economic feeling.

Dong (2010): reported that the profitability and liquidity of the firms is affected by the management
of working capital. It has been discovered that the connection between these factors is highly
positive. This denotes a decline in profitability owing to a rise in the process of money
transformation. It is also found that if the number of days of receivable account and inventories

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decreases then the profitability will increase the number of days of receivable accounts and
inventories in the effective functioning of any organization.

Ross (2000) and Myers (2003): researched surplus liquidity is a business cost. Current assets may
deposit or invest money and produce interest income as an alternative. Thus, the interest rate is the
cost of working capital over funding. The business must either obtain short-term loans or buy some
liquid assets in the event of liquidity deficits, which is also a cost. Profitability advantages only from
the optimum rate of liquidity.

Kumar Sumesh & Kaur Gurbachan (2014): The automotive industry is the dominant force in the
world economy. After liberalization, Indian automotive industry has appeared as a major
contribution to India's GDP. The research found that there is no important distinction in the mean
rating of different financial ratios of Maruti Suzuki and Tata engines, but in fulfilling their long-term
commitments and the effectiveness of using the property demonstrate the important distinction in the
effectiveness of both companies.

Krishnaveni, M. & Vidya, R. (2015): Finding that India's automotive industry is now a highflying
industry and developing as an export center in the aftermath of liberalization and globalization. This
article reviews India's classification of smart automotive manufacturing, revenues and imports.
Growth in industry can be seen in pre-and post-liberalization terms. Increase 15 percent in customs
duties on cars and MUVs as govt enables 100 percent FDI to encourage local manufacturers and
concessional import duties on designated hybrid vehicle parts.

Saswata Chatterjee (2010): concentrated on the significance of set and current assets. It affects
profitability and liquidity directly. In the company, a trend has been noted that most businesses boost
the profit and loss percentage because this deed shrinks the magnitude of operating assets compared
to revenues. But if businesses want to boost or enhance their liquidity, then their working capital
must be increased.

Chen & Shimerda (1981): examined each ratios contains some unique and common factors.
Therefore, the study recommends selecting the ratios that capture the common and unique

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characteristic of an entity and also that provides useful insights on financial performance of an
organization.

Barnes (1987): stated that financial ratios are used for various purposes. It can be, to ascertain the
financial performance of an organization, to check the cash inflows and outflows within the
organization, to check firm’s ability to make appropriate investments etc. They often compared with
established standards to have better idea on financial soundness of the company.

Delen, Kuzey & Uyar (2013): analyzed the ratios that are important to check the financial viability
of an entity. Ratios like Net Profit Margin, Debt Equity, Asset Turnover, and Leverage Ratios have
significant impact on firm’s financial performance and also stated that two profitability ratios
Earnings before Tax to Equity Ratio and NPM impacts companies performance the most.

Ohlson (1980): concluded that the predictive power of any model depends on the choice of variables
chosen and financial report available and secondly ratios have become robust measure for
forecasting financial performance of the firms. So, it becomes necessary to combine this technique
with some other models in order to achieve more precise and reliable results.

BINOD KUMAR SINGH (2012): the paper describes how NANO was launched on the Indian
market, its comparative analysis with other car brands such as Maruti 800, Alto and Santro, how
environmentally friendly it is, its scope and how it affected the car segments of "B" & "C." Tata
Motors Nano has been appreciated by many sources due to its low cost and Green initiatives such as
compressed air used in it as a fuel and its electric version namely E-Nano. Nano's release could
substitute the 2 wheelers, cargo vehicles at the entrance stage and even the 3 wheelers used for public
transport. Thus, Nano not only supplied the environmentally friendly alternative, but also offered the
status symbol to clients with 2 wheelers only or uses public means for transportation.

Hotwani Rakhi (2013): the author examines the company's stance on profitability and development
in the context of Tata Motors ' revenues and profitability over the previous 10 years. Data is
evaluated by means of supplies, standard deviations and variance coefficient. The research shows
that a powerful connection does not exist between business revenues and profitability.

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Sarangi Pradeepta K et al (2014): a survey was undertaken to predict the automotive industry's
potential pattern. The research outlined the six distinct tests that were conducted to evaluate 38
scores for the next 3 years for a span of 12 years information. Using a spreadsheet, a linear trend was
traced and extended to calculate potential scores in each experiment graph.

Zafar S.M.Tariq & Khalid S.M (2012): the research investigated the calculation of proportions
from financial statements ready as required leadership strategies on depreciation and stock valuation.
Ratio is a straightforward numerator comparative with a denominator that is unable to create a full
and genuine company image. Results are manipulated and other factors that affect company
performance by promoters may not be highlighted.

Shende Vikram (2014): this study will help fresh entrants and current vehicle manufacturers in
India to figure out the requirements of their customers and their business offers. The aim of the
research is to identify variables affecting the efficiency of clients for specific car section. This
research will assist define customer demands for new entrants and present car manufacturing
companies in India and their company possibilities. The study objective is to define factors that
affect customer effectiveness for particular segment of the vehicle.

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 CHAPTER 3
RESEARCH METHODOLOGY

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3.1 INTRODUCTION:
Research methodology is the process of collecting the facts about the certain definite aspects of the
community to obtain the well-defined information. Research methodology tells us about the both
reactionary and progressive elements of the economy. The main purpose of research methodology is
to give the well-furnished plan to carry out the research.

According to S. Bhattacharya, “Research methodology is the scientific study of its conditions and
needs purpose of presenting a constructive programme of industrial advancement, a method of
business introspection checked by statistical measurement and the comparative standards of business
experts” The investigator implemented data analysis in a way that combines significance in operation
to intent with economy.

3.2 RESEARCH DESIGN:

Nature of study: This is an analytical study

Nature of data: Secondary data is used in the study, as the study mainly depended on secondary
data.
Source of data: Secondary data is collected from company’s website - www.tatamotors.com
Period of study: The study is based on the current year and past four years.

3.2.1 Sample design:

Size of sample: The sample size is limited to one company. The company selected is TATA Motors
ltd.

3.3 NEED OF STUDY:

1. Assessing the operational efficiency and managerial effectiveness of the company

2. Analyzing the financial strengths and weaknesses and credit worthiness of the company
3. Providing information’s about the cash position company is holding and how much debit the
company has in relation to equity

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4. Studying the reasonability of stock and debtors held by the company

3.4 SCOPE OF THE STUDY:

The study is based on the accounting information of TATA MOTORS. The study covers the
financial statement such as income statements and balance sheet. The scope of the study involves the
various factors that affect the financial status of the company. This study finds out the operational
status of the organization and allocation of resources to improve the status of the organization. The
data of the past five years are taken into account for the study. The performance is compared within
those periods. This study finds out the areas where TATA MOTORS can improve the status clarity
of its assets and funds employed.

3.5 OBJECTIVES OF THE STUDY:

1. To compare and analyze the financial statements for the past FIVE financial years.
2. To know the Profitability, Activity, Solvency & Financial stability position of TATA MOTORS.
3. To estimate the overall profitability of the concern.
4. To bring out the profile of the unit.

3.6 TOOLS OF ANAYLSIS:

For analysis, the data collected through secondary source especially the financial statements of the
company, statistical tools such as ratio analysis and comparative balance sheet are used and the
results are interpreted using tables, graphs and bar diagrams.

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 CHAPTER 4
LARGE SCALE INDUSTRY – AUTOMOBILE INDUSTRY
IN INDIA

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4.1 INTRODUCTION TO LARGE SCALE INDUSTRY:

Industries at different scales constitute the various parts of an economy. Large scale businesses and
industries employ a significant number of people and offer politicians generous support. In India,
large-scale industries are the ones with a fixed asset of more than one hundred million rupees. The
Indian economy relies heavily on such industries for economic growth, generation of foreign
currency, and the creation of job opportunities for millions of Indians.

The term ‘large-scale’ is universal in nature and includes different types of industries. In India, the
following heavy industries fall under the purview of large scale industries:

 Iron and Steel Industry

 Textile Industry

 Automobile Manufacturing Industry

 Over the last two decades, Information and Technology (IT) industry has evolved and has
contributed huge revenues while creating thousands of jobs for Indians. Hence, many economists
include it in the large-scale industry sector.

 Telecom Industry

4.1.2 AUTOMOBILE INDUSTRY PROFILE:

The automobile industry comprises a wide range of companies and organizations involved in

the design, development, manufacturing, marketing, and selling of motor vehicles. India’s
automobile industry is one of the fastest growing auto markets in the world. The industry is at the
crossroads with global mergers and relocation of production centres to emerging developing
economies.

The last 20 years saw the automobile industry make it among the large scale industries in India. This
is primarily because of the government’s liberalization in the automobile sector.

Since then, the automobile industry has seen steady growth with the entry of new manufacturers.
This includes multinational transport companies which saw the need to complement India’s
economic growth by increase in the transport business.

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Foreign companies found India as a feasible place for expansion of the automobile industry. Leading
Indian automobile companies like Tata Motors, Ashok Leyland, etc. have gone as far as
collaborating with leading multinational automobile businesses for technology transfer.

The Indian automobile companies made it big as with the use of the updated automotive technology.
They have been successful to make India’s automobile industry fight for a slice of the world auto
industry market.

To date, India’s automobile industry has diversified its product range by coming up with mass
production of various categories of vehicles. They have been producing passenger cars, multi-utility
vehicles, commercial vehicles, two-wheelers and three-wheelers too.

Today, the large car manufacturers has a production facility in the different markets and from each
platform a car is produced for that market as well as for exports to other markets.

Big players in automobile industry do not have just one big factory which exports its products to all
other countries. It may have the same technical platform, but the design and the options and features
differ between countries. They are different because the demands of customers differ between
countries.

4.2 OVERVIEW OF INDIAN AUTOMOBILE MARKET:

Although the appearance of mass production in the automotive industry coincided with the

emergence of large-scale business organization, the two had originated independently. They were
related, however, and influenced each other as the industry expanded. Only a large firm could make
the heavy investment in plant and tooling that the assembly line required.

The outstanding contribution of the automotive industry to technological advance was the
introduction of full-scale mass production, a process combining precision, standardization,
interchange ability, synchronization, and continuity.
The pioneer automobile manufacturer not only had to solve the technical and financial problems of
getting into production but also had to make a basic decision about what to produce.

The Two Wheelers segment leads the Indian Automobiles market with 80% market share owing to a
growing middle class and a young population. This is followed by the Passenger Vehicle (PV)

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segment with 14% market share. India is also likely to benefit from low car penetration, emerging
demographic dividend, increasing urbanization, rising incomes levels and consumption.
 
India’s annual production in FY 2021 was 22.7 mn vehicles and 13 million vehicles from April to
October 2021.

In the Automobile market in India, Two-wheelers and passenger cars accounted for 81.2% and
14.6% market share, respectively. Passenger car sales are dominated by small and midsized cars.

Overall, Indian automobile export was 4.1 million vehicles in FY21. Indian automobile exports stood
at 1,419,430 units from April 2021 to June 2021 as compared to 436,500 units In April 2020 to June
2020.

4.3 CURRENT SCENARIO OF THE AUTOMOBILE INDUSTRY

According to Commerce Minister Kamal Nath, India is an attractive destination for global auto
giants like BMW, General Motors, Ford and Hyundai who were setting base in India, despite the
absence of specific trade agreements.

 On the cost front of Indian automobile industry, OEMs are eyeing India in a big way,
investing to source products and components at significant discounts to home market.

 On the revenue side, OEMs are active in the booming passenger car market in India.

 By 2011, India is expected to witness over Rs 40,000 crore of investment. The automobile
industry in India is on an investment overdrive. Be it passenger car or two-wheelers
manufacturers, commercial vehicle makers or three-wheelers companies.

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The automobile industry in India is on an investment overdrive. Be it passenger car or two wheelers
manufacturers, commercial vehicle makers or three-wheelers companies – everyone appears to be
in a scramble to hike production capacities.

4.4 ABOUT OF THE COMPANY:

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, 4th largest truck manufacturer,
and 2nd largest bus manufacturer by volume.

Founded in 1945 as a manufacturer of locomotives, the company manufactured its first commercial
vehicle in 1954 in collaboration with Daimler-Benz AG, which ended in 1969. Tata motors entered
the passenger vehicle market in 1991 with the launch of the Tata Sierra, becoming the first Indian
manufacturer to achieve the capability of developing a competitive indigenous automobile. In 1998,
Tata launched the first fully indigenous Indian passenger car. Tata motors acquired the South Korean
truck manufacturer Daewoo commercial vehicles company in 2004 and purchased jaguar range rover
from ford in 2008.

Tata Motors Limited is India’s greatest automobiles organization with incomes of Rs.20,483 crores
2004-05 it is the chief with the aid of for in business cars hip separately piece and the next largest in
the passenger cars market with prevailing invention in the compacted mud dimension vehicle and
utility automobiles segments.

The business enterprise is the world’s fifth greatest intermediate and heavyweight business
vehicle manufacture. The company’s 2200 employees are guided via method of the model to be
throughout the distance and extensiveness of India. Over 3 million Tata cars play on India roads due
to the element that the initial moved out in 1954.

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New York inventory exchange has additionally developed as an international vehicle company. In
2004 it received the Daewoo Marketable Automobiles Company, Korea’s 2nd biggest tune maker.
The rechristen over Tata Daewoo business cars employer has before now began the launch original
goods.

In 2005 Tata motors received a 21 percent in Hispono Cascara; reputation Spanish, manufactures,
with an choice to accumulate the remaining stake as well. These acquisitions will similarly
prolong Tata Motors global footprint, set up through exports considering the statistic that 1961, the
company’s viable and traveller cars are even now presence promoted in fairly a rare countries in
Europe, Africa. It has meeting operations in Malaysia, Kenya, Bangladesh, Spain, Ukraine, Russia
and Senegal.

The basis of the corporation’s boom over the final 50 ages is a cavernous appreciation of
monetary incentives and client desires and the capability to translate them into purchaser –
designed offering via leading part R and D 14000 eng and scientists the enterprise engineering study
centre established in 1966 has enabled pioneering applied sciences and products.

4.4.1 TATA MOTORS: HISTORY IN BRIEF:

Tata Motors is a member of the Tata Group that handles its Tata Sons shareholding. Established as a
locomotive manufacturing facility in 1935, the firm extended its activities to the commercial vehicle
industry in 1954 after forming a joint venture with Germany's Daimler-Benz AG. Over the years,
Tata Motors Ltd. has evolved into a multinational company based in Mumbai, India. It was once
regarded as TELCO (TATA Engineering and Locomotive Company) as part of the Tata Group.
Following the takeover of British car companies Jaguar and Land Rover in 2008, Tata Motors has
combined income of USD 16 billion. His concentrate on developing in-house technological
capacities was a separate element that was obviously discernible within Tata Motors mode of
service. The company's Engineering Research Center, founded in 1966, has allowed groundbreaking
techniques and products with more than 2,000 technicians and researchers. The business now has
R&D centres in Pune, Jamshedpur, India, and South Korea, Spain, and Great Britain. The first
indigenously built Light Commercial Vehicle, India's first Sports Utility Vehicle, and the Tata India,

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India's first completely native passenger car in 1998 was created by Tata Motors. Tata India became
India's biggest sale vehicle in its section within two years of its release. In 2005, by 107 introducing
the Tata Ace, India's first indigenously built mini-truck; the firm revealed its People's Car, the Tata
Nano, which India and the globe looked forward to receiving in January 2008. The Tata Nano was
introduced in India in March 2009 as scheduled. It has a spacious seat with ample arm space and
headroom designed with a community in mind. Four people can comfortably be seated. Its
development of mono-volume will put a fresh benchmark for tiny vehicles. Its efficiency in safety in
India reaches legislative demands; the output of its tailpipe emissions reaches legislative demands
too.

Tata Motors revealed its fresh variety of conventional globe trucks in May 2009. These trucks are
planned to "make the finest output in the globe at a reduced price of the life cycle." 12 In June 2009,
the Indian industry launched a fresh variety of premium luxury cars from Jaguar and Land Cover.
The Jaguar XF, XFR and XKR as well as Land Rover Discovery 3, Range Rover Sport and Range
Rover are included. In addition to product development, Tata Motors ' R&D arm also focuses on
environmentally sensitive emission and new energies techniques.

The firm is presently involved through its subsidiaries in aerospace and automotive alternatives,
building machinery production, automotive parts manufacturing and supply chain activities, machine
tools and factory automation systems, high-precision instruments and plastic and electronic
components for automotive and computer applications, and automotive retail and utility apps.

In line with the Tata Group's tradition, Tata Motors is also dedicated to Corporate Social
Responsibility in text and mood. It is a signatory to the Global Compact of the United Nations and is
fully involved in society and cultural projects on labour and environmental norms with the principles
of the Global Compact.

The foundation of the company’s growth over the last 69 years is a deep understanding of economic
stimuli and customer needs, and the ability to translate them into customer-desired offerings through
leading edge R&D.

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Established in 1945, Tata Motors’ presence cuts across the length and breadth of India. Over 8
million Tata vehicles ply on Indian roads, since the first rolled out in 1954, with consolidated
revenues of INR 2, 32,834 crores (USD 38.9 billion) in 2013-14. It is the leader in commercial
vehicles in each segment, and among the top in passenger vehicles with winning products in the
compact, midsize car and utility vehicle segments. 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 Tata Motors Group’s over 60,000 employees are guided by the
mission “to be passionate in anticipating and providing the best vehicles and experiences that excite
our customers globally.''

Tata Motors' principal subsidiaries include the British premium car maker Jaguar Land Rover (the
maker of Jaguar, Land Rover, and Range Rover cars) and the South Korean commercial vehicles
manufacture Tata Daewoo. Tata Motors has a bus-manufacturing joint venture with Marco polo S.A.
(Tata Marco polo), a construction-equipment manufacturing joint venture with Hitachi (Tata Hitachi
Construction Machinery), and a joint venture with Fiat which manufactures automotive components
and Fiat and Tata branded vehicles. The milestones achieved by the company in 2013 are:

 Tata Nano becomes the first Auto Brand in India to cross 3 million fans on Face book.
 The Tata Indigo eCS enters Limca Book of Records.
 Tata Motors' Jamshedpur plant rolls out its two millionth trucks.
 Tata Nano offered industry first phenomenon - Swipe your credit card and drive home a
Nano.
 Tata Motors launches the world-class range of Tata PRIMA trucks in Sri Lanka

Tata Motors is listed on the Bombay Stock Exchange, where it is a constituent of the BSE SENSEX
index, the National Stock Exchange of India, and the New York Stock Exchange. Tata Motors is
ranked 314th in the 2012 Fortune Global 500 ranking of the world's biggest corporations.

4.4.2 MISSION AND VISION:

Tata Motors ltd innovate mobility solutions with passion to enhance the quality of life. By FY 2024,
the company will become the most inspirational Indian auto brand, consistently winning, by

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  Delivering superior financial returns.
 Delivering sustainable mobility solutions.
 Exceeding customer expectations.
 Creating a highly engaged work force.

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 CHAPTER 5
DATA ANALYSIS

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5.1 DATA ANAYLYSIS:
Data analysis is a process of inspecting, cleansing, transforming, and modelling data with the goal of
discovering useful information, informing conclusions, and supporting decision-making. Data
analysis has multiple facets and approaches, encompassing diverse techniques under a variety of
names, and is used in different business, science, and social science domains. In today’s business
world, data analysis plays a role in making decisions more scientific and helping businesses operate
more effectively.

Although many groups, organizations, and experts have different ways to approach data analysis,
most of them can be distilled into a one-size-fits-all definition. Data analysis is the process of
cleaning, changing, and processing raw data, and extracting actionable, relevant information that
helps businesses make informed decisions. The procedure helps reduce the risks inherent in decision
making by providing useful insights and statistics, often presented in charts, images, tables, and
graphs.

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(A) Liquidity Ratio (short term solvency ratio)

1. Current Ratio = current assets/current liabilities

Table 5.1 showing current ratio

YEAR CURRENT RATIO

2016 0.63
2017 0.59
2018 0.62
2019 0.57
2020 0.53

The following table shows current ratio. The current ratio of 2:1 is said to be an ideal one. This ideal
ratio means that the current assets shall be at least twice the current liability. The table shows that the
current ratio of the company in past five years is below ideal ratio. It is almost consistent for the last
five years. So the current ratio of the company is highly unsatisfied. That means it is not able to meet
even the current liabilities of the company.

Figure 5.1 showing current ratio

CURRENT RATIO
0.64
0.62

0.6
0.58

0.56 CURRENT RATIO

0.54

0.52
0.5

0.48
0.46
2016 2017 2018 2019 2020

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2. Liquid Ratio = liquid assets/current assets

Table 5.2 showing liquid ratio

YEARS LIQUID RATIO

2016 0.27

2017 0.24

2018 0.29

2019 0.27

2020 0.26

The following table shows liquid ratio. Generally, liquid ratio of 1:1 is considered as satisfactory.
This means that liquid assets are just equal to the current liabilities. For this company the past five
years show a less than liquid ratio, when compared to the satisfactory ratio. It further means that, the
company is not able to pay off its current liabilities.

Figure 5.2 showing liquid ratio

LIQUID RATIO
0.35

0.3

0.25

0.2 LIQUID RATIO

0.15

0.1

0.05

0
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 26

3. Super quick ratio = super quick assets/current liabilities

Table 5.3 showing super quick ratio

YEARS SUPER QUICK RATIO

2016 0.04

2017 0.02

2018 0.03

2019 0.06

2020 0.14

The following table shows super quick ratio. The acceptable norm of super quick ratio is 0.5:1.
Company’s super quick ratio shall be equal to half of current liabilities. Here, the company shows an
increasing super quick ratio. But it is not satisfactory because it is lower than the ideal ratio of the
super quick ratio.

Figure 5.3 showing super quick ratio

SUPER QUICK RATIO

0.16
0.14
0.12
0.1 SUPER QUICK RATIO
0.08
0.06
0.04
0.02
0
2016 2017 2018 2019 2020

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(B) Solvency Ratio (long term solvency ratio)

4. Debt-equity ratio = long term debt/share holders’ fund

Table 5.4 showing debt-equity ratio

YEARS DEBT EQUITY RATIO

2016 0.46

2017 0.65

2018 0.65

2019 0.63

2020 0.8

The following table shows debt-equity ratio. The standard debt-equity ratio is 1:1. Here, the
company shows lower ratio for the past five years. It indicates that it is better for the creditors. But
this lower ratio is not a satisfactory ratio for the share holders’ as it indicates the firm has not been
able to use outsiders fund to manage their earnings.

Figure 5.4 showing debt-equity ratios

DEBT EQUITY RATIO

0.9
0.8
0.7
0.6
0.5 DEBT EQUITY RATIO

0.4
0.3
0.2
0.1
0
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 28

5. Proprietary ratio = share holders’ fund/total assets

Table 5.5 showing proprietary ratio

YEARS PROPRIETARY RATIO

2016 0.41

2017 0.36

2018 0.34

2019 0.36

2020 0.29

The following table shows proprietary ratio. A ratio of 0.5:1 or above is considered as satisfactory.
Here, the proprietary ratio is declined for the last five years which is a greater risk to the creditors. In
the share holders’ point of view, the lower ratio indicates the company is highly dependent on
creditors for its working capital. Therefore, the company’s financial position for the last five years is
not sound.

Figure 5.5 showing proprietary ratio

PROPRIETARY RATIO
0.45
0.4
0.35
0.3
0.25 PROPRIETARY RATIO
0.2
0.15
0.1
0.05
0
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 29

6. Solvency ratio = total assets/total debt

Total debt = long term borrowings + current liabilities

Table 5.6 showing solvency ratio

YEARS SOLVENCY RATIO

2016 1.93

2017 1.67

2018 1.58

2019 1.65

2020 1.54

The following table shows solvency ratio. If the ratio is more than one it is treated as satisfactory.
Here, the company shows higher ratio than the satisfactory ratio which indicates the solvency and
financial position are strong. And in the creditors’ point of view, it shows a greater margin of safety
to them.

Figure 5.6 showing solvency ratio

SOLVENCY RATIO
2.5

1.5 SOLVENCY RATIO

0.5

0
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 30

7. Fixed assets to net worth ratio = fixed assets/total share holders’ fund

Table 5.7 showing fixed assets to net worth ratio

YEARS FIXED ASSETS TO NET WORTH RATIO

2016 1.15

2017 1.32

2018 1.33

2019 1.29

2020 1.62

The following table shows fixed assets to net worth ratio. The standard rate of the fixed assets to net
worth ratio is one. The company shows higher ratio for the past five years, when compared to the
standard ratio. A higher ratio indicates that the outsiders’ funds have been used to acquire a part of
fixed assets.

Figure 5.7 showing fixed assets to net worth ratio

FIXED ASSETS TO NET WORTH

RATIO
1.8
1.6
1.4
FIXED ASSETS TO NET
1.2 WORTH RATIO
1
0.8
0.6
0.4
0.2
0
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 31

8. Fixed assets ratio = (fixed assets/long term funds)*100

Long term funds = share capital + reserves and surpluses + long term liabilities

Table 5.8 showing fixed assets ratio

YEARS FIXED ASSETS RATIO

2016 181%

2017 173%

2018 180%

2019 180%

2020 161%

The following table shows fixed assets ratio. The standard percentage is 100%. Here the company
shows decreased mode for the past five years but it is higher when compared to the standard rate.
This indicates that the company’s fixed assets are more than long term funds. That means fixed
assets have been financed out of short term funds. So the company’s financial position is not sound.

Figure 5.8 showing fixed assets ratio

FIXED ASSETS RATIO

185%
180%
175%
170% FIXED ASSETS RATIO

165%
160%
155%
150%
2016 2017 2018 2019 2020

THE KPES COLLEGE 2022-2023 Page 32

(C) Profitability Ratio

9. Gross profit ratio = (gross profit/revenue from operation)*100

Table 5.9 showing gross profit ratio

YEARS GROSS PROFIT RATIO

2016 44.91%

2017 40.39%

2018 38.19%

2019 40.26%

2020 41.92%

The following table shows gross profit ratio. There is no norm to interpret gross profit ratio.
Generally, a higher ratio is considered better. Here the company has highest ratio for the last five
years. So the gross profit ratio is satisfied.

Figure 5.9 showing gross profit ratio

GROSS PROFIT RATIO

46.00%

44.00%

42.00%
GROSS PROFIT RATIO
40.00%

38.00%

36.00%

34.00%
2016 2017 2018 2019 2020

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10. Net profit ratio = (net profit after tax/revenue from operation)*100

Table 5.10 showing net profit ratio

YEARS NET PROFIT RATIO

2016 -0.15%

2017 -5.48%

2018 -1.76%

2019 2.92%

2020 -16.59%

The following table shows net profit ratio. Generally, the ideal net profit ratio is 10%. The company
has failed to attain the standard ratio, which means the company is under pricing. Also shows lower
profitability and lower return to the share holders of the company. Net profit ratio for the past five
years shows negative value because of net loss for the mentioned period except 2018-2019.

Figure 5.10 showing net profit ratio

NET PROFIT RATIO

5.00%

0.00%
1 2 3 4 5
-5.00% NET PROFIT RATIO

-10.00%

-15.00%

-20.00%

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11. Operating cost ratio = (operating cost/revenue from operation)*100

Table 5.11 showing operating cost ratio

YEARS OPERATING COST RATIO

2016 8.42%

2017 9.52%

2018 7.55%

2019 7%

2020 11.87%

The following table shows operating cost ratio. The ideal ratio of operating cost ratio is 60% to 80%.
Although, the lower it is, the better. Here, the company has lower ratio, which indicates that the
expenses are decreasing. This is a positive sign for the company.

Figure 5.11 showing operating cost ratio

OPERATING COST RATIO

14.00%
12.00%
10.00%
8.00% OPERATING COST RATIO

6.00%
4.00%
2.00%
0.00%
2016 2017 2018 2019 2020

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12. Operating profit ratio = (operating profit/revenue from operation)*100

Operating profit = Net profit before taxes + Non-operating expenses – Non-operating incomes

Table 5.12 showing operating profit ratio

YEARS OPERATING PROFIT RATIO

2016 68.34%

2017 69.65%

2018 72.22%

2019 73.85%

2020 59.47%

The following table shows operating profit ratio. An operating profit ratio higher than 15% is
considered good. The company has higher ratio for the past five years. So it indicates that the
company is earning enough money from business operations to pay for all of the associated costs
involved in maintaining the business.

Figure 5.12 showing operating profit ratio

OPERATING PROFIT RATIO

80.00%
70.00%
60.00%
50.00% OPERATING PROFIT
RATIO
40.00%
30.00%
20.00%
10.00%
0.00%
2016 2017 2018 2019 2020

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 CHAPTER 6
CONCLUSION AND RECOMMENDATION

THE KPES COLLEGE 2022-2023 Page 37

6.1 CONCLUSION:
I would like to conclude that the prosperity of Tata Motors Ltd. is wealthy. The study highlights, the
financial performance of Tata Motors Ltd is satisfactory. Tata Motors Company has shown its
impact on industry. We can see the downfall of the company, but it is expected, as it is such a big
company.

Looking at all the five years, 2019 is considered the best financial year out of all the five years, as it
has improved its profitability in the year 2019.These changes in the profits might have occurred due
to:

1. High taxation

2. High cost of borrowed funds

3. High depreciation cost

4. High expenses

Which can be modified by implementing proper financial management concepts; the results also
highlights few areas that needs to be considered like current ratio can be a matter of concern for the
investors as it directly impacts the company’s financial performance.

Also, the company has performed well in the 2019 before COVID-19 pandemic and the possible
reasons could be the policies adopted by the company such as voluntary retirement scheme and sell-
off non-core assets has worked well in favour of the company.

Thus it can be concluded that inner strength of the company is remarkable. Company can further
improve its profitability through optimum capital gearing and reduction in Administration and
Financial expenses.

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6.2 SUGGESTIONS:
I would like to mention here some suggestions which may be useful for important decision making
and for the further research study on financial performance and also for the betterment of the selected
Automobile industry

1. The management should try to utilize their production capacity fully in order to reduce factory
overheads and to utilize their fixed assets properly.

2. Cost control is the most important factor to increase financial performance. The management of
the car manufacturing companies should try to increase the production so as to get economies of
large-scale production.

3. The management should try to adopt cost reduction techniques in their companies to increase the
profitability of the companies, it is suggested to control the cost of goods sold, operating expenses
and other revenue expenses of car manufacturing companies under study.

4. Cost accounting and cost audit should be made mandatory and cost sheet along with annual
financing statement should be prepared.

5. The selected car manufacturing company is highly capital intensive in nature but the management
should plan carefully to form the policy of purchase of fixed assets so that the funds may be properly
utilized.

6. To strengthen the financial efficiency, long-term funds should be used to finance core current
assets and a part of temporary current assets.

7. It is suggested that the Company can take more measures with regard to of its competitors.

8. It is suggested that the Company has to adopt innovation in its products at various promotional
activities.

9. It is suggested that the Company has to build up its consumer base across the levels of country, as
an expanded consumer base will be helpful in building the market of the Company.

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6.3 FINDINGS:
1. Current ratio is below the ideal ratio and it is in a declined rate.

2. Liquid ratio of the company is not satisfactory because it is lower than the standard ratio.

3. Super quick ratio is not satisfactory because it is lower than the ideal ratio of the super quick ratio.

4. The company’s short term assets are not sufficient to meet the short term liabilities.

5. The company is highly dependent on creditors for the working capital and its outsiders’ funds are
not sufficient to manage their earnings.

6. The company’s solvency position is strong as they have sufficient total assets to meet their debts.

7. The company use share holders’ funds and short term funds to finance the fixed assets.

8. The company’s equity share capital is less than fixed income bearing funds, which is a satisfactory
element to the share holders.

9. The company is in loss for the past five years except 2019, which means that the company is not
able to pay the returns to share holders.

10. The company has to improve its net profit. The company shows lower ratio in operating cost
ratio, which is a satisfactory.

11. Operating profit ratio shows higher value indicating that it is a good sign.

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 CHAPTER 7
BIBLIOGRAPHY

THE KPES COLLEGE 2022-2023 Page 41

REFERENCES:

1. Altman, E. I. (1968). Financial Ratios, Discriminate Analysis and the Prediction of Corporate
Bankruptcy. The Journal of Finance, 23(4)589

2. Barnes, P. (1987). The Analysis and Use of Financial Ratios: A Review Article. Journal of
Business Finance & Accounting, 14(4), 449-461.

3. Chen, K. H., & Shimerda, T. A. (1981). An Empirical Analysis of Useful Financial Ratios,
Financial Management, 10(1), 51

4. Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios a
decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.

5. Edmister, R. O. (1972) an Empirical Test of Financial Ratio Analysis for Small Business Failure
Prediction. The Journal of Financial and Quantitative Analysis, 7(2), 1477

6. Ohlson, J. A. (1980) Financial Ratios and the Probabilistic Prediction of Bankruptcy. Journal of
Accounting Research, 18(1), 109

7. Pandya, B. H. (2012) Financial Analysis of Tata Steel Ltd - A Case Study. International Journal of
Research in Commerce & Management, 3(1), 93-97.

8. Annual Report, Tata Motors (2016-2020)

 Brigham, E. and Houston, J., n.d. Fundamentals of financial management.

 Higgins, R., Koski, J. and Mitton, T., 2019, Analysis for financial management, New York,
NY: McGraw-Hill Education.
 Palmer, J., 1983, financial ratio analysis, New York, N.Y.: American Institute of Certified
Public Accountants.

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WEB REFERENCE:

https://www.economicsdiscussion.net/india/large-scale-industries/top-10-large-scale-
industries-in-india/19171

https://www.3ecpa.co.in/blog/consider-these-large-scale-industries-in-india/

https://www.ibef.org/industry/india-automobiles.aspx

https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-
labor/businesses-and-occupations/automobile-industry

https://www.tatamotors.com/investors/annual-reports/

https://www.moneycontrol.com/financials/tatamotors/ratiosVI/TM03

https://www.equitymaster.com/research-it/annual-results-analysis/TELCO/TATA-
MOTORS-2020-2021-Annual-Report-Analysis/944

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