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Project Report On TECHNICAL ANALYSIS OF TATA MOTORS Submitted To: Prof.

. Sapna Jain Submitted By: Pawan Rathi In partial fulfillment for the award of the degree Of

MBA+PGPM-INTERNATIONAL
In

INSTITUTE OF MANAGEMENT AND DEVELOPMENT Sec.63 NOIDA

MAHARSHI DAYANAND UNIVERSITY ROHTAK

INDEX S.No. 1 2 3 4 5 6 7 8 Particulars Introduction Strategic Framework of Tata Motors Profit and Loss A/C Balance Sheet Capital Structure Question No. 1st and 2nd Question No. 3rd Question No. 4th Page No. 4 5 7 8 9 10 11 14

Objective of the study:Analysis of financial data to find out about company that it: Is the company is revenue growing? Is it actually making profit? Is it in strong enough position to beat out its competitor in future? Is it able to repay its debts?

INTRODUCTION
The Tata Group was founded in 1868 when India was under British Empire. The group formed their textile business in 1874 and Steel manufacturing in 1907. In 1945, Tata Sons Limited started the automotive business with manufacturing steam locomotive boilers after purchasing the shops of East Indian Railways from Government of India, which was under the British Government in that year. After purchasing these shops, the Tata sons decided to establish Tata Engineering and Locomotive Company Limited (TELCO Limited) and establish the primary manufacturing facility in Jamshedpur (an industrial city in Eastern India). This company was managed by J.R.D. Tata from 1945 to 1973 and by Sumand Moolgaokar from 1973 to 1988. Sumand established the second manufacturing facility in Pune India looking into the boom in the auto market. In 1991 Ratan Tata took over the Tata Empire from his uncle and moved the Tata group out of the sectors where they were not very competitive like Cement and Textiles. Today, Tatas largest manufacturing businesses are Steel and Motors after the consolidation carried out by Ratan Tata. As on end of financial year 2008, the Tata Group has an annual turnover in excess of $30 Billion out of which more than $9 Billion is contributed by Tata Motors. TELCO Limited is now widely known as Tata Motors that is among the worlds top five manufacturers of medium and heavy trucks and worlds second largest manufacturer of medium and heavy busses. Tata possess a strategic engagement with Mercedes Benz for assembling and selling Mercedes Benz commercial vehicles and passenger cars in India. Another strategic tie up that they possess is with Cummins pertaining to their diesel engines through Tata Holset Limited. In fact, Tata Motors contributed to the Cummins Diesel engines by adding turbo chargers on them vide their joint manufacturing operations with Tata Holset Limited. The only partnership of Tata that didnt go well was with Rover Group of Britain that went bankrupt in year 2005. Tata tried entering the European markets through a model named CityRover that faired poorly due to its negative publicity, higher price and poor quality compared to the competition. Ratan Tata is now 70 years old but still presents the image of a dynamic, innovative and revolutionary entrepreneur. He is known for high aggressive moves for the benefits of Tata Motors customers. In 1997, Tata Motors launched its first indigenously developed car named Indica that currently possesses more than 15% of the car market share in India. The other car models of Tata Motors that are popular in India and some markets of Asia are Tata Indigo, Tata Sierra, Tata Sumo and Tata Safari. In 2008, Tata achieved a global publicity due to two major activities that made headlines worldwide. In the Geneva Motor show they presented their fourseater small car named Nano priced about $2500 which is expected to be the cheapest car of the world. In March 2008, Tata Motors acquired the two globally prestigious companies Jaguar and Land Rover from Ford Motor Company. It is assessed that Tata Motors did so to achieve a new image of a global automotive company like Ford Motor Company given that their business span has largely remained indigenous within India for a long time.

Strategic Framework of Tata Motors


Tata Motors is certified as ISO 9001:2000 compliant in Quality Management System and as ISO 14001:1996 compliant in Environmental Management System. Hence, they possess global recognition in best practices that strengthens their branding at a global level. They are known to be very much customer focused and are very conscious about the fitment of their products for customer needs. They believe in continuous innovations as they keep on releasing new innovations in their existing models. Although the indigenous cars of Tata Motors do not compare with the engineering excellence of a global player like Ford Motor Company, they are well suited for Asian conditions where the comfort factor is more important than cruising at high speeds. Reviews by Indian Motor sites reveal that the Tata Motors Indica & Indigo models possess sluggish performance of engine in terms of speed and performance but are good in terms of fuel efficiency, maintainability, internal space that are more important factors given the road and traffic conditions in India. This reveals that Tata Motors have focused on the local conditions of the country and have designed cars that are more suitable for customer needs rather than imposing additional but useless engineering on them. Example, there is no point designing a car that can run at 100 miles per hour if the maximum speeds that can be achieved even at best roads is 70 miles an hour. One of the major success factors of Tata Motors are their supply chain excellence. The entire world is surprised by the launch of Tata Nano that shall be priced at $2500 approximately. An analysis by Fogarty, Justin (2009) reveals that Tata Motors could commit this price to the industry due to their excellent backend supply chain network. Tata Motors worked very early with their suppliers in arriving at the cost estimate of the car to the extent that even the functional specifications of the parts were completed much before even talking about the car to the markets. Tata Motors uses Ariba spend management solution as reported by Business Wire in 2005. Ariba is a software based platform that helps in reducing bottom line costs considerably. Tata Motors is a modest company when it comes to spending because one of their primary objectives has been achieving highest operational efficiencies at lowest costs. Tata Motors extensively uses Information Technology to support their business objectives. They possess Computer Aided Design and Computer Aided Modeling technologies, Siebel for Customer network management, SAP for supplier relationships and supply chain management, business logistics management, customer relationship management, human resources management and Finance management. They also use BMC Software for business services management under the ITIL and ISO 20000:2005 framework. The IT systems of Tata Motors limited are outsourced to their group company named Tata Technologies Limited. The BMC tools help them to manage IT services management, IT change management and also to comply with critical statutory laws and best practices like Sarbanes Oxley Act, ITIL, and ISO 20000:2005. [Ogilvy Public Relations Worldwide. 2008; BMC Software. 2008] Tata Motors do have the fundamentals to play the role of change agent for some of the major changes in the global automobile industry. Historically, Tata Motors have not done well in entering the motor markets in western countries and hence this acquisition presents an excellent opportunity for Tata Motors to establish their presence in UK and European car markets. Jaguar and Land Rover may not have done well in the recent past but they have remained the pride and heritage of Great Britain and are very close to heart of the native British citizens.

Tata Motors may just have to apply some technical innovations in these cars and re-price them according to the modern economics and these models for sure will again do wonders in the UK markets. One good thing about this acquisition is that the heritages of India and Britain have many common links including the very establishment of Tata Group that was done during the British rule in India. The fundamentals of Tata Motors possess many best practices of the British industries and hence the employees of Jaguar and Land Rover will be able to easily correlate the culture of Tata Motors with the original British heritage although these organizations have remained under American influence for so long. The biggest gamble that Tata Motors is currently playing is the Tata Nano targeted at urban middle class that are yet to afford a car and have been moving on Motorcycles. Tata Motors have priced this car at $2500 approximately which itself is a challenge for them to fulfill. They have already made a loss of more than 300 Million Dollars because they had to shift their entire plant for Tata Nano manufacturing from a location called Singur in the eastern part of India amidst local disturbances and security problems [http://www.india-server.com/news/tata-motors-pulls-out-of-singur-4172.html]. Miel van Blitterswijk & Rosen Karadzhov 29 The current manufacturing capacity of Tata Nano is 50,000 cars per year whereas Brown, Robin (2009) of motortorque.com expects a booking of 500,000 units in the first lot itself. This means that in the current capacity Tata Motors will take 10 years to fulfill the orders of first lot itself. After the Singur crisis, they are in the process of setting up a new factory such that the combined output of Tata Motors can be 250000 cars per year which again will take two years to fulfill the bookings of the first lot itself. Hence, Tata Nano is going to be a major challenge for Tata Motors whereby they would need to aggressively deploy new plants although they are reeling under cash crunch due to their acquisition of Jaguar and Land Rover in 2008. Hence, overall it is a do or die situation for Tata Motors if they succeed they will attain the status of no. 1 small car manufacturer of the world; but if they fail they would lose reputation in the global markets permanently.

Profit & Loss A/C of Tata Motors:


Profit & Loss account Mar '11 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 52,067.87 4,110.63 47,957.24 341.53 354.22 48,652.99 35,047.05 471.28 2,294.02 1,753.46 2,790.19 2,067.42 -817.68 43,605.74 Mar '11 12 mths PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) 5,047.25 1,383.79 3,663.46 1,360.77 106.17 2,196.52 0.00 2,196.52 384.70 1,811.82 8,558.69 0.00 1,274.23 192.80 6,346.14 28.55 200.00 314.93 ------------------- in Rs. Cr. ------------------Mar '10 12 mths Mar '09 12 mths Mar '08 12 mths 33,123.54 4,355.63 28,767.91 734.17 -40.48 29,461.60 20,891.33 325.19 1,544.57 904.95 2,197.49 964.78 -1,131.40 25,696.91 Mar '08 12 mths 3,764.69 471.56 3,293.13 652.31 64.35 2,576.47 0.00 2,576.47 547.55 2,028.92 4,805.58 0.00 578.43 81.25 3,855.04 52.63 150.00 202.70 Mar '07 12 mths 31,089.69 4,425.44 26,664.25 1,114.38 349.68 28,128.31 19,879.56 327.41 1,367.83 872.95 1,505.23 1,051.49 -577.05 24,427.42 Mar '07 12 mths 3,700.89 455.75 3,245.14 586.29 85.02 2,573.83 -0.07 2,573.76 660.37 1,913.46 4,547.86 0.00 578.07 98.25 3,853.74 49.65 150.00 177.59

38,173.39 28,538.20 2,800.10 2,877.53 35,373.29 25,660.67 1,220.86 921.29 606.63 -238.04 37,200.78 26,343.92 25,366.12 18,801.37 362.62 304.94 1,836.13 1,551.39 1,289.60 866.65

2,126.10 1,652.31 1,707.06 1,438.89 -740.54 -916.02 31,947.09 23,699.53 Mar '10 Mar '09 12 mths 5,253.69 1,246.25 4,007.44 1,033.87 144.03 2,829.54 0.00 2,829.54 589.46 2,240.08 6,580.97 0.00 859.05 132.89 5,705.58 39.26 150.00 259.03 12 mths 2,644.39 704.92 1,939.47 874.54 51.17 1,013.76 15.29 1,029.05 12.50 1,001.26 4,898.16 0.00 311.61 34.09 5,140.08 19.48 60.00 240.64

Balance Sheet of Tata Motors:


Balance Sheet of Tata Motors Mar '11 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Secured Loans Unsecured Loans Total Debt Total Liabilities 634.65 634.65 3.06 0.00 19,351.40 24.19 20,013.30 7,766.05 8,132.70 15,898.75 35,912.05 Mar '11 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 21,883.32 8,466.25 13,417.07 4,058.56 22,624.21 3,891.39 2,602.88 638.79 7,133.06 5,852.42 1,790.13 14,775.61 0.00 15,740.69 3,222.71 18,963.40 -4,187.79 0.00 35,912.05 4,798.83 314.93 ------------------- in Rs. Cr. ------------------Mar '10 12 mths 570.60 570.60 0.00 0.00 14,208.55 24.63 14,803.78 7,742.60 8,883.31 16,625.91 31,429.69 Mar '10 12 mths 18,416.81 7,212.92 11,203.89 5,232.15 22,336.90 2,935.59 2,391.92 612.16 5,939.67 5,248.71 1,141.10 12,329.48 0.00 16,909.30 2,763.43 19,672.73 -7,343.25 0.00 31,429.69 3,708.33 259.03 Mar '09 12 mths 514.05 514.05 0.00 0.00 11,855.15 25.07 12,394.27 5,251.65 7,913.91 13,165.56 25,559.83 Mar '09 12 mths 13,905.17 6,259.90 7,645.27 6,954.04 12,968.13 2,229.81 1,555.20 638.17 4,423.18 5,909.75 503.65 10,836.58 0.00 10,968.95 1,877.26 12,846.21 -2,009.63 2.02 25,559.83 5,433.07 240.64 Mar '08 12 mths 385.54 385.54 0.00 0.00 7,428.45 25.51 7,839.50 2,461.99 3,818.53 6,280.52 14,120.02 Mar '08 12 mths 10,830.83 5,443.52 5,387.31 5,064.96 4,910.27 2,421.83 1,130.73 750.14 4,302.70 4,831.36 1,647.17 10,781.23 0.00 10,040.37 1,989.43 12,029.80 -1,248.57 6.05 14,120.02 5,590.83 202.70 Mar '07 12 mths 385.41 385.41 0.00 0.00 6,458.39 25.95 6,869.75 2,022.04 1,987.10 4,009.14 10,878.89 Mar '07 12 mths 8,775.80 4,894.54 3,881.26 2,513.32 2,477.00 2,500.95 782.18 535.78 3,818.91 6,208.53 290.98 10,318.42 0.00 6,956.88 1,364.32 8,321.20 1,997.22 10.09 10,878.89 5,196.07 177.59

Capital Structure:
Capital Structure (Tata Motors) Period Instrument Authorized Issued Capital Capital From To (Rs. cr) (Rs. cr) 2010 2011 Equity Share 900 634.61 2009 2010 Equity Share 900 570.56 2008 2009 Equity Share 900 514.01 2007 2008 Equity Share 450 385.5 2006 2007 Equity Share 450 385.37 2005 2006 Equity Share 410 382.83 2004 2005 Equity Share 400 361.75

-PAIDUPShares (nos) 634613990 570557544 514008314 385503954 385373885 382834131 361751751 Face Value 10 10 10 10 10 10 10 Capital 634.61 570.56 514.01 385.5 385.37 382.83 361.75

Question 1:- Is the company revenue growing? Answer:- Yes, Company is revenue growing because Tata Motors' gross revenue for the year ended March 31, 2011, was Rs52,067.87 Cr., posting a growth of 35.9 per cent over Rs38,173 Cr. in the previous year. Revenues (net of excise) of Rs48,957.24 Cr., represented a growth of 35 per cent over Rs35,373.29 Cr. in the previous year. Cost pressure, including commodity price increase, resulted in a reduction in the operating margins to 9.9 per cent, and an operating profit (EBITDA) of Rs4,705.72 Cr. in the year, posting a growth of 14.2 per cent over Rs4,032.83 Cr. in the previous year. The PBT for the year is Rs2,196.52 Cr. as compared to Rs2,829.54 Cr. in the previous year. The PAT for the year is Rs1,812 Cr. as compared to Rs2,240 Cr. in the previous year.
60000

50000

40000 Net Sales Operting Profit 20000

30000

10000

0 2007 2008 2009 2010 2011

Question 2 :- Is it actually making profit? Answer:- For answer of that question we can calculate profitability ratio, Profitability Ratio (Always in % except EPS):In relation to sales Gross Profit Ratio Net Profit Ratio Operating Ratio in relation to investment -Return on capital employed -Return on equity -EPS

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Here we calculate EPS for profitability1. EPS = Profit After Tax / No. of Equity Shares = = 1811.82 Cr. / 63.4613990 Cr. 28.55 Per Share

Question 3:- Is it in a strong enough position to beat out its competition in future? Answer :- For answer of that question we can see the major competitor P&L a/c and Balance Sheet and also market share of each and gat a idea about tat motors strong position in marketProfit & Loss account Tata Motors Mar '11 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 52,067.87 4,110.63 47,957.24 341.53 354.22 48,652.99 35,047.05 471.28 2,294.02 1,753.46 2,790.19 2,067.42 -817.68 43,605.74 Tata Motors Mar '11 Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax 4,705.72 5,047.25 1,383.79 3,663.46 1,360.77 106.17 2,196.52 ------------------- in Rs. Cr. ------------------Ashok Leyland Mar '11 12,393.36 986.21 11,407.15 40.60 175.54 11,623.29 8,406.17 65.19 974.60 86.04 857.00 0.19 -24.06 10,365.13 Ashok Leyland Mar '11 1,217.56 1,258.16 188.92 1,069.24 267.43 0.00 801.81 Eicher Motors Dec '10 488.32 46.34 441.98 54.87 2.12 498.97 300.59 5.48 39.37 2.18 50.87 0.63 0.00 399.12 Eicher Motors Dec '10 44.98 99.85 2.57 97.28 10.79 0.00 86.49 Force Motors Mar '11 1,736.24 211.39 1,524.85 48.93 28.38 1,602.16 1,126.83 28.12 197.03 16.92 102.12 2.31 -20.90 1,452.43 Force Motors Mar '11 100.80 149.73 23.32 126.41 44.82 0.00 81.59

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Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

0.00 2,196.52 384.70 1,811.82 8,558.69 0.00 1,274.23 192.80 6,346.14 28.55 200.00 314.93

0.00 801.81 170.50 631.30 1,958.96 0.00 266.07 43.16 13,303.38 4.75 200.00 19.97

0.29 86.78 11.17 75.44 98.53 0.00 29.63 0.40 269.38 28.01 110.00 169.53

0.58 82.17 23.55 58.62 325.60 0.00 6.59 1.07 131.76 44.49 50.00 253.70

Balance Sheet Tata Motors Mar '11 Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 634.65 634.65 3.06 0.00 19,351.40 24.19 20,013.30 7,766.05 8,132.70 15,898.75 35,912.05 Tata Motors Mar '11 Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors 21,883.32 8,466.25 13,417.07 4,058.56 22,624.21 3,891.39 2,602.88

------------------- in Rs. Cr. ------------------Ashok Leyland Mar '11 133.03 133.03 0.00 0.00 2,523.65 1,306.28 3,962.96 1,272.22 1,385.97 2,658.19 6,621.15 Ashok Leyland Mar '11 6,691.89 2,058.10 4,633.79 387.82 1,230.00 2,208.90 1,185.21 Eicher Motors Dec '10 26.94 26.94 0.00 0.00 429.73 0.00 456.67 14.36 3.11 17.47 474.14 Eicher Motors Dec '10 159.27 87.52 71.75 3.06 463.98 28.23 3.64 Force Motors Mar '11 13.18 13.18 0.00 0.00 321.10 0.00 334.28 119.08 130.43 249.51 583.79 Force Motors Mar '11 1,089.32 696.78 392.54 59.49 56.74 311.31 161.37

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Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

638.79 7,133.06 5,852.42 1,790.13 14,775.61 0.00 15,740.69 3,222.71 18,963.40 -4,187.79 0.00 35,912.05 4,798.83 314.93

179.53 3,573.64 787.17 0.00 4,360.81 0.00 3,505.26 490.33 3,995.59 365.22 4.31 6,621.14 881.77 19.97

3.63 35.50 57.65 7.47 100.62 0.00 124.19 41.08 165.27 -64.65 0.00 474.14 86.22 169.53

14.56 487.24 118.02 0.20 605.46 0.00 429.21 101.23 530.44 75.02 0.00 583.79 89.64 253.70

From above information & chart we can see that tata motors has 64% market shares in automobile industry, now we can say that tata has 1st rank in market in order of Production, Turnover, Sales and Profit Making, its competitor is far away from it.

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Question 4:- Is it able to repay its debts? Answer:- Answer for that question we can find the Liquidity And Solvency Ratios Current Ratio Quick Ratio Debt Equity Ratio Debt to Total Equity Ratio 1. Current Ratio = Current Assets / Current Liabilities Objective: The objective is to measure the ability of the firm to meet its short term obligations and to reflect the short term financial strength/ solvency of a firm. It suggests whether firm can meet its short term obligation from short term Assets. Ideal Ratio is 2:1 = 7133.06 Cr. / 15740.69 Cr. = .45:1 It indicates rupees of current assets available for each rupee of current liability. Higher the ratio, greater is the margin of safety for shortterm creditors and vice versa. However, too high/too low ratio calls for further investigation since the too high ratio may indicate the presence of idle funds with the firm or the absence of investment opportunities with the firm and too low ratio may indicate problem of short-term insolvency. Traditionally, a current ratio of 2:1 is considered to be a satisfactory ratio. But Tata Motors has too low ratio, so Management should try to balance that. 2. Debt Equity Ratio = Debt / Equity Debt equity ratio shows the relative claims of creditors (Outsiders) and owners (Interest) against the assets of the firm. Thus this ratio indicates the relative proportions of debt and equity in financing the firms assets. It can be calculated by dividing outsider funds (Debt) by shareholder funds (Equity) Debt equity ratio = Outsider Funds (Total Debts) Shareholder Funds or Equity The outsider fund includes long-term debts as well as current liabilities. The shareholder funds include equity share capital, preference share capital, reserves and surplus including accumulated profits. However fictitious assets like accumulated deferred expenses etc should be deducted from the total of these items to shareholder funds. The shareholder funds so calculated are known as net worth of the business.

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Total Debt = 15898.75 Cr. Total Equity = 20013.30 Cr. Ratio is = .80:1 3 . Debt to Total Equity Ratio = Total Debt / Total Assets Total Debt is 15988.75 Cr. Total Assets is 35912.05 Cr. Ratio is = .44:1 From above calculation we can say that Tata motors is able to repay its all debt in long term and it has a great position in market.

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