EXECUTIVE SUMMARY

The purpose the dissertation is driven by the

goal of examining the financial statements
and ratio analysis of
TATA MOTORS
dated 31.03.2015
Financial Year 2014-15

The method of the process in the

dissertation is primary divided in:Strategic analysis,
Financial statement analysis,
Ratio analysis,
Financial performance in automobile
industry,
Market performance,

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Market position,
Economic and the industry
environment,and
Cost saving initiatives

Through a thorough financial analysis, my aim

to understand the financial factors
is influencing the company and its decision
making.
Later, I try and evaluate the various ratios to
appreciate their impact on companys
performance over the last four years. The
financial statements of
last four years are
identified, studied and interpreted in light of
companys
performance. Critical decisions
of distributing dividends, Issue of bonus
Debentures and other
current news are analyzed
and their impact on the bottom line of the
company is assessed.
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Finally, I study ratio analysis, profit and loss

statements and
balance sheet of the company
to analyze the financial position of the
company in the last year.

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1.INTRODUCTION

1.1 Introduction
CURRENT CORPORATE STRATEGY OF TATA MOTORS

The current strategy of the Tata Motors can best

be summarized as Disruptive
Innovation, wherein it has offered lower pric
ed products and surpassed the market
expectations. Its two latest offerings
have further strengthened the Tata Motors
position as a leading player. While Ace has been
a rage in the market, Tata Nano has taken the
world with awe.

Much of the practices of Tata Motors, including

its customer focus, attributes to the learning and
experience of over six decades. Tata Motors that
started with a huge success and market demand
faced its first product failure in the launch
of 1516. With the foreign players entering
India, Tata motors that was primarily focusing
on High weight commercial vehicles, included
LCV in its offering and came up with Tata 407.
Tata Motors in the meanwhile was also vying to
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develop end to end in-house technical competence

and thus ventured into engine design
by partnering
with Cummins. Tata motors continuously face
d the problem
of overloading by the users and responded by
introducing stronger machines.However, a
major change came after a heavy loss of Rs 550
cr in 1999 where init re-aligned its marketing
team and became more sensitized to customer
needs. The revival strategy of Tata motors had
three phased business plan. Firstly, it focused
on the cost reduction initiatives for immediate
turnaround. Secondly, it foc us ed on
do mes tic an d in te r n a tion al gr owth th r o u g h
ne w pr odu c ts an d improved sales and
service. Finally, it linked long term growth
with increased business in LCVs, new product
segments and new geographies. The strategy and
learnings have gone a long way with Tata Motors
earning net profit of more than Rs 1000 cr even in
a lean FY 2014-15.

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1.2

CORPORATE

GOVERNANCE

Tata Motors being part of the Tata conglomerate

has its philosophy deeply linked to the core
philosophy of the Tata group. It has fair,
ethical and transparent governance practices
along with highest standards of professionalism,
honesty,integrity and ethical behaviour. The
company gives maximum importance to the value
creation and sustainability of all the other
stakeholders viz. customers,creditors,
employees, vendors, community and the
Government. Tata Motors have implemented the
Tata Business Excellence model which is a part
of
Tatac o de of c o n d u c t app lic ab le to al l su bs id
iar i e s of Tata gr ou p. T h e c omp anyoperate s
wit h a st r o n g s o c ial c o ns c i en c e an d be lie ve
in br in g in g ben efit to peoples lives. Tata
Motors strictly follows The Whistle Blower
Policy, an extension of the Tata
C od e of C o n du c t, wh ic h r eq u ir es very emp l
oy ee to pr ompt ly r ep or t to th e
management any actual or possible viola
t i o n o f t h e C o d e O r a n e v e n t h e becomes
aware of that could affect the business or
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reputation of the Company. The Ethics and

Compliance Committee who monitors the
compliance of the Tata Code of Conduct for
Prevention of Insider Trading by checking
monthly reports on dealings in securities and also
decides penal action, if necessary. This is more
important since in Indian market Tata brand
is synonymous activities of Tata Motors covers
major areas like environment, energy and water
conservation, health, education and livelihood.

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1.3 METHOD
The assignment is built by the following structure

1
2
3
CONCLUSION

1.4 BRIEF DESCRIPTION OF TERMS

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 Introduction
The introduction will contain introduction, problem
statement,
limitation and method.
Presentation
The presentation of TATA MOTORS will provide the
reader insight into the company. The
presentation contains among history, ownership,
products and development in the market
price.
Strategic analysis
The meaning of the strategic analysis is to get an
overview of the external and internal factors.
The conclusion of the strategic analysis is to be
further used in the valuation.
The strategic analysis will consist of three levels:
Society level
Industry level
Company level
The analysis on the perspective of society is to
show which factors in society which effects
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TATA MOTORS. This analyze will be done through

the PEST model, Political factors, Economical
factors, Social factors and Technological factors.
The relations in the industry will be analyzed
through Porters Five Forces. This model focuses
on competitive rivalry in the industry, threat of new
entrants, the threat of substitute products
or service, the bargaining power of customers and
the bargaining power of suppliers.
Then we will do an internal analysis of TATA
MOTORS by an SWOT analysis, which also works
as a tool to gather the content of the strategy so
we can conclude on the strategic analysis.
FINANCIAL STATEMENT ANALYSIS

The Balance Sheet

Profit And Loss Account

They provide some extremely useful information to

the extent that balance Sheet mirrors the financial
position on a particular date in terms of the
structure of assets, liabilities and owners equity,
and so on and the Profit and Loss account shows
the results of operations during a certain period of
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time in terms of the revenues obtained and the

cost incurred during the year. Thus the financial
statement provides a summarized view of financial
position and operations of a firm.
Meaning of Financial Analysis
The first task of financial analysis is to select the
information relevant to the decision under
consideration to the total information contained in
the financial statement. The second step is to
arrange the information in a way to highlight
significant relationship. The final step is
interpretation and drawing of inference and
conclusions. Financial statement is the process of
selection, relation and evaluation.

Features of Financial Analysis

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 To present a complex data contained in the

financial statement in simple and
understandable form.
To classify the items contained in the financial
statement inconvenient and rational groups.
To make comparison between various groups
to draw various conclusions.

Purpose of Analysis of financial

statements
To know the earning capacity or profitability.
To know the solvency.
To know the financial strengths.
To know the capability of payment of interest &
dividends.
To make comparative study with other firms.
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 To know the trend of business.

To know the efficiency of mgt.
To provide useful information to mgt.

Procedure of Financial Statement Analysis

The following procedure is adopted for the analysis
and interpretation of financial statements : The analyst should acquaint himself with
principles and postulated of accounting. He
should know the plans and policies of the
managements that he may be able to find out
whether these plans are properly executed or
not.
The extent of analysis should be determined so
that the sphere of work may be decided. If the
aim is find out. Earning capacity of the
enterprise then analysis of income statement
will be undertaken. On the other hand, if
financial position is to be studied then balance
sheet analysis will be necessary.
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 The financial data be given in statement should

be recognized and rearranged. It will involve
the grouping similar data under same heads.
Breaking down of individual components of
statement according to nature. The data is
reduced to a standard form. A relationship is
established among financial statements with
the help of tools & techniques of analysis such
as ratios, trends, common size, fund flow etc.
The information is interpreted in a simple and
understandable way. The significance and
utility of financial data is explained for help
indecision making.

The conclusions drawn from interpretation are

presented to the management in the form of
reports. Analyzing financial statements
involves evaluating three characteristics of a
company: its liquidity, its profitability, and its
insolvency. A short-term creditor, such as a
bank, is primarily interested in the ability of
the borrower to pay obligations when they
come due. The liquidity of the borrower is
extremely important in evaluating the safety of
a loan. A long-term creditor, such as a
bondholder, however, looks to profitability and
solvency measures that indicate the companys
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ability to survive over a long period of time.

Long-term creditors consider such measures as
the amount of debt in the companys capital
structure and its ability to meet interest
payments. Similarly, stockholders are
interested in the profitability and solvency of
the company. They want to assess the
likelihood of dividends and the growth potential
of the stock.

2.

COMPANY PRESENTATION
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The presentation will serve as an introduction to

the strategic analysis and financial statement
analysis.

2.1 Company history

Tata entered the commercial vehicle sector in 1954
after forming a joint venture with Daimler-Benz of
Germany. After years of dominating the
commercial vehicle market in India, Tata Motors
entered the passenger vehicle market in 1991 by
launching the Tata Sierra, a multi utility vehicle.
Tata subsequently launched the Tata Estate (1992;
a station wagon design based on the earlier
'TataMobile' (1989), a light commercial vehicle),
the Tata Sumo (1994; LCV) and the Tata Safari
(1998; India's first sports utility vehicle).
Tata launched the Indica in 1998, the first fully
indigenous Indian passenger car. Although initially
criticized by auto analysts, its excellent fuel
economy, powerful engine, and an aggressive
marketing strategy made it one of the best-selling
cars in the history of the Indian automobile
industry. A newer version of the car, named Indica
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V2, was a major improvement over the previous

version and quickly became a mass favourite. Tata
Motors also successfully exported large numbers of
the car to South Africa. The success of the Indica
played a key role in the growth of Tata Motors.
In 2004, Tata Motors acquired Daewoo's South
Korea-based truck manufacturing unit, Daewoo
Commercial Vehicles Company, later renamed Tata
Daewoo.
On 27 September 2004, Tata Motors rang the
opening bell at the New York Stock Exchange to
mark the listing of Tata Motors.
In 2005, Tata Motors acquired a 21% controlling
stake in the Spanish bus and coach
manufacturer Hispano Carrocera. Tata Motors
continued its market area expansion through the
introduction of new products such as buses
(Starbus and Globus, jointly developed with
subsidiary Hispano Carrocera) and trucks (Novus,
jointly developed with subsidiary Tata Daewoo).
In 2006, Tata formed a joint venture with the
Brazil-based Marcopolo, Tata Marcopolo Bus, to
manufacture fully built buses and coaches.
In 2008, Tata Motors acquired the British car
maker Jaguar Land Rover, manufacturer of the
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Jaguar, Land Rover, and Daimler luxury car brands,

from Ford Motor Company.
In May 2009, Tata unveiled the Tata World Truck
range jointly developed with Tata Daewoo; the
range went on sale in South Korea, South Africa,
the SAARC countries, and the Middle East at the
end of 2009.
Tata acquired full ownership of Hispano Carrocera
in 2009.
In 2009, its Lucknow plant was awarded the "Best
of All" Rajiv Gandhi National Quality Award.
In 2010, Tata Motors acquired an 80% stake in the
Italian design and engineering company Trilix for
1.85 million. The acquisition formed part of the
company's plan to enhance its styling and design
capabilities.
In 2012, Tata Motors announced it would invest
around 6 billion in the development of Futuristic
Infantry Combat Vehicles in collaboration
with DRDO.
In 2013, Tata Motors announced it will sell in India,
the first vehicle in the world to run on compressed
air (engines designed by the French company MDI)
and dubbed "Mini CAT".

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In 2014, Tata Motors introduced first Truck Racing

championship in India "T1 Prima Truck Racing
Championship".
On 26 January 2014, the Managing Director Karl
Slym was found dead. He fell from the 22nd floor
to the fourth floor of the Shangri-La Hotel in
Bangkok, where he was to attend a meeting of
Tata Motors Thailand.
On 2 November 2015, Tata Motors
announced Lionel Messi as global brand
ambassador at New Delhi, to promote and endorse
passenger vehicles globally.
Tata Motors Limited (formerly TELCO, short
for Tata Engineering and Locomotive
Company) is an Indian multinational
automotive manufacturing company headquartered
in Mumbai, Maharashtra, India, and a subsidiary of
the Tata Group. Its products include passenger
cars, trucks, vans, coaches, buses, construction
equipment and military vehicles. It is the world's
17th-largest motor vehicle manufacturing
company, fourth-largest truck manufacturer, and
second-largest bus manufacturer by volume.
Tata Motors has auto manufacturing and assembly
plants
in Jamshedpur, Pantnagar, Lucknow, Sanand, Dhar
wad, and Pune in India, as well as in Argentina,
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South Africa, Thailand, and the United Kingdom. It

has research and development centres in Pune,
Jamshedpur, Lucknow, and Dharwad, India and in
South Korea, Spain, and the United Kingdom. Tata
Motors' principal subsidiaries purchased the British
premium car maker Jaguar Land Rover (the maker
of Jaguar, Land Rover, and Range Rover cars) and
the South Korean commercial vehicle
manufacturer Tata Daewoo. Tata Motors has a busmanufacturing joint venture with Marcopolo
S.A. (Tata Marcopolo), a construction-equipment
manufacturing joint venture with Hitachi (Tata
Hitachi Construction Machinery), and a joint
venture with FiatChrysler which manufactures
automotive components and FiatChrysler and Tata
branded vehicles.
Founded in 1945 as a manufacturer of locomotives,
the company manufactured its first commercial
vehicle in 1954 in a collaboration with DaimlerBenz 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, the Indica, and in
2008 launched the Tata Nano, the world's cheapest
car. Tata Motors acquired the South Korean truck
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manufacturer Daewoo Commercial Vehicles

Company in 2004 and purchased Jaguar Land
Rover from Ford in 2008.
Tata Motors is listed on the (BSE) 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 287th in the 2014 Fortune Global
500 ranking of the world's biggest corporations.

2.2 TATA motors market

Tata Motors (BSE -0.17 %) wants to regain the
market share it lost in passenger vehicles, as it set
a target to double segment sales to more than 4
lakh units a year by the end of the decade.
The company had a 10% market share more than
a decade ago, when its Indica hatchback was a
favourite for personal use and as a taxi. The
market share has now fallen to 5.7%. If it
manages to achieve the target, it will return to
about 10% of the estimated market in 2020.
Tata Motors is projecting the personal vehicle
market to reach 4.1 million units by that time,
while the forecast of global research firm JD Power
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is 4.5 million. But it will miss late managing

director Karl Slym's vision to become one of the
top two players by 2020.
Tata Motors unveiled the target before its vendors
last week. Chairman Cyrus Mistry urged suppliers
to improve their quality and scale to global levels
so that the company can compete more
aggressively with multinational auto makers, said
people who attended the meeting in Pune. Its
projection is based on the new vehicles in its
pipeline and an expected pick-up in a market that
has been sluggish for most part of the past three
years, but is now showing signs of improvement.

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However, gaining back the lost ground will be

tough as rivals such as French auto maker Renault,
local utility vehicle major Mahindra & Mahindra,
market leader Maruti SuzukiBSE -0.19 % and
Hyundai Motor have all lined up several models for
launch in India.
The target is too ambitious, said Gaurav Vangaal,
senior analyst for forecasting at consultancy IHS
Automotive. But he said the focus given by the top
management can act as a strong driving force.
"Tata has the ability to claw back in the market.
The product pipeline seems to be in place, it all
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now depends on timely launches of new products."

It has lined up at least four passenger vehicles for
launch in the coming 18 months. These are the
Kite-4 hatchback, Kite-5 sedan, Eagle Crossover or
Hexa, and a sub-4 meter compact SUV Nexon or
Osprey as it is internally called.
A Tata Motors spokesperson said as a policy, it
does not comment on future products or growth
projections, but added that company is committed
to build strong products for the future.
The company is strengthening its position in the
commercial vehicle front as well. To take on
increasing competition from global truck giant
Daimler and Ashok LeylandBSE 1.03 %, Tata
Motors is coming out with a new range of
affordable trucks, called Signa. Thanks to a pick-up
in mining and infrastructure activity, the company
is aiming 25-30% growth in medium and heavy
truck sales over the next 12-24 months.
The company has seen growth momentum
returning to the commercial vehicle market, the
spokesperson said. "With our market-defining
products, such as Prima, Ultra, and more products
in the pipeline, as well as the continued investment
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in our network, we expect to continue with our

strong leadership position."
At last week's meeting, Tata Motors informed
vendors that the company is focussing on
developing future-ready technology and may be
ready with BS V and BS VI engines much before
these stricter emission regulations come into force.
It expects the Advanced Modular Platform it is
developing for passenger vehicle to be a key driver
of growth.

(Source: tata motors annual report.)

The modern AMP architecture is expected to have
70% commonality and 60% common parts,
thereby helping the company from economies of
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scale and in introducing new products at a quicker

pace.
The company has already got board approval to
invest in the future modular platform. In the first
half of fiscal 2016, Tata Motors passenger car sales
grew 27% to about 55,000 units, even as the
utility vehicle segment posted a similar level of
decline.
Sales of passenger vehicles, including vans,
totalled more than 76,000 in the first half and the
company is expecting this to reach two lakh for the
year.
On the commercial vehicle front, it has seen
growth of almost 30% in the medium and heavy
commercial vehicle space to 64,279 units.
However, the small commercial vehicles segment
continues to remain sluggish.
Through its VAVE (Value Addition and Value
Engineering) initiative, the company is aiming to
save up to Rs 500 crore this year and Rs 900 crore
next year. And interestingly, a senior executive told
vendors that the company is studying the
quadricycle space, and not ruling out the possibility
of entering it.

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(Source: economic times)

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(Source: ndtvprofits)

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Source:cnbc

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2.3

Shareholders

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Source:tata motors annual report

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Source: economic times

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Source: ndtv profits

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3. STRATEGIC ANALYSIS
3.1 Macro analysis
3.1.1 PEST Analysis
We will go through the PEST analysis by looking
at the factors in the surrounding world of
TATA MOTORS. The PEST model consists of the
following factors: Political- , economic- ,
socialand
technological- factors.
In accordance to the most important political
relations which affects Carlsberg we will
discuss; Tax and expenses, marketing,
environment and competitive law
The purpose of the strategic analysis is to provide
an overview of internal and external factors
which affects TATA MOTORS strategic position. The
strategic analysis focuses on the nonfinancial
value drivers. The non- financial value drivers
makes an important part of the
budget, which later will be used for valuation, this
is due to the value drivers which aren`t
financial, but is a basis for the financial drivers,
which are used in the budget.
The strategic analysis will contain the following
three levels: Society-, industry- and company
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level. First we will analyze the society level, then

the industry level and at last the company
level.

3.2 SWOT Analysis

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The Major SBUs of Tata Motors in which they have

divided their business are:
Commercial Vehicles (Light weight trucks to
multi-axle 40 ton vehicles)
Passenger Cars, economy and luxury (Indica,
Nano, JLR)
Utility vehicles, standard and premium (Sumo,
Safari)
Spare parts, components and accessories (HV
Axles and transmission,High horse power engine
via Tata Cummins)
Financing for customers and channel partners (via
Tata Motors Finance)

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3.3 Structural analysis of industry

3.3.1 Enterprise Process Model (EPM) Process Management at Tata Motors

When Tata Motors made a huge loss of 500
crores in the year 2000-01, analysts had all but
written off Tata Motors fortunes. But TML was
determined to bounce back and hence started
the process of serious introspection. Three key
reasons were identified for the massive loss
a) Lack of customer focus
b) lack of process management
c) lack of new products and variants. TML had
decided the three
e l e m e n t s i n a s y s t e m a t i c m a n n e r ,t h e m
a j o r e m p h a s i s b e i n g p r o c e s s management.
Tata Motors hence started to adopt the APQC
13 (American Productivity andQuality Center)
processes and sub process and hence derive the
Tata Business Excellence Model (TBEM, based
on the Malcolm Baldrige National Quality Award
Process), thus adopting a process oriented
approach than merely people oriented
approach. This practice minimized the influe
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nce of individual employees inrunning the

operations. This also entailed the
documentation of the processes,which brought
about lot of clarity in terms of roles and
responsibilities of
processown er s , in pu ts an d ou tpu ts of th e pr
oc es s es , in pr oc es s an d en d pr oc es s measur
es, entities involved and its linkage with the ISO
and TS standard system. The Enterprise Process
Model has been depicted in the figure below.

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3.3.2 OPERATIONS AND PRODUCTION

MANAGEMENT
Inbound logistics

Procurement

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3.3.3 Manufacturing
In an au tomotive in du s tr y, th e main empha
s is on qu al ity wou ld be on th e manufacturing
process. There would be about fifteen thousand
accessories and component parts to assemble
and activate while we manufacture a car.
Tatamotors believes in the indigenous
development of manufacturing process and
development of technology. Unless many
automobile companies, the strategy of the firm is
not to blindly adopt any new successful
technology. It believes in state-of-the-art
technology. With reference to the product
market matrix (with
product development, market develop
m e n t , m a r k e t p e n e t r a t i o n a n d diver s ific a
tion) wh ic h c ompos es th e mer gin g of pr odu
c tion an d mar ketin g strategies Tata motors is
seen to follow the diversification strategy
wherein it produces new products and gets into
new market to target with the product.

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3.3.4 Product development

New Product Development would involve idea
generation, product screening,concept testin
g, Business and financial analysis, product de
velopment, testmarketing and
commercialization. An automobile product
development cycle
iss a i d t o b e c o n s i s t i n g o f c o n c e p t s t a g e (
w h e r e t h e c a r s t a r t s ) , A d v a n c e engineering
(where the car takes shape),
product engineering (where the details
are filled in), production engineering (where
the car is worked out) and the
manufacturing stage (where all comes togeth
er)
3.
Tata Motors Engineering Research Centre in
Jamshedpur focuses in upgrading the
components and parts with evolution of
technology and also is one of the best in
determining the needs of a customer and
developing a new product to cater to the needs.
Tata Nano
isone s u c h pr odu c t fr om th e s table of Tata
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motor s . Bes ides th is c en tr e th e Research and

development of Tata motors has become
international with centresin Spain, UK and South
Korea also.
3.3.5 Cost Cutting Techniques
After a r ou gh fis c al year in 20 01 , Tata
M otor s r eal ized th at th e on ly way to survive
this market was to cut down on costs. They started
practicing an entirely new way of procuring
their supplies and hence gave rise to a
unique way of managing supplier relationship.
The earlier traditional method that Tata
Motorsgave th e tec h n ic al s pec ific ation s to t
he su pp lier an d th e s u ppli er wh o was succe
ssful in acquiring the bid filled up the
orders. However under the new system Tata
Motors simply provided the output they
expected, and allowed the
suppliers to be as creative and innovative wit
h their designs, materials, and prices.
In other words Tata Motors would simply
describe the goal that they wanted to achieve
with certain part and the suppliers would
supply the parts
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ac c or din g th eir own c onven i en c e. For ex am

pl e in s tead of giv in g tec h n ic al specifications
for the wind shield of Tata Indica, it would just
describe the goal of cleaning the windshield, and
let the suppliers come up with ideas to
meet those goals in the most cost effective
manner, without compromising on quality. This
practice led to huge cost savings in raw materials
and the Tatas could deliver the cheapest car of
the world at just 2500$. By leveraging local
design capabilities and avoiding the dependency
on high end design systems, Tata Motors has been
able to provide low cost solutions in a continuous
and efficient manner. Also Tata Motors tried the
innovative method of Zero Based Costing. For
example
initially TML paid for forged components on a co
st plus basis, in the new system it paid a price
depending on the weight of the forgings.

3.3.6 Quality Management

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The shifting
o f f o c u s o n T Q M ( Tot a l Q u a l i t y M a n a g e m
e n t ) a n d S i x S i g m a principles by Tata
Motors has been a gradual one since the year
2000. One quarter of the work force undergo
training to maintain and create high quality
products every year. The personnel are even
sent to foreign manufacturers locations,
whenever a new machine would be imported, to
undergo training.

Operations

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3.3.7 Outbound Logistics

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3.3.8 Sales & Marketing at Tata Motors

Product and Brand Strategy
Tata Motors follows a sub brand strategy.
Although there is no separate Brand for TATA
motor s as su c h bu t th e TATA bran d is u s ed
as a moth er brand. All th e products of
benefit from the association with the TATA
brand, which in India stands for trust and
reliability. TATA motors products can be
categorised into four major categories:
Passenger cars, Utility vehicles, trucks and
commercial passenger carriers. The following table
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shows the different product lines of each category

and the launch periods as well. (Source: Company
Website).

The products also reflects the commitment of

TATA Motors to customer needs and
new pr odu c t in n o vation . T h e c o mpany h as
als o ex p or ted its veh ic les aft er creating
customised variants which have higher payload
and engine capacity. It
has also customised its domestic products by
introducing passenger option,higher payloads,
bigger engines etc.In broad terms the following
sums up the TATA motors marketing philosophy:

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3.3.9 Pricing
TATA motors have a pricing advantage due to
its low cost leans manufacturing abilities. The inhouse steel company acts as a shock absorber
against steel price
fluctuations. The pricing methodology adopte
d is that of a perceived value pricing. It was
demonstrated by the Rs 1 Lakh price of TATA Nano,
where the cost of producing the car left a very
small margin for TATA.

3.3.10 Promotion
TATA Motors uses extensive promotion for its
passenger car segment. The Utility vehicle and
commercial passenger carrier follow this segment
based on Share of Voice.
3.3.11 Distribution
TATA Motors has a large network of dealers
and Stockyards, all across the globe and uses
the DMS technology for efficient cooperation
between these dealers. Its distribution network
includes operations in India, Nepal, Bhutan,
53 | P a g e

Ghana, Italy, Poland, South Africa, Spain, Sri

Lanka and Turkey. The company's dealership,
sales, services and spare parts network comprises
over 3500 touch
points.Apar t fr om th e wi de dis tr ibu tion n etw
or k Tata M otors als o h as D is tr ibu ted
manufacturing it has Assembly units at
South Africa, Thailand, Bangladesh, Brazil
apart from India. The company's
manufacturing base in India is spread across
Jamshedpur (Jharkhand), Pune (Maharashtra),
Lucknow (Uttar Pradesh),
Pantnagar (Uttarakhand) and Dharwad
(Karnataka). To augment the scarce resources, it
has a joint venture with Fiat wherein Fiat sells
its vehicles through Tata dealerships and in
return Tata Motors has access to Fiats
technology and unutilized capacity Over the years,
one of the major success factors of Tata Motors
is their supply chain excellence. To keep
their distribution costs to the minimum
they have outsourced the logistics and
distribution part of their business to Tata Motors
Ltd.Distribution Company (TDCL), a wholly ow
ned subsidiary of Tata Motors Ltd.
Through this arrangement, Tata Motors is able to
reduce its logistical costs by atleas t 1% an d to
54 | P a g e

foc us mor e on th e c or e bu s in es s . T h is in
tur n h as pr ovi ded flexibility to Tata Motors in
terms of delivering the right product at the right
time at the right place. Therefore, today,
Tata Motors is a fully integrated automobile
manufacturer with a portfolio which covers tr
ucks, buses, utility vehicles &passenger
vehicles/cars. The dealers and suppliers are
bound by a Supplier Relationship
Management Program and Dealer Management
System. These programs are reviewed from
time
to time. The efficiency of transactions within
the organization and also supplier coverage are
given importance. Suppliers day, Vendors meets,
Channel partner meets are organised where in
the Board members can interact with suppliers
to share ideas and thoughts

55 | P a g e

4. Financial Strategy of TATA MOTORS

4.1 Cost cutting and recovery strategies:
The transformation of Tata Motors into a highly successful,
well-diversified, and globally ambitious automobile giant
represents one of Indias most remarkable corporate-success
stories in recent
times.I n 2 0 0 1 a f t e r a d e c a d e o f s t r o n g r e v e n u e a n d m
a r g i n g r o w t h , Tat a M o t o r s plunged into a financial crisis
when demand for its trucks suddenly collapsed. The lost sales
compounded by heavy investment for its entry into the
passenger car business, the cost of complying with new
emissions standards, and an increasing threat from overseas
competitors caused Tata Motors to shock the markets with a
5 billion rupee ($110 million) loss for the fiscal year ending March
2001.Even in late 90s Tata Motors was predominantly a
manufacturer of commercial vehicles, and that is a very
cyclical business. At the time it was making huge
investments in car manufacturing to move away from that
cyclicality. But while itwas in the middle of this diversification,
the commercial-vehicle market in India shrank by more than
40 percent, with massive consequences for both the to
expand, more particularly, the bottom lines of the company. The
5 billion rupee loss
in 2001 was the first time something on this scal
e h a d h a p p e n e d i n t h e companys history which really
shook everybody within the organization. So in 2001 Tata Motors
decided on a recovery strategy that had three distinct phases,
each of which was intended to last for around two yearssix
years in all. Phase one was intended to stem the bleeding. Phase
56 | P a g e

two was to be about consolidating our position in India, and

phase three was to involve going outside India and expanding our
operations internationally. The key objectives were to move to a
system of market pricing and to reduce our break-even point,
both of which called for major reductions in costsvariable
costs, fixed costs, and interest costs. It used many approaches to
cost reduction, including bench-marking its rivals. For example, it
took apart vehicles to see what they could do to modify their
products and to lower costs. They went in for e- sourcing,
which was then very new, but today it is the largest
company doing esourcing in India and one of the leading ones in t
h e a u t o m o b i l e i n d u s t r y worldwide. In two and a half
years, it reduced our break-even from nearly two-thirds of
capacity utilization to around one-third, which meant that
even if the market shrank by close to 60 percent, it
would still be profitable. The whole organization really got
together to ensure that the bleeding
stopped.F o r p h a s e t w o , t h e c o n c e n t r a t i o n w a s o n i
m p r o v i n g p r o d u c t q u a l i t y a n d upgrading product features
so as to make the products more competitive. It also started
work on new products that would be required by the market after
three to five years and strengthened its position in the
marketplace by setting up a newsalesplanning process, tightening credit norms, improving the
liquidity andp r o f i t a b i l i t y o f t h e d e a l e r s , r e o r i e n t i n g t o
ward customer satisfaction, ande x t e n d i n g t h e r e a c
h of its distribution network. For phase three,
t h e concentration was on starting work on international
markets by identifying key markets and segments and
developing a comprehensive plan to improve its
competitive position so as to get a respectable market
57 | P a g e

share. It also started looking at opportunities for inorganic

growth.

4.2 Tata Motors Finance Ltd (TMFL)

The auto financing arm for Tata Motors was established in
1957 in the name of BHPC (bureau for Hire Purchase and
Credit). TMFL came into existence in June 2003. This was a
common front-end, jointly formed by BHPC (Bureau for
Hire Purchase and Credit) of Tata Motors and the asset financing
arm of erstwhile Tata Finance Ltd. It was in the market for
exclusively financing Tata Motors vehicles. Subsequently Tata
Finance was merged with Tata Motors and in April 2005
TMFbecame a division of Tata Motors. It is engaged in fi
nancing entire range of passenger cars & commercial vehicles
manufactured by Tata Motors Ltd. TMF is the largest financier of
vehicles manufactured by Tata Motors Ltd. With more than 2
million customers financed, TMF reaches out & helps customers to
realize their dreams of owning a Tata vehicle easily.

4.2.1 Corporate Purpose

TMF aspires to be a preferred financier by choice for Tata
Motors customers &dealers across all its products. Tata
Motor finance would be the top-of-the-mind choice for all
stakeholders when it comes to Tata Motors products. With a
core purpose to reach out & help customers realize the
dream of owning a TATA vehicle easily, we are present
across 150+ locations and at all Tata Motors Ltd authorized
dealerships.Schemes designed to suit every customer req
uirement, flexible repayment options, hassle-free eligibility
criteria, simple documentation and fast sanctioning process
makes it the preferred choice of any customer desirous of owning
a Tata Car or Commercial vehicle.

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4.2.2 Strategy defined

TMF came into existence for the prime reason of easy
financing the Tata Car or Commercial vehicles. Through
these new initiatives, TMF aimed to reach small towns and
villages, where they could find buyers for their products,
such as the Ace and, going forward, for their small car. In
the competitive world, there is an existing demand for
cars, and along with it, it is important to make finance
available to the potential buyers to help them buy the
vehicles. With the low availability of conventional banking
services in rural areas, it was necessary
fort h e m t o o f f e r f i n a n c e t o t h e i r b u y e r s
i n s u c h f a r - f l u n g m a r k e t s . Tata Motors has
dealers in nearly every district in India. This helps them to build a
good database of the financial credibility and worthiness of
their customers across the country, which will be valuable
information for the entire Tata Group. Similarly, this
perspective would be deployed in their global operations
in South Africa, South Asia, South Korea and the Middle East
where they can adopt.
The partnering strategy could
well involve a local bank in the respective country as the
individual countries have their own financial regulatory
requirements. In other cases we could partner with Indian
banks which have operations in foreign countries.
The State Bank of India, for example, is already present
in many African countries. So it can be looked upon as a
prospective partner.

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5. Financial statement analysis

5.1 Introduction
Financial statement analysis (or financial analysis) is the
process of reviewing and analyzing a company's financial
statements to make better economic decisions. These statements
include the income statement, balance sheet, statement of cash
flows, and a statement of retained earnings. Financial statement
analysis is a method or process involving specific techniques for
evaluating risks, performance, financial health, and future
prospects of an organization.
It is used by a variety of stakeholders, such as credit and equity
investors, the government, the public, and decision-makers
within the organization. These stakeholders have different
interests and apply a variety of different techniques to meet their
needs. For example, equity investors are interested in the longterm earnings power of the organization and perhaps the
sustainability and growth of dividend payments. Creditors want to
ensure the interest and principal is paid on the organizations debt
securities (e.g., bonds) when due.

Horizontal analysis compares financial information over time,

typically from past quarters or years. Horizontal analysis is
performed by comparing financial data from a past statement,
such as the income statement. When comparing this past
information one will want to look for variations such as higher or
lower earnings.
Vertical analysis is a percentage analysis of financial statements.
Each line item listed in the financial statement is listed as the
percentage of another line item. For example, on an income
60 | P a g e

statement each line item will be listed as a percentage of gross

sales. This technique is also referred to as normalization or
common-sizing.

5.2 Recasting financial statements

Investors typically are attempting to understand how much cash

the company will generate in the future and its rate of profit
growth, relative to the amount of capital deployed. Analysts may
modify ("recast") the financial statements by adjusting the
underlying assumptions to aid in this computation. For example,
operating leases (treated like a rental transaction) may be recast
as capital leases (indicating ownership), adding assets and
liabilities to the balance sheet. This affects the financial statement
ratios.
Recasting financial statements requires a solid understanding of
accounting theory. Once the cash flow in future years is
projected, a discount rate or interest rate will be applied to
measure the value of the company and its stock or debt

5.3 Accounting policy

(a) Basis of preparation
The financial statements of the Company have been prepared
under the
historical cost convention on an accrual basis of accounting in
accordance with the Generally Accepted Accounting Principles in
India
to comply with the Accounting Standards notified under Section
133 of
Companies Act, 2013 read with Rule 7 of the Companies
(Accounts) Rules,
61 | P a g e

2014 and relevant provisions of the Companies Act, 2013 (the

2013
Act).
(b) Use of estimates
The preparation of financial statements requires management to
make judgments, estimates and assumptions, that affect the
application of accounting policies and the reported amounts of
assets, liabilities,
income, expenses and disclosures of contingent liabilities at the
date
of these financial statements. Actual results may differ from
these
estimates. Estimates and underlying assumptions are reviewed
at each
balance sheet date. Revisions to accounting estimates are
recognised in
the period in which the estimate is revised and future periods
affected.
(c) Revenue recognition
The Company recognises revenues on the sale of products, net
of
discounts and sales incentives, when the products are delivered
to the
dealer / customer or when delivered to the carrier for export
sales,
which is when risks and rewards of ownership pass to the dealer/
customer.
Sales include income from services, and exchange fluctuations
relating
to export receivables. Sales include export and other recurring
and non-recurring incentives from the Government at the national
and state levels. Sale of products is presented gross of excise
duty where
applicable, and net of other indirect taxes.
62 | P a g e

Revenues are recognised when collectability of the resulting

receivables is reasonably assured.
Dividend from investments is recognized when the right to
receive the
payment is established and when no significant uncertainty as to
measurability or collectability exists.
Interest income is recognized on the time basis determined by
the
amount outstanding and the rate applicable and where no
significant
uncertainty as to measurability or collectability exists.
(d) Depreciation and amortisation
(i) Depreciation is provided on the Straight Line Method (SLM)
over the
estimated useful lives of the assets considering the nature,
estimated
usage, operating conditions, past history of replacement,
anticipated
technological changes, manufacturers warranties and
maintenance
support. Taking into account these factors, the Company has
decided to
retain the useful life hitherto adopted for various categories of
fixed
assets, which are different from those prescribed in Schedule II
of the
Act. Estimated useful lives of assets are as follows :

63 | P a g e

Type of Asset

Estimated useful life

* Leasehold Land

* Buildings, Roads, Bridges

and culverts

Amortised over the

period of the
lease
4 to 60 years

* Plant, machinery and equipment

8 to 20 years

* Computers and other IT assets

4 to 6 years

* Vehicles

4 to 10 years

* Furniture, fixture and office appliances

* Technical Know-how
* Computer software

5 to 15 years
5 to 6 years
4 years

* Water system and sanitation

20 years

* Assets taken on lease are amortised

over the period of lease

10 years

(ii) Product development cost are amortised over a period of upto

120
months for New generation vehicles and powertrains on the basis
of higher of the volumes between planned and actuals and on a
straight
line method over a period of 36 months for vehicle variants,
derivatives and other regulatory projects.
(iii) In respect of assets whose useful life has been revised, the
64 | P a g e

unamortised depreciable amount has been charged over the

revised
remaining useful life.
(iv) Depreciation is not recorded on capital work-in-progress until
construction and installation are complete and asset is ready for
its
intended use.
(v) Capital assets, the ownership of which doesn't vest with the
Company, other than leased assets, are depreciated over the
estimated
period of their utility or five years, whichever is less.
(e) Fixed assets
(i) Fixed assets are stated at cost of acquisition or construction
less
accumulated depreciation / amortization and accumulated
impairment, if
any.
(ii) Product development cost incurred on new vehicle platform,
engines, transmission and new products are recognised as fixed
assets,
when feasibility has been established, the Company has
committed
technical, financial and other resources to complete the
development
and it is probable that the asset will generate probable future
benefits.
(iii) Cost includes purchase price, taxes and duties, labour cost
and
directly attributable overhead expenditure for self constructed
assets
incurred up to the date the asset is ready for its intended use.
Borrowing cost incurred for qualifying assets is capitalised up to
the
65 | P a g e

date the asset is ready for intended use, based on borrowings

incurred
specifically for financing the asset or the weighted average rate
of
all other borrowings, if no specific borrowings have been incurred
for
the asset. The cost of acquisition is further adjusted for
exchange
differences relating to long term foreign currency borrowings
attributable to the acquisition of depreciable asset w.e.f. April
1,2007.
(iv) Software not exceeding Rs.25,000 and product development
costs
relating to minor product enhancements, facelifts and upgrades
are
charged off to the Statement of Profit and Loss as and when
incurred.
(f) Impairment
At each Balance Sheet date, the Company assesses whether
there is any
indication that the fixed assets with finite lives may be impaired.
If
any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment, if
any.
Where it is not possible to estimate the recoverable amount of
individual asset, the Company estimates the recoverable amount
of the
cash-generating unit to which the asset belongs.
As of March 31,2015 none of the fixed assets were considered
impaired.
(g) Leases
(i) Finance lease
66 | P a g e

Assets acquired under finance leases are recognised as an asset

and a
liability at the commencement of the lease, at the lower of the
fair
value of the assets and the present value of minimum lease
payments.
The finance expense is allocated to each period during the lease
term
so as to produce a constant periodic rate of interest on the
remaining
balance of the liability. Assets given under finance leases are
recognised as receivables at an amount equal to the net
investment in
the lease and the finance income is based on a constant rate of
return
on the outstanding net investment.
(ii) Operating lease
Leases other than finance lease, are operating leases, and the
leased
assets are not recognised on the Company's Balance Sheet.
Payments
under operating leases are recognised in the Statement of Profit
and
Loss on a straight-line basis over the term of the lease.
(h) Transactions in foreign currencies and accounting of
derivatives
(i) Exchange differences
Transactions in foreign currencies are recorded at the exchange
rates
prevailing on the date of the transaction. Foreign currency
monetary
assets and liabilities are translated at year end exchange rates.

67 | P a g e

(1) Exchange differences arising on settlement of transactions

and
translation of monetary items other than those covered by (2)
below are
recognized as income or expense in the year in which they arise.
Exchange differences considered as borrowing cost are
capitalized to
the extent these relate to the acquisition / construction of
qualifying
assets and the balance amount is recognized in the Statement of
Profit
and Loss.
(2) Exchange differences relating to long term foreign currency
monetary assets / liabilities are accounted for with effect from
April
1, 2007 in the following manner:
* Differences relating to borrowings attributable to the
acquisition of
the depreciable capital asset are added to / deducted from the
cost of
such capital assets.
* Other differences were accumulated in Foreign Currency
Monetary Item
Translation Difference Account and amortized over the period,
beginning
April 1,2007 or date of inception of such item, as applicable, and
ending on March 31,2011 or the date of its maturity, whichever
was
earlier.
* Pursuant to notification issued by the Ministry of Corporate
Affairs
on December 29, 2011, the exchange differences on long term
foreign
currency monetary items (other than those relating to acquisition
of
68 | P a g e

depreciable assets) are amortised over the period till the date of
maturity or March 31, 2020, whichever is earlier.
(ii) Hedge accounting
The Company uses foreign currency forward contracts to hedge
its risks
associated with foreign currency fluctuations relating to highly
probable forecast transactions. With effect from April 1,2008, the
Company designates such forward contracts in a cash flow
hedging
relationship by applying the hedge accounting principles set out
in
Accounting Standard 30- Financial Instruments: Recognition and
Measurement.
These forward contracts are stated at fair value at each reporting
date. Changes in the fair value of these forward and option
contracts
that are designated and effective as hedges of future cash flows
are
recognized directly in Hedging Reserve Account under Reserves
and
Surplus, net of applicable deferred income taxes and the
ineffective
portion is recognised immediately in the Statement of Profit and
Loss.
Amounts accumulated in Hedging Reserve Account are
reclassified to
Profit and Loss in the periods during which the forecasted
transaction
occurs.
Hedge accounting is discontinued when the hedging instrument
expires or
is sold, terminated, or exercised, or no longer qualifies for hedge
accounting. For forecasted transactions, any cumulative gain or
loss
69 | P a g e

on the hedging instrument recognised in Hedging Reserve

Account is
retained there until the forecasted transaction occurs.
If the forecasted transaction is no longer expected to occur, the
net
cumulative gain or loss recognised in Hedging Reserve Account is
immediately transferred to the Profit and Loss Statement.
Foreign
currency options and other derivatives are stated at fair value as
at
the year end with changes in fair value recognized in the
Statement of
Profit and Loss.
(iii) Premium or discount on forward contracts other than those
covered
in (ii) above is amortised over the life of such contracts and is
recognised as income or expense.
(i) Product warranty expenses
The estimated liability for product warranties is recorded when
products are sold. These estimates are established using
historical
information on the nature, frequency and average cost of
warranty
claims and management estimates regarding possible future
incidence
based on corrective actions on product failures. The timing of
outflows
will vary as and when warranty claim will arise - being typically
up to
3 to 4 years.
(j) Income on vehicle loan
Interest income from loan contracts are accounted for by using
the
70 | P a g e

Internal Rate of Return method. Consequently, a constant rate of

return
on the net outstanding amount is accrued over the period of
contract.
The Company provides an allowance for hire purchase and loan
receivables that are in arrears for more than 11 months, to the
extent
of an amount equivalent to the outstanding principal and
amounts due
but unpaid, considering probable inherent loss including
estimated
realisation based on past performance trends. In respect of loan
contracts that are in arrears for more than 6 months but not
more than
11 months, allowance is provided to the extent of 10% of the
outstanding and amount due but unpaid.
(k) Inventories
Inventories are valued at the lower of cost and net realisable
value.
Cost of raw materials and consumables are ascertained on a
moving
weighted average/ monthly moving weighted average basis.
Cost,
including variable and fixed overheads, are allocated to
work-in-progress, stock-in-trade and finished goods determined
on full
absorption cost basis. Net realisable value is estimated selling
price
in the ordinary course of business less estimated cost of
completion
and selling expenses.
(l) Employee benefits
(i) Gratuity

71 | P a g e

The Company has an obligation towards gratuity, a defined

benefit
retirement plan covering eligible employees. The plan provides
for a
lump sum payment to vested employees at retirement, death
while in
employment or on termination of employment of an amount
equivalent to
15 to 30 days salary payable for each completed year of service.
Vesting occurs upon completion of five years of service. The
Company
makes annual contributions to gratuity fund established as trust.
The
Company accounts for the liability for gratuity benefits payable in
future based on an independent actuarial valuation carried out at
each
Balance Sheet date using the projected unit credit method.
(ii) Superannuation
The Company has two superannuation plans, a defined benefit
plan and a
defined contribution plan. An eligible employee on April 1, 1996
could
elect to be a member of either plan.
Employees who are members of the defined benefit
superannuation plan
are entitled to benefits depending on the years of service and
salary
drawn. The monthly pension benefits after retirement range from
0.75%
to 2% of the annual basic salary for each year of service. The
Company
accounts for the liability for superannuation benefits payable in
future under the plan based on an independent actuarial
valuation as at
Balance Sheet date.
72 | P a g e

With effect from April 1,2003, this plan was amended and
benefits
earned by covered employees have been protected as at March
31,2003.
Employees covered by this plan are prospectively entitled to
benefits
computed on a basis that ensures that the annual cost of
providing the
pension benefits would not exceed 15% of salary.
During the year 2014-15, the employees covered by this plan
were given
a one time option to exit from the plan prospectively. Further, the
employees who opted for exit were given a one time option to
withdraw
accumulated balances from the superannuation plan.
The Company maintains a separate irrevocable trust for
employees
covered and entitled to benefits. The Company contributes up to
15% or
Rs. 1,00,000 whichever is lower of the eligible employees' salary
to
the trust every year. The Company recognizes such contributions
as an
expense when incurred. The Company has no further obligation
beyond
this contribution.
(iii) Bhavishya Kalyan Yojana (BKY)
Bhavishya Kalyan Yojana is an unfunded defined benefit plan for
employees of the Company. The benefits of the plan include
pension in
certain case, payable up to the date of normal superannuation
had the
employee been in service, to an eligible employee at the time of
death
73 | P a g e

or permanent disablement, while in service, either as a result of

an
injury or as certified by the appropriate authority. The monthly
payment to dependents of the deceased / disabled employee
under the
plan equals 50% of the salary drawn at the time of death or
accident or
a specified amount, whichever is higher. The Company accounts
for the
liability for bKy benefits payable in future based on an
independent
actuarial valuation as at Balance Sheet date.
(iv) Post-retirement medicare scheme
Under this scheme, employees of the Company receive medical
benefits
subject to certain limits of amount, periods after retirement and
types
of benefits, depending on their grade and location at the time of
retirement. Employees separated from the Company as part of
Early
Separation Scheme, on medical grounds or due to permanent
disablement
are also covered under the scheme. The liability for postretirement
medical scheme is based on an independent actuarial valuation
as at
Balance Sheet date.
(v) Provident fund
The eligible employees of the Company are entitled to receive
benefits
in respect of provident fund, a defined contribution plan, in which
both employees and the Company make monthly contributions at
a
specified percentage of the covered employees' salary (currently
12% of
74 | P a g e

employees' salary). The contributions as specified under the law

are
made to the provident fund and pension fund set up as
irrevocable trust
by the Company . The Company is generally liable for annual
contributions and any shortfall in the fund assets based on the
government specified minimum rates of return or pension and
recognises
such contributions and shortfall, if any, as an expense in the year
incurred.
(vi) Compensated absences
The Company provides for the encashment of leave or leave with
pay
subject to certain rules. The employees are entitled to
accumulate
leave subject to certain limits, for future encashment. The
liability
is provided based on the number of days of unutilised leave at
each
balance sheet date on the basis of an independent actuarial
valuation.
(m) Investments
Long term investments are stated at cost less other than
temporary
diminution in value, if any. Current investments are stated at
lower of
cost and fair value. Fair value of investments in mutual funds are
determined on a portfolio basis.
(n) Income taxes
Tax expense comprises current and deferred taxes.
Current tax is the amount of tax payable on the taxable income
for the
75 | P a g e

year as determined in accordance with the provisions of the

Income Tax
Act, 1961. Current tax is net of credit for entitlement for
Minimum
Alternative Tax (MAT).
Deferred tax is recognised, on timing differences, being the
difference
between taxable income and accounting income that originate in
one
period and are capable of reversal in one or more subsequent
periods.
Deferred tax assets in respect of unabsorbed depreciation and
carry
forward of losses are recognised if there is virtual certainty that
there will be sufficient future taxable income available to realise
such losses. Other deferred tax assets are recognised if there is
reasonable certainity that there will be sufficient future taxable
income to realize such assets.
Deferred tax assets and liabilities are measured based on the tax
rates
that are expected to apply in the period when asset is realised or
the
liability is settled, based on tax rates and tax laws that have
been
enacted or substantively enacted by the balance sheet date.
(o) Redemption premium on Non Convertible Debentures (NCD)
Premium payable on redemption of NCD as per the terms of
issue, is
provided fully in the year of issue by adjusting against the
Securities
Premium Account (SPA) (net of tax).
(p) Borrowing costs

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Fees towards structuring / arrangements and underwriting and

other
incidental costs incurred in connection with borrowings are
amortised
over the period of the loan.
(q) Liabilities and contingent liabilities
The company records a liability for any claims where a potential
loss
is probable and capable of being estimated and discloses such
matters
in its financial statements, if material. For potential losses that
are
considered possible, but not probable, the Company provides
disclosure
in the financial statements but does not record a liability in its
accounts unless the loss becomes probable.
(r) Business segments
The Company is engaged mainly in the business of automobile
products
consisting of all types of commercial and passenger vehicles
including
financing of the vehicles sold by the Company. These, in the
context of
Accounting Standard 17 on Segment Reporting, as specified in
the
Companies (Accounting Standards) Rules, 2006, are considered
to
constitute one single primary segment. Further, there is no
reportable
secondary segment i.e. Geographical Segment.

INCOME STATEMENT
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An income statement or profit and loss account (also

referred to as a profit and loss statement(P&L), statement of
profit or loss, revenue statement, statement of financial
performance, earnings statement, operating statement,
or statement of operations) is one of the financial
statements of a company and shows the companys revenues and
expenses during a particular period. It indicates how the
revenues (money received from the sale of products and services
before expenses are taken out, also known as the top line) are
transformed into the net income (the result after all revenues and
expenses have been accounted for, also known as net profit or
the bottom line). It displays the revenues recognized for a
specific period, and the cost and expenses charged against these
revenues, including writeoffs (e.g., depreciation and amortization of various assets)
and taxes.The purpose of the income statement is to
show managers and investors whether the company made or lost
money during the period being reported.

6.PREPARATION OF FINANCIAL STATEMENTS

6.1

INCOME STATEMENT OF TATA MOTORS (2014-15)

(currency in million Rs.)
Particulars
(2013-14)
(2014-15)
Revenues
323,612.0
356,514.8
Other Revenues
19.6
65.0
TOTAL REVENUES

325,143.8

Cost of Goods Sold

GROSS PROFIT

234,753.6
90,390.2

358,086.0
254,571.5
103,514.5
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Selling General &

Admn expenses
R&D Expenses
Depreciation
Other Operating Exp
OTHER OPER. EXP
OPERATING INCOME

30,811.0
850.2
6,880.9
17,508.5
56,050.6
34,339.6

35,136.3
659.5
7820.7
24,046.6
67,663.1
35851.4

Interest Expense
Interest and Invst
NET INT EXPENSE
Income (Loss)
on Equity Investments
Currency Exchange
Gains (Loss)
Other Non Operating
Particulars
Income (Expenses)
EBT, EXCLUDING
UNUSUAL ITEMS

-4,650.6
592.5
-4,058.1

-9,127.2
1,696.6
-7,430.6

Gain (Loss) on
Sale of Assets
Other Unusual Items,
EBT, INCLUDING
UNUSUAL ITEMS
Income Tax Expense
Minority Interest
in Earnings
Earnings from
Continuing Operations
NET INCOME

394.2

652.0

652.1

1376.1

2013-14
-1.4

2014-15
-0.6

31,326.4

30,448.3

--52.2

1,103.6
-37.0

31,274.2
8,832.1

31,514.9
8,515.4

-742.2

-1322.5

21,699.9
21699.9

21,677.0
21677.0

79 | P a g e

6.2 Balance sheet

In financial accounting, a balance sheet or statement of financial
position is a summary of the financial balances of a sole proprietorship,
a business partnership, a corporation or other business organization, such as
an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a
specific date, such as the end of its financial year. A balance sheet is often
described as a "snapshot of a company's financial condition". Of the three
basic financial statements, the balance sheet is the only statement which
applies to a single point in time of a business' calendar year.
A standard company balance sheet has three parts: assets, liabilities, and
ownership equity. The main categories of assets are usually listed first, and
typically in order of liquidity. Assets are followed by the liabilities. The
difference between the assets and the liabilities is known as equity or the
net assets or the net worth or capital of the company and according to
the accounting equation, net worth must equal assets minus liabilities.[3]
Another way to look at the balance sheet equation is that total assets equals
liabilities plus owner's equity. Looking at the equation in this way shows how
assets were financed: either by borrowing money (liability) or by using the
owner's money (owner's or shareholders' equity). Balance sheets are usually
presented with assets in one section and liabilities and net worth in the other
section with the two sections "balancing".
A business operating entirely in cash can measure its profits by withdrawing
the entire bank balance at the end of the period, plus any cash in hand.
However, many businesses are not paid immediately; they build up
inventories of goods and they acquire buildings and equipment. In other
words: businesses have assets and so they cannot, even if they want to,
immediately turn these into cash at the end of each period. Often, these
businesses owe money to suppliers and to tax authorities, and the
proprietors do not withdraw all their original capital and profits at the end of
each period. In other words, businesses also have liabilities.

80 | P a g e

BALANCE SHEET OF TATA MOTORS

(currency in millions Rs.)
Particulars
Assets

2013-14

2014-15

Cash and Equivalents

TOTAL CASH AND
SHORT TERM INVESTMENT
Accounts Receivable

11,542.7

38,331.7

11,542.7
17,022.2

38,331.7
20,605.1

Notes Receivable
Other Receivables
TOTAL RECEIVABLES

84,553
62.7
101,638.5

76,938.9
11.9
97,555.9
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Inventory
Prepaid Expenses
Other Current Assets
TOTAL CURRENT ASSETS
Gross Property
Plant and Equipment
Accumulated Depreciation
NET PROPERTY PLANT
AND EQUIPMENT

31,669.0

32,946.4

1,247.3

3,334.8

16,681.7

20,504.7

162,779.2

192,673.5

129,408.3
54,266.5

182,484.4
57,652.4

75,141.8

124,832.0

Goodwill
LongTerm Investments
Deferred Charges, Long Term
Other Intangibles
Other Long-Term Assets
TOTAL ASSETS
Accounts Payable

4,430.1
11,745.9
119.3
-254163
48,723.3

Accrued Expenses
Short Term Borrowings

4,704.9
34,325

5,389.3
52,503.2

Current Income Taxes Pay.

Other Current Liabilities,
Unearned Revenue, Current
TOTAL CURRENT
LIABILITIES
Long-Term Debt
Capital Leases
Minority Interest

1,084.2
38,789.2
6.7

901.4
62,104.1
218.0

127,633.7
38,693.
-2,499.6

188,948.8
63,345.5
-4,683.1

8,172.7
176,999.6

9,744.5

Deferred Tax Liability

TOTAL LIABILITIES
266,721.9
Common Stock

3,853.6

5,661.6
26,658.3
2,442.1
1,429.6
-353,697.1
67,832.8

3,854.9
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Additional Paid in Capital

Retained Earnings
Comprehensive Income
TOTAL COMMON EQUITY
TOTAL LIABILITIES
AND EQUITY

19,364.0
44,087.8
9,911.3
77,216.7

15,372.2
58,523.7
9,224.4
58,523.7

254,216.3

353,697.1

6.3 RATIO ANALYSIS OF TATA MOTORS

Liquidity ratio
Current ratio = Current assets / Current liability
Current Assets
2013-14
192,673.5
Current Liability

2014-15
162,779.2
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2013-14
2014-15
188,948.8
127,633.7
Current Ratio (2014-15)
192,673.5/ 188,948.8 =1.01
Current Ratio (2013-14)
162,779.2/ 127,633.7 =1.27
Quick Ratio (2014-15)
C.A. - Invent. / C.L.
192,673.5- 32,946.4 / 188,948.8 =.85
Quick Ratio (2013-14)
162,779.2- 31,669.0/127,633.7 =1.02

Interval measure Current assets-inven. / avg. daily cash oper. Exp

For 2014-15
Avg. daily cash oper. Exp Total cash exp./ 365
67,663.1/ 365 = 185.3
Interval measure192,673.5- 32,946.4 / 185.3 =862 days
For 2013-14
Avg. daily cash oper. Exp56,050.6/ 365 = 153.5
84 | P a g e

Interval measure162,779.2- 31,669.0 / 153.5 =854 days

Conclusion
In liquidity ratio, we observe that current ratio in 2014-15 is less
in comparison of 2013-14. it means companies efficiency
decreases in paying current liability. And inquick ratio, it also
decreases. In 2014-15, regular cash meet was 862 days in
comparison of 854 of 2013-14. It means firms ability to pay its
daily exp.increases.

Leverage Ratio
Total debt ratio Total debt / capital employed
For 2014-15
Total debt - 63,345.5
Capital employed - Net worth + borrowing
Or
Share capital + debt.
86,975.2+ 63,345.5= 150320.7
63,345.5 / 150320.7 = 0.42
For 2013-14
Total debt - 38,693.6
85 | P a g e

Capital employed 77,216.7 + 38,693.6= 115910.3

38,693.6 / 115910.3 =.33
Debt equity ratio - Net worth / total debt
Net worth = share cap.
For 2014-15
86,975.2/63,345.5 =1.37
For 2013-14
77,216.7 /38,693.6 =1.99

Capital equity ratio For 2014-15

For 2013-14

Capital employed / net worth

150320.7 / 86,975.2=1.73
115910.3 / 77,216.7 =1.50

Interest coverage ratio

EBIT + depreciation / interest

Earning before tax

Add- Interest

2014-15
30,448.3
9127.2
39575.5

2013-14
31,326.4
4,650.6
35977

For 2014-15 39575.5 + 7,820.7/9,127.2 =5.19

86 | P a g e

For 2013- 14
35977 + 6,880.9 / 4,650.6=9.21
In 2014-15, the long term financial position getting strong than
2013-14.

CONCLUSION
Capability of paying long term debt. is increases. As we seen,
debt ratio increases. And the contribution of debt is increases in
2014-15 than 2013-14 and the part of share capital is also
increases in total capital employed than 2013-14 it means,
company is increasing its capital through shares.

Activity Ratio
Inventory Turnover Ratio:- Cost of goods sold /
Inventory

Cost of goods sold

Inventory

(2014-15)
254,571.5
32,946.4

(2013-14)
234,753.6
31,669.0

87 | P a g e

For 2014-15:254,571.5 / 32,946.4 =7.72

For 2013-14 :234,753.6 / 31,669.0 =7.41
Debtor Turnover Ratio :- Sales / debtors
For 2014-15 :358,086.0 (sales) / 97,555.9 (debtors) =3.67
For 2013-14 :325,143.8 (sales) / 101,638.5 (debtors) =3.20
Average collection period (2014-15) = 360 / 3.67 =
98days Average collection period (2013-14) = 360 / 3.20
= 112 days
Assets Turnover Ratio :- Sales / Net assets or capital
employed
For 2014-15 :358,086.0 (sales) / 150320.7 (c.e.) =2.38
For 2013-14:325,143.8 (sales) / 115910.3 (c.e.) =2.80
Working Capital Turnover Ratio:- Sales / Net working
capital
Net Working Capital = Current assets Current liability
For 2014-15=
192,673.5 -188,948.8 =3724.7
For 2013-14 =
162,779.2 - 127,633.7 = 35145.5

88 | P a g e

For 2014-15 :358,086.0 (sales) / 3724.7 (N.W.C.) =96.13

For 2013-14 :325,143.8 (sales) / 35145.5(N.W.C) =9.25
Conclusion
As we seen, companys efficiency of using its assets is increasing
in 2014-15 than 2013-14. The inventory turnover ratio which
shows its efficiency of selling product is increasing. Average
collection period is decreasing means company is selling its
product more on cash basis in 2014-15 than 2013-14 but
companys assets turnover ratio is decreasing means sales is not
growing according to its capital employed and working capital.

Profitability Ratio
Gross Margin =
Gross profit / Sales
Gross Margin (2014-15) =
103,514.5 / 358,086.0 =.29
Gross Margin (2013-14) =
90,390.2 / 325,143.8 =.28

EBIT Ratio =
PAT / EBIT
21,677.0 / 37878.9=.57

(For 2014-15)

89 | P a g e

For 2013-14 =

21,699.9 / 35384.5 =.61

Return on investment = EBIT / Capital employed

For 2014-15 =
39575.5 / 150320.7 =.26
For 2013-14 =

35977 / 115910.3=.31

Return on equity =
PAT / Net worth
For 2014-15 =
21,677.0 / 86,975.2 =.25
For 2013-14 =

21,699.9 / 77,216.7 =.28

Conclusion
In profitability ratio, the gross profit ratio is increasing in 2014-15
than 2013-14. It means its profit is growing in sales. But
companys EBIT ratio is decreasing means interest on capital and
tax rate is increased in 2014-15 than 2013-14 which is
responsible in decreasing its PAT. And companys return on
investment is decreased that indicates that its earning on capital
employed is decreased in 2014-15 than 2013-14. And its ROE is
also decreases means its PAT on its share capital is decreased.

90 | P a g e

COMPARATIVE BALANCE SHEET OF TATA MOTORS

For the year
Ended 31st march 2015
2014-15 2013-14 Abs.chnge %chin
Long term source
Of funds
A .Shareholders fund
Share capital
Reserve and surplus
Internal equity

385.54
7453.96
7839.50

385.41
6484.43
6869.75

B. Loan funds
Secured loans

2461.99

2022.04

00.13 00.03
969.62 14.95
969.75 14.12
439.95

21.76

91 | P a g e

Unsecured
External equity
c.deferred tax liab.(net)
d.total fund employed

3818.53
6280.52

1987.10 1831.43 92.17

4009.14 2271.38 56.66

975.72
15095.74

786.63
188.89 24.00
11665.72 3430.02 29.40

Application of funds
Long term investments
e. fixed assets
i) gross block
ii)less-dep.
iii) Net block
iv)capital Wip
f.investments

10830.83 8775.80 2055.03 23.42

5443.52
4894.54 548.98 11.22
5387.31
3881.26 1506.05 38.80
5064.96
2513.32
2551.64 101.5
4910.27
2477.00 2433.27 98.2
15362.54
8871.58 6490.96 73.17

Short term investments

(working capital CA-CL)
g.Current assets
i)int. accrued on invt.
ii) inventories
iii)sundry debtors
iv) cash and bank bal.
v) loans&advances
h. current liabilities
i) sundry creditors
ii) provisions

0.86
2421.83
1130.73
2397.31
4433.05
10383.78

5.94
(5.08) (85.52)
2500.95 (79.12) (3.1)
782.18 348.55
44.56
826.76 1570.55 189.96
6396.22 (1963.17) (30.70)
10512.05 (128.17) (01.22)

8667.20
1989.43
10656.63

6363.6
1364.3
7728.00

2303.52
625.11
2928.63

36.20
45.82
37.90

Net current assets

92 | P a g e

(g-h)
j.misc.exp
TOTAL ASSETS (net)
29.40
(X+I+J)

(272.85)
6.05
15095.74

2784.05
10.09

(3056.90) (109.8)
(04.04) (40.04)

11665.72

3430.02

COMMENTS ON THE FINANCIAL SOUNDNESS OF THE TATA

MOTORS BY ANALYIZING THE COMPARATIVE BALANCE SHEET
OF THE COMPANY
I)
It was observed from the comparative balance sheet that
internal equity is comprised of Share capital and reserve
& surplus ,in which increment was noticed by 14.12%.
The major increment was seen in reserve & surplus by
14.95% and share capital was marginally increased by
00.03% as compared to the previous financial year.
II)
It was also observed that the company has increased the
external equity by56.66%. The company has raised
secured loan by 21.76% and unsecured loan by92.17% as
compared to the previous financial year. Overall the
company has increased its capital structure position by
93 | P a g e

70.78% as compared to previous financial year , which is

a good indication for the company as the company is
increasing its investment and expanding the business.
III) Deferred tax liability was increased by 24.00% as
compared to the previous financial year, the company
should try to reduce the deferred tax liability as we know
that it is the obligation for the company to pay. So ,
the company should not increase the fund by blocking
deferred tax liability. which is not a good policy of
the company.
IV) It was observed that total fund employed by the company
was increased by29.40% as compared to the previous
financial year. In the current year (2014-15), the
company has increased the employable fund by 29.40%
which is a good sign of growth of the company.
V) Investment in the fixed assets was noticed by 63.46%
and in investment by98.23% as compared to the previous
financial year. It was noticed that the total longterm
investment of the company has registered an increment
of 73.17% , whichindicate that the company is having a
good opportunity of growth and by investing inlong term ,
the company is intelligently grapping the opportunity.
VI) The working capital of the company was decreased by
109.80% as compared to the previous financial year ,
which is not a good sign for the company. The company
is not able to manage the working capital sufficiently .the
company should takespecial care to manage the working capital
of the company as we know that theworking capital is the blood
of the company ,without proper working capital thecompany will
not manage to run its operation successfully.

94 | P a g e

6.4 COMPARATIVE PROFIT AND LOSS

STATEMENT OF TATA MOTORS
For the year ended 31 march ,2015
2014-15

Abs.change

%change

31819.48

1274.45

04.00

4349.45

13.66

00.31

28730.82

27270.03

1260.79

04.59

24093.93
1544.57
25638.50

22789.57
1368.09
24157.66

1304.36
176.48
1408.84

05.72
12.90
06.13

A.Gross revenue
Sale of product 33093.93
and other income
less- excise duty 4363.11
B.Net revenue
C.Cogs
Raw materials
Employee cost

2013-14

95 | P a g e

D.Op.profit(B-C) 3092.32
E.Dividend&other
Incomes
483.18
F.Profit before dep. 3575.50
Interest and tax
G.Less:Product dev.exp. 64.35
Depreciation
652.31
Interest
282.37
H.Profit before tax 2576.47
(A-B)
Tax:-current
(146.01)
Deferred
(401.54)
(547.55)
J. Profit after tax 2028.92
K. Balance b/f
From previous yr 1013.83

776.76

237.07

30.52

L. Bal avai. for

Appropriations

2690.22

352.53

13.10

578.07
98.25

00.36
(17.00)

00.06
(17.30)

3042.75

M. Appropriations
proposed dividend 578.43
ii) tax on pr. div.
81.43
iii) resi.div.paid
for 2012-13
-iv) general res. 1000.00
v) bal.carried to
balance sheet 1383.07
3042.75

3312.37

(220.05)

(06.64)

245.19
3557.56

237.99
17.94

97.06
00.51

85.02
586.29
313.07
2573.18

(20.67)
66.02
(30.70)
3.29

(24.31)
11.26
(09.81)
00.13

(482.50)
(177.22)
(659.72)
1913.46

(112.17)
115.46

(17.00)
06.03

00.07
1000.00

(00.07)
--

(100.00)
--

1013.83

369.27

36.42

2690.22

362.53

13.10

96 | P a g e

COMMENTS ON THE FINANCIAL CONDITION OF THE

TATA MOTORS BY ANALYZING THE COMPARATIVE PROFIT
AND LOSS ACCOUNT OF THE COMPANY
I)

It was observed that the sales revenue was increased by

04.00% and in terms of absolute figure by Rs 1274.45
crores as compared to the previous financial year.
Respectively, excise duty was increased by 00.31% as
compared to the previous financial year.
II) The net revenue of the company was noticed an
increment of 04.59% as compared to the previous
financial year and in terms of absolute figure by Rs
1260.79 crores .But the cost of good sold by the company
was increased by 06.13% , which was around Rs 1480.84
crores in absolute figures. Which also cause to decrease
the operating profit of the company by 06.64% as
compared to the previous financial year. The company
should put special attention to check out its direct
cost (cost of goods sold ) as it was judged from the
comparative P/L A/C that the increment in the direct
expense by the company is excess than the increment in
the net revenue of the company.
III) The increment in the dividend and other incomes was
noticed by 97.06% as compared to the previous financial
year. which increases the PBIT (Profit before interest and
tax) by 00.51% and in terms of absolute figure by Rs
237.99 crores .
IV) The profit before tax (PBT) was noticed an increment of
00.13%, whereas profit after tax (PAT) was increased by
06.03% as compared to previous financial year. The huge
increment in the PAT was noticed despite of having
less increment in PBT due to decrease in the payment of
tax by 17.00% as compared to the previous financial

97 | P a g e

V)

year,which approximately realised Rs 115.46 crores in

the hand of the company.
It was also noticed that balance brought forward by the
company was increased by30.52% , which means that in
the previous financial year the company have a good
surplus amount left in their hand after appropriating the
available funds . which increases the bottom line balance
by 13.10%

6.5 COMMON SIZE BALANCE SHEET OF TATA

MOTORS
For the year ended 31 march,2015
(Rs. in crores)
2013-14
Long term sources
Of funds
A.Shareholders funds
i) share capital
ii) reseves and surplus

2014-15

385.54
6484.34

02.55
49.38

385.41
7453.96

03.30
55.58

6869.75

51.93

7839.50

58.89

98 | P a g e

B. Loan funds
i) secured
ii) unsecured

2022.04
1987.10
4009.14

16.31
17.03
34.37

2461.99
3818.53
6280.52

17.33
25.30
42.60

C.Deferred tax liab.(net)

786.63

06.46

975.72

06.74

D.Total Fund Employed

11665.72

100

8775.80
4894.54
3881.26
5064.96

71.75 10830.83
36.06 5443.52
35.69 5387.31
69.24
6394.58

75.23
41.96
33.29
54.82

2477.00

21.23

32.5

15095.74

100

Application of funds
Long term investments
E. Fixed assets
i) gross block
ii) less-depreciation
iii) net block
iv) capital wip
F. Investments
3

8871.58

4910.27

76.05 15362.54 101.77

Short term investments

(working capital CA-CL)
G.Current assets
i) interest accrued on
investments
ii) Inventories
iii) sundry debtors
iv) cash and bank bal.
v) loans and advances

H.Current liablities
i) sundry creditors
ii) provisions

0.86
2421.83
782.18
826.76
4433.05
10383.78

00.01 5.94
16.04 2500.95
06.70 1130.73
07.08 2397.31
29.36 6396.22
68.94 10512.05

6363.68
1364.32

54.55
11.70

8667.20
1989.43

00.05
21.44
07.49
15.88
54.83
90.11

57.41
13.18
99 | P a g e

I.Net current assets

(G-H)
J.Miscellanous exp
TOTAL ASSETS (NET)

7728.00

66.25 10656.63

(272.85)

(01.80) 2784.05

6.05
11665.72

00.04
100

10.09
15095.74

70.59
23.87
00.09
100

100 | P a g e

101 | P a g e