IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828

Vol. 4, No.4, August 2015

A STUDY ON FINANCIAL ANALYSIS OF TATA

MOTORS
B.SUREKHA1, K.RAMA KRISHNAIAH2
1
Assistant professor, Department of H&S, VTA, Kavali, Nellore District, A.P
2
Professor, Department of Commerce, Management & Computer Science, S V
University, Tirupati.
Abstract:
The primary objective of the Tata Motors
is to earn profit for the surviving and growth
of the company. The profit is earned with the
help of money invested in the business. It is
essential to observe how much profit has been
earned. This is possible by using Profitability
ratios. These ratios are the most important and
reliable indicators to measure the financial
performance of Tata Motors. These ratios
check the current operating performance of
the Tata Motors, and are very helpful for the
management to take remedial measures if
there is a declining trend.
In this paper, analysis reveals the
prosperity of Tata Motors from 2010 to 2014.
Prosperity can be examined by using
profitability ratios, statistical tools and growth
chart.
keywords: Net profit, PBDIT, PBT, PAT,
RONW
1. INTRODUCTION:
To study the progress is very important.
Through this study, organization can
recognize its strengths and weaknesses, so
that they can be properly analyzed.
Profitability analysis helps to the organization
to identify whether investment is sufficient or
not, management is capable or not,

organization has efficient workers or not.

Finally, organization can identify its progress,
profits and growth. Profit is important for any
business. For surviving, growth, expansion
and diversification it is necessary. Profit is
important to satisfy the investors, to repay the
debt or loans, to pay wages and salaries to
staff and other day-to-day expenses. Profit is
the most useful measure of overall efficiency
of a business.
This study aims at analyzing the overall
financial study of the Tata Motors by using
various financial tools. The study is based on
the accounting information of Tata Motors.
This study covers a period of 2010 to 2014,
for analyzing the financial statements such as
income statements and balance sheet. The
data of the past five years are taken into
account for the study. The performance is
compared with in those periods.
Objectives of the study
1. To know the Financial position of the
company for the past 5 years.
2. To calculate the growth of Tata Motors.
3. To provide suggestions for improving the
overall financial position of the Tata Motors.
2. LITERATURE REVIEW
Rakhi Hotwani reveals in his study
Profitability Analysis of Tata Motors that
company has created significant wealth for its

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015

stakeholders and provided hand some return

on investment[1]. Companies profit margins
have fluctuations. Return on net worth has
been below 10% in 2 years. Any way inner
strength of the company is remarkable.
Company can further improve its profitability
through optimum capital gearing and
reduction in administration and financial
expenses.
Daniel Moses Joshuva stated in his
study Financial Status of Tata Motors LTD
that company has stable growth and also
suggested to reduce the expenditure[2].
Decrease in expenses will increase the
profitability. He also suggested that company
should utilize its working capital efficiency.
Patel Vivek indicated in his study on
Financial Performance of Tata Motors that
the company has issued equity capital rather
than going for performance share which
means the companys dividend will not be
fixed but the company has provided a good
amount of dividend to share holders[3].
Despite of having large reserves, company
has opted for loan funds. The company had a
good operating income which shows that the
company has a sustainable growth.
Financial analysis of Tata motors was
carried out by Rakhi, Daniel & Patel up to the
financial year 2009-10. The methodology
adopted by each author is different. Here in
this paper, analysis was carried out from the
financial analysis from 2009 to 2015.
3. METHODOLOGY
The study consists of 5 years data of Tata
Motors from 2009-10 to 2013-14. This is

complete secondary data. This data is taken

from the published annual reports of Money
Control. Profitability ratios and statistical
techniques will be used to analyze the data.
Financial Analysis of Tata Motors
For financial analysis, some profitability
ratios are to be calculated to assess the
financial position of the company. The basic
aim of this analysis is to reveal financial
position is increasing or decreasing.
PBDIT Ratio:- PBDIT is an indicator of a
companys financial performance which is
calculated in the following PBDIT
calculation.
PBDIT = Revenue - Expenses ( excluding
depreciation, interest, tax )
This ratio tells us the net operating income
after deducting operating expenses.
Table 1. PBDIT Ratio of Tata Motors ( Rs.
Crores ) (In % )
Years

Net Sales

PBDIT

2009 10
2010 11

35,373.29
47,088.44

5,253.69
4,940.99

PBDIT
Ratio
14.85
10.49

2011 12

54,306.56

4,166.39

7.67

2012 13

44,765.72

3,380.31

7.55

2013 14
Average

34,319.28
43,170.66

2,382.02
4,024.68

6.94
9.50

Std Deviation

8,382.23

1,170.87

3.29

Co-efficient of
Variance

19.42

29.09

34.63

Source: Money control.com published annual

reports
This ratio assumes great importance to

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015

money lenders and financiers as it reveals the

cash availability of the firm for payment of
interest to the creditors. Tata Motors has
grown highest PBDIT in FY 2009 - 10 at
5,253.69 crores. Compared to 2010 to 2014,
2010 is the best year. 2010 - 11 earnings are
also very good. Average ratio of the company
is 9.50%. Standard deviation and C0-efficient
of variance are 3.29 and 34.63 respectively,
indicating stability of the performance of the
company.
PBT Ratio
This ratio measures combines all of the
companys profit before tax, including
operating,
non-operating,
continuing
operations and non-continuing operations.
PBT exists because tax expense is constantly
changing and taking it out helps to give an
investor a good idea of changes in a
companys profit or earnings from year to
year.
Table 2. Profit before tax ratio of Tata Motors
(Rs. Crores ) ( In% )
Years
2009 10
2010 11
2011 12
2012 13
2013 14
Average
Std Deviation
Co-efficient of
Variance

Net Sales
35,373.29
47,088.44
54,306.56
44,765.72
34,319.28
43,170.66
8,382.23
19.42

PBT
2,829.54
2,196.52
1,341.03
174.93
-1,025.80
1,103.24
1,551.33
140.62

PBT Ratio
7.99
4.66
2.47
0.39
-2.99
2.51
4.17
166.40

Source: Money control.com published annual

reports
Companys PBT ratio is mostly in line
with the PBDIT ratio above. Average PBT
ratio for the company is 2.51% as against
average PBDIT ratio of 9.50%. Difference
between these ratios indicates interest and

depreciation expenses to that tune.

Highest PBT is recorded by the company
in FY 2009 - 10. Next years it will be reduced.
However, standard deviation and co-efficient
of variance are 4.17 and 166.40 respectively,
indicating stability in Profit Before Tax of the
company. Company earnings will be reduced
in FY 2012 - 2013 and 2013 - 14. FY 2011 12 has also been below par for the company in
terms of PBT ratio.
PAT Ratio:- This ratio represents the
relationship between Net Profit of the
company and its Net Sales. Difference
between net profit ratio ( PAT Ratio ) and
PBT ratio reflects tax provisions made by the
company. It may also include items of extra
ordinary nature. In net profit ratio the net
amount earned by a business after all taxation,
related expenses have been deducted. The
profit after tax is often a better assessment of
what a business is really earning and hence
can use in its operations than its total
revenues.
Table 3. Profit after tax ratio of Tata Motors
( Rs.Crores ) (In% )
Years

Net Sales

PAT

2009 - 10

35,373.29

2,240.08

PAT
Ratio
6.33

2010 - 11

47,088.44

1,811.82

3.85

2011 - 12

54,306.56

1,242.23

2.29

2012 - 13
2013 - 14
Average
Std Deviation
Co-efficient of
Variance

44,765.72
34,319.28
43,170.66
8,382.23
19.42

301.81
334.52
1,186.09
867.86
73.17

0.67
0.98
2.82
2.33
82.54

Source: Money
information

control.com

published

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015

We have seen that FY 2009 - 10 has been the

best year for the company as it has recorded
highest PBDIT and PBT in that year. This
ratio indicates that company witnessed its
highest net profit in FY 2009 - 10. 2010 - 11 is
also good. On an average, companys net
profit ratio stands at 2.82%. Standard
deviation and Co-efficient of Variance is high
at 2.33 and 82.54 respectively.
RONW Ratio:- Return on Net Worth is also
known as Return on Equity ( ROE ). The
amount of net income returned as a
percentage of share holders equity is called
RONW. RONW ratio measures a corporations
profitability by revealing how much profit a
company generates with the money
shareholders have invested.
Table 4. Return on Net Worth ratio of Tata
Motors ( Rs.Crores ) (In% )
Years

Net Worth

PAT

2009 10

14,779.15

2,240.08

RONW
Ratio
15.16

2010 11

20,013.30

1,811.82

9.05

2011 12

19,626.01

1,242.23

6.33

2012 13

19,134.84

301.81

1.58

2013 14

19,176.65

334.52

1.74

Average

18,545.99

1,186.09

6.77

Std Deviation

2,172.55

867.86

5.66

Co-efficient of
Variance

11.71

73.17

83.60

Source: Money control.com published

information
Stake holders of the company are most
concerned with this ratio as it indicates return
on amount invested by them in the firm.
Normally, a return of more than 8% or the rate
offered by the bank on deposits is considered

to be the minimum bench mark return for any

investment. One can safely earn the return
without risk.
This ratio reveals that poor performance
of the company as average ratio stands at
6.77% which is considerably below the bench
mark level. FY 2009 - 10 emerges as the best
year for the company in terms of return on net
worth. Companys position is good in the first
years and shows poor in the last two years.
Standard deviation and Co-efficient of
variance are 5.66 and 83.60.
Table 5.Percentage increase in profits in
proportion to percentage increase in sales
Years

2009 - 10
2010 - 11
2011 - 12
2012 - 13
2013 - 14

Percentage
increase
In Sales
33.12
15.33
- 17.57
- 23.34

Percentage
increase
In Profits
- 19.12
- 31.44
- 75.70
10.84

This table shows the comparison of increase

in sales with increase in profits. In the FY
2010 - 11, it found to be highest percentage
decrease in sales among all and the FY 2013 14 shows the lowest. The reasons for the
variation may be due to high tax, high
borrowed funds, high depreciation cost etc.
In FY 2013 - 14 the percentage increase
in profits is found to be highest when
compared to the remaining periods. (negative
sign indicates the decreasing pattern of the
profits). In FY 2012 - 13 the percentage
decrease in profits is found to be more
significant than the other financial years.
4. RESULTS
Table 6. Profitability ratios of Tata Motors
Years

PBDIT
Ratio

PBT
Ratio

PAT
Ratio

RONW
Ratio

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IRACST International Journal of Commerce, Business and Management (IJCBM), ISSN: 23192828
Vol. 4, No.4, August 2015

2009 10

14.85

8.00

6.33

15.16

2010 11

10.49

4.66

3.85

9.05

2011 12

7.67

2.47

2.29

6.33

2012 13

7.55

0.39

0.67

1.58

2013 14

6.94

- 2.99

0.98

1.74

Average

9.50

2.51

2.82

6.77

Std
Deviation
Co-efficient
of
Variance

3.29

4.17

2.33

5.66

34.63

166.4

82.54

83.60

Source: Money control.com Annual reports

This table shows considerable growth attained
by the company in last five years. 2009-10 is
the best financial year.

3. High depreciation cost

4. High expenses etc.
Which can be modified by implementing
proper financial management concepts. Thus
it can be concluded that inner strength of the
company is remarkable. Company can further
improve its profitability through optimum
capital
gearing
and
reduction
in
Administration and Financial expenses.
REFERENCES
[1]. K. Rajeswara Rao and G. Prasad, Accounting and
Finance Jai Bharat Publications, 10th Edition,
2008, pp.20.1 - 20.26.
[2]. Dr.S.N.Maheswari - Financial Management Principles and practice, S.Chand & Company Ltd,

CONCLUSION
I would like to conclude that the prosperity of
Tata Motors Ltd., is wealthy for the last 5
years period. It was found to be in a gradual
increasing manner regarding the Net Sales
and the Net Profits of the company since 2009
onwards. These changes in the profits might
have occurred due to:
1. High taxation
2. High cost of borrowed funds

9th edition, 2004.

[3]. Hotwani, Rakhi. "PROFITABILITY ANALYSIS
OF TATA MOTORS." Ratio2.8918.06 (2001):
763-35.
[4]. Bagavathi R.S.N.Pillai - Management Accounting,
S.Chand and Company Ltd., 4th edition, 1997.
[5]. Annual reports of Tata Motors.
[6]. Sharma R.K. and Gupta Shashi K., Financial
Management, Kalyani Publisher, New Delhi,
2008.

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