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 complete secondary data. This data is taken
on investment[1]. Companies profit margins from the published annual reports of Money
have fluctuations. Return on net worth has Control. Profitability ratios and statistical
been below 10% in 2 years. Any way inner techniques will be used to analyze the data.
strength of the company is remarkable.
Company can further improve its profitability Financial Analysis of Tata Motors
through optimum capital gearing and For financial analysis, some profitability
reduction in administration and financial ratios are to be calculated to assess the
expenses. financial position of the company. The basic
aim of this analysis is to reveal financial
Daniel Moses Joshuva stated in his position is increasing or decreasing.
study Financial Status of Tata Motors LTD
that company has stable growth and also PBDIT Ratio:- PBDIT is an indicator of a
suggested to reduce the expenditure[2]. companys financial performance which is
Decrease in expenses will increase the calculated in the following PBDIT
profitability. He also suggested that company calculation.
should utilize its working capital efficiency.
PBDIT = Revenue - Expenses ( excluding
Patel Vivek indicated in his study on depreciation, interest, tax )
Financial Performance of Tata Motors that This ratio tells us the net operating income
the company has issued equity capital rather after deducting operating expenses.
than going for performance share which
means the companys dividend will not be Table 1. PBDIT Ratio of Tata Motors ( Rs.
fixed but the company has provided a good Crores ) (In % )
amount of dividend to share holders[3]. Years Net Sales PBDIT PBDIT
Ratio
Despite of having large reserves, company 2009 10 35,373.29 5,253.69 14.85
has opted for loan funds. The company had a 2010 11 47,088.44 4,940.99 10.49
good operating income which shows that the 2011 12 54,306.56 4,166.39 7.67
company has a sustainable growth. 2012 13 44,765.72 3,380.31 7.55
2013 14 34,319.28 2,382.02 6.94
Financial analysis of Tata motors was
Average 43,170.66 4,024.68 9.50
carried out by Rakhi, Daniel & Patel up to the
Std Deviation 8,382.23 1,170.87 3.29
financial year 2009-10. The methodology Co-efficient of 19.42 29.09 34.63
adopted by each author is different. Here in Variance
this paper, analysis was carried out from the
financial analysis from 2009 to 2015. Source: Money control.com published annual
reports
3. METHODOLOGY
The study consists of 5 years data of Tata This ratio assumes great importance to
Motors from 2009-10 to 2013-14. This is

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Vol. 4, No.4, August 2015

money lenders and financiers as it reveals the depreciation expenses to that tune.
cash availability of the firm for payment of Highest PBT is recorded by the company
interest to the creditors. Tata Motors has in FY 2009 - 10. Next years it will be reduced.
grown highest PBDIT in FY 2009 - 10 at However, standard deviation and co-efficient
5,253.69 crores. Compared to 2010 to 2014, of variance are 4.17 and 166.40 respectively,
2010 is the best year. 2010 - 11 earnings are indicating stability in Profit Before Tax of the
also very good. Average ratio of the company company. Company earnings will be reduced
is 9.50%. Standard deviation and C0-efficient in FY 2012 - 2013 and 2013 - 14. FY 2011 -
of variance are 3.29 and 34.63 respectively, 12 has also been below par for the company in
indicating stability of the performance of the terms of PBT ratio.
company. PAT Ratio:- This ratio represents the
PBT Ratio relationship between Net Profit of the
This ratio measures combines all of the company and its Net Sales. Difference
companys profit before tax, including between net profit ratio ( PAT Ratio ) and
operating, non-operating, continuing PBT ratio reflects tax provisions made by the
operations and non-continuing operations. company. It may also include items of extra
PBT exists because tax expense is constantly ordinary nature. In net profit ratio the net
changing and taking it out helps to give an amount earned by a business after all taxation,
investor a good idea of changes in a related expenses have been deducted. The
companys profit or earnings from year to profit after tax is often a better assessment of
year. what a business is really earning and hence
can use in its operations than its total
Table 2. Profit before tax ratio of Tata Motors revenues.
(Rs. Crores ) ( In% ) Table 3. Profit after tax ratio of Tata Motors
Years Net Sales PBT PBT Ratio ( Rs.Crores ) (In% )
2009 10 35,373.29 2,829.54 7.99 Years Net Sales PAT PAT
2010 11 47,088.44 2,196.52 4.66 Ratio
2011 12 54,306.56 1,341.03 2.47 2009 - 10 35,373.29 2,240.08 6.33
2012 13 44,765.72 174.93 0.39
2013 14 34,319.28 -1,025.80 -2.99 2010 - 11 47,088.44 1,811.82 3.85
Average 43,170.66 1,103.24 2.51 2011 - 12 54,306.56 1,242.23 2.29
Std Deviation 8,382.23 1,551.33 4.17
2012 - 13 44,765.72 301.81 0.67
Co-efficient of 19.42 140.62 166.40
2013 - 14 34,319.28 334.52 0.98
Variance
Average 43,170.66 1,186.09 2.82
Source: Money control.com published annual Std Deviation 8,382.23 867.86 2.33
reports Co-efficient of 19.42 73.17 82.54
Variance
Companys PBT ratio is mostly in line
with the PBDIT ratio above. Average PBT
ratio for the company is 2.51% as against Source: Money control.com published
average PBDIT ratio of 9.50%. Difference information
between these ratios indicates interest and

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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 to be the minimum bench mark return for any
best year for the company as it has recorded investment. One can safely earn the return
highest PBDIT and PBT in that year. This without risk.
ratio indicates that company witnessed its This ratio reveals that poor performance
highest net profit in FY 2009 - 10. 2010 - 11 is of the company as average ratio stands at
also good. On an average, companys net 6.77% which is considerably below the bench
profit ratio stands at 2.82%. Standard mark level. FY 2009 - 10 emerges as the best
deviation and Co-efficient of Variance is high year for the company in terms of return on net
at 2.33 and 82.54 respectively. worth. Companys position is good in the first
years and shows poor in the last two years.
RONW Ratio:- Return on Net Worth is also Standard deviation and Co-efficient of
known as Return on Equity ( ROE ). The variance are 5.66 and 83.60.
amount of net income returned as a Table 5.Percentage increase in profits in
percentage of share holders equity is called proportion to percentage increase in sales
RONW. RONW ratio measures a corporations Years Percentage Percentage
increase increase
profitability by revealing how much profit a In Sales In Profits
company generates with the money 2009 - 10 - -
shareholders have invested. 2010 - 11 33.12 - 19.12
2011 - 12 15.33 - 31.44
Table 4. Return on Net Worth ratio of Tata 2012 - 13 - 17.57 - 75.70
Motors ( Rs.Crores ) (In% ) 2013 - 14 - 23.34 10.84
Years Net Worth PAT RONW
Ratio
2009 10 14,779.15 2,240.08 15.16 This table shows the comparison of increase
2010 11 20,013.30 1,811.82 9.05 in sales with increase in profits. In the FY
2011 12 19,626.01 1,242.23 6.33 2010 - 11, it found to be highest percentage
2012 13 19,134.84 301.81 1.58 decrease in sales among all and the FY 2013 -
2013 14 19,176.65 334.52 1.74 14 shows the lowest. The reasons for the
Average 18,545.99 1,186.09 6.77 variation may be due to high tax, high
Std Deviation 2,172.55 867.86 5.66 borrowed funds, high depreciation cost etc.
Co-efficient of 11.71 73.17 83.60 In FY 2013 - 14 the percentage increase
Variance in profits is found to be highest when
compared to the remaining periods. (negative
Source: Money control.com published sign indicates the decreasing pattern of the
information profits). In FY 2012 - 13 the percentage
Stake holders of the company are most decrease in profits is found to be more
concerned with this ratio as it indicates return significant than the other financial years.
on amount invested by them in the firm. 4. RESULTS
Normally, a return of more than 8% or the rate Table 6. Profitability ratios of Tata Motors
Years PBDIT PBT PAT RONW
offered by the bank on deposits is considered Ratio Ratio Ratio Ratio

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Vol. 4, No.4, August 2015

2009 10 14.85 8.00 6.33 15.16 3. High depreciation cost

2010 11 10.49 4.66 3.85 9.05 4. High expenses etc.
2011 12 7.67 2.47 2.29 6.33
Which can be modified by implementing
2012 13 7.55 0.39 0.67 1.58
proper financial management concepts. Thus
2013 14 6.94 - 2.99 0.98 1.74
it can be concluded that inner strength of the
Average 9.50 2.51 2.82 6.77
company is remarkable. Company can further
Std 3.29 4.17 2.33 5.66
Deviation
improve its profitability through optimum
Co-efficient 34.63 166.4 82.54 83.60 capital gearing and reduction in
of Administration and Financial expenses.
Variance

REFERENCES
Source: Money control.com Annual reports
[1]. K. Rajeswara Rao and G. Prasad, Accounting and
This table shows considerable growth attained
Finance Jai Bharat Publications, 10th Edition,
by the company in last five years. 2009-10 is
2008, pp.20.1 - 20.26.
the best financial year.
[2]. Dr.S.N.Maheswari - Financial Management -
Principles and practice, S.Chand & Company Ltd,
CONCLUSION
9th edition, 2004.
I would like to conclude that the prosperity of
[3]. Hotwani, Rakhi. "PROFITABILITY ANALYSIS
Tata Motors Ltd., is wealthy for the last 5
OF TATA MOTORS." Ratio2.8918.06 (2001):
years period. It was found to be in a gradual
763-35.
increasing manner regarding the Net Sales
[4]. Bagavathi R.S.N.Pillai - Management Accounting,
and the Net Profits of the company since 2009
S.Chand and Company Ltd., 4th edition, 1997.
onwards. These changes in the profits might
[5]. Annual reports of Tata Motors.
have occurred due to:
[6]. Sharma R.K. and Gupta Shashi K., Financial
1. High taxation
Management, Kalyani Publisher, New Delhi,
2. High cost of borrowed funds
2008.

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