Institute for Integrated Learning in Management IILM Graduate School of Management GREATER NOIDA

PROJECT ON WORKING CAPITAL OF TATA MOTORS

SUBMITTED TO: DR.ANUBHA GUPTA

SUBMITTED BY: PUNAM PANDEY FT-FS-11-335

Content
Introduction Market share Comparison with companies Graphs & details Analysis Interpretation

INTRODUCTION Tata Motors Limited was founded in 1945 by Jamshedji Tata and is headquartered in Mumbai. Its products include passenger cars, trucks, vans and coaches. It is the world's eighteenthlargest motor vehicle manufacturing company, fourth-largest truck manufacturer and second-largest bus manufacturer by volume. The subsidiaries of Tata Motors are Jaguar Land Rover, Tata Daewoo and Tata Hispano. Tata Motors was ranked as India's 3rd Most Reputed Car manufacturer in the Reputation Benchmark Study - Auto (Cars) Sector, launched in April 2012. Tata Motors has been ranked 314th in the Fortune Global 500 rankings in the year 2012.

Market share of tata motor

Comparison with competitors (ET 500) 3

RANK 21

COMP Mahindra & Mahindra Ltd. Maruti Suzuki India Ltd. Ashok Leyland Ltd. Tata Motors Ltd. Force Motors Ltd.

TURN OVER 37026.37

ASSET 36926.19

19 67

38140.69 11133.04

14762.90 6621.16

7
396 148 212

123222.91
1574.05 5138.64 3167.19

52209.48
583.79 474.14 2036.43

Eicher Motors Ltd.

Escorts Ltd.

SALES FIGURES OF CARS IN 2012

Tata Motors sold 83,363 cars in March 2011 and in March 2012, they reported a 20% growth and pegged sales at a whooping 100,414 units. The drivers of the overall increase in sales figures for March were Nano (10,475 units, up 20%), Indica (11420 units, up 65%) and the Sumo-Safari segment (6,794 units, up 40%).

Trend of the market price

CURRENT RATIO:-

Year Current Ratio

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

0.51

0.53

0.44

0.44

0.64

Current Ratio = Current Assets/ Current Liabilities. It assesses short term solvency i.e. the ability to meet short term obligation of the company. When compared with other players, the ratio is the least in amount, Mahindra (avg. of 0.9)and Maruti (avg. of 1.22). The Low value can indicate that the company is having difficulty in meeting current obligations. On the other hand, it can also be said that the organization has good long-term prospects, so it is able to borrow against those prospects to meet current obligations.

DEBT-EQUITY RATIO

YEAR Debt Equity Ratio

Mar '12 0.57

Mar '11 0.80

Mar '10 1.12

Mar '09 1.06

Mar '08 0.80

Debt Equity Ratio = Outsiders Funds/ Insiders Funds . Maruti Suzuki is having an avg. D/E Ratio of 0.068, that of Mahindra & Mahindra is 0.46, which indicates that the D/E Ratio of Tata Motors is quite high. A higher ratio shows a large share of financing is done by the creditors of the firm compared to that of the owners. This can indicate that owners do not have faith in their company and thus is investing less in the company. Looking at the figures above, it can be said that the D/E Ratio of Tata Motors is showing a decreasing trend which is a positive sign for the company.

ASSET TURNOVER RATIO

YEAR Asset Turnover Ratio

Mar '12 2.65

Mar '11 2.22

Mar '10 1.95

Mar '09 1.88

Mar '08 2.69

Fixed Assets Turnover Ratio = Net Sales/ Fixed Assets. This ratio shows the extent to which the investment in fixed asset contributes to sales and how efficiently the fixed assets are utilized. Maruti Suzuki is having an avg. Asset Turnover Ratio of 2.65, that of Mahindra & Mahindra is 3.662, which indicates that the Asset Turnover Ratio of Tata Motors is less compared to its competitors. According to the above figures, Tata Motors has experienced a growth in the Asset Turnover Ratio, which indicates that the company has utilized all its assets efficiently to generate sales recently compared to the previous years.

NET PROFIT MARGIN

YEAR Net Profit Margin(%)

Mar '12
2.26

Mar '11
3.74

Mar '10
6.26

Mar '09
3.77

Mar '08
6.96

Net Profit Ratio = (Net Profit After Tax/ Net Sales) X 100. Maruti Suzuki is having an avg. Net Profit Ratio of 6.812, that of Mahindra & Mahindra is 9.368, which indicates that the Net Profit earned by Tata Motors is much less compared to the others. This factor can either indicate that either the Net Profit is less or the amount of sales is high, but the company is not able to maintain a good profit margin which may be due to the pricing of products of the company. The sharp decline in the Ratio (by 39.57%) can be attributed to the increase in cost of manufacturing due to importation costs (Depreciation of Rupees), which led to higher expenditure and lower returns.

RETURN ON CAPITAL EMPLOYED

YEAR Return On Capital Employed(%)

Mar '12 10.36

Mar '11 10.19

Mar '10 10.37

Mar '09 6.41

Mar '08 18.96

Return on Capital Employed= (Net Profit after tax/ Average Capital Employed) X 100. It indicates the efficiency of the usage of the long term funds of the creditors and owners. Maruti Suzuki is having an avg. ROCE of 21.33, that of Mahindra & Mahindra is 22.09, which indicates that the Net Profit earned by Tata Motors is much less compared to the others. ROCE for the Tata Motors has increased in the recent years which indicates that the firm is efficiently using the long term funds of the creditors and owners. This has a positive impact on investors because it indicates that the company has a good opportunity to grow.

EARNINGS PER SHARE

YEAR Earnings Per Share

Mar '12

Mar '11

Mar '10

Mar '09

Mar '08

3.91

28.55

39.26

19.48

53.63

Earning per Share = Net Profit available to Equity shareholders/Number of Equity Shares. Maruti Suzuki is having an avg. EPS of 64.87, that of Mahindra & Mahindra is 41.53, which indicates that the EPS of Tata Motors way below. The sharp decrease in the EPS indicates that the profit which theoretically belongs to the owners is very, which can give a negative impression about the company. This negative impact can lead to a decrease in the overall demand of the shares, which leads to a decrease in the share price.

DIVIDEND PER SHARE

YEAR Dividend Per Share

Mar 12 Mar 11 Mar 10

Mar09

Mar08

4.00

20.00

15.00

6.00

15.00

DPS = Net distributed profit to equity shareholders/ Number of Equity Shares. Maruti Suzuki is having an avg. DPS of 5.90, that of Mahindra & Mahindra is 11.00. The above figures indicate that the dividend paid to the ordinary shareholders (calculated per share basis) has decreased rapidly from Rs.20 to Rs.4, which indicates that the exact amount of profit received by the owners has decreased. This will decrease the demand of the shares of the company.

DIVIDEND PAYOUT RATIO

YEAR

Mar 12 Mar 11 Mar 10

Mar09

Mar08

DIVIDEND 117.71 PAYOUT RATIO

80.96

44.28

34.52

32.51

Maruti Suzuki is having an avg. DPR of 10.66, that of Mahindra & Mahindra is 31.31. This ratio tries to establish the relationship between the profit belonging to equity shareholders and amount paid to them. Since, the EPS amount is very small in the case of Tata, the DPR % is very high, which is indicating that the actual amount paid is higher than the amount entailed. Dividend payout ratio in % when subtracted from 100, that shows the percentage of profit retained by the business, i. e, the amount of profit retained by the company is negative.

PROFIT EARNING RATIO

TATA
75.05

MARUTI
22.68

MAHINDRA
16.05

Price Earning Ratio: Market Price of share/EPS. The current market price of the shares of Tata, Maruti and Mahindra are Rs. 247.90, Rs. 1183.05 and Rs. 783.80 respectively. This ratio represents that for every rupee of earning per share, how much the price is being paid by the market. The Tata Motors P/E Ratio is high compared to the others, which indicates that either the M.P. is very high or the EPS is very low. Considering the previous ratios, it can be said that due to the low EPS value of Tata, the P/E Ratio is very high.

RETURN ON EQUITY

YEAR ROE(%)

Mar 12 6.42

Mar 11 9.06

Mar 10 15.15

Mar09 8.09

Mar08 25.98

Return on equity (ROE) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity. It shows how well a company uses investment funds to generate earnings growth. ROE= Net Income/Shareholders Equity.

Profit & Loss - Tata Motors Ltd.

Mar'12
12 Months

Mar'11
12 Months

Mar'10
12 Months

Mar'09
12 Months

Mar'08
12 Months

INCOME
Sales Turnover 59,220.94 52,067.87 38,173.39 28,538.20 33,123.54

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Excise Duty

5,003.72

4,110.63

2,800.10

2,877.53

4,355.63

NET SALES
Other Income

54,217.22
0.00

47,957.24
0.00

35,373.29
0.00

25,660.67
0.00

28,767.91
0.00

TOTAL INCOME EXPENDITURE:

Manufacturing Expenses Material Consumed Personal Expenses Selling Expenses Administrative Expenses Expenses Capitalised Provisions Made

54,791.30

48,377.93

35,775.56

26,502.21

29,127.33

2,937.80 40,457.95 2,691.45 2,370.44 2,489.16 -907.13 0.00

2,224.74 34,692.83 2,294.02 2,289.11 2,568.50 -817.68 0.00

1,652.22 24,759.49 1,836.13 1,583.24 2,249.92 -740.54 0.00

1,171.59 19,039.41 1,551.39 1,224.15 1,867.05 -916.02 0.00

1,230.14 20,931.81 1,544.57 1,179.48 1,982.79 -1,131.40 0.00

TOTAL EXPENDITURE
Operating Profit

50,039.67
4,177.55

43,251.52
4,705.72

31,340.46
4,032.83

23,937.57
1,723.10

25,737.39
3,030.52

EBITDA Depreciation Other Write-offs EBIT Interest EBT Taxes Profit and Loss for the Year

4,751.63 1,606.74 0.00 3,144.89 1,218.62 1,926.27 98.80 1,827.47

5,126.41 1,360.77 106.17 3,659.47 1,383.79 2,275.68 384.70 1,890.98

4,435.10 1,033.87 144.03 3,257.20 1,246.25 2,010.95 589.46 1,421.49

2,564.64 874.54 51.17 1,638.93 704.92 934.01 12.50 921.51

3,389.94 652.31 64.35 2,673.28 471.56 2,201.72 547.55 1,654.17

Interpretation After going through the figure of profit & loss account we come to know that in the net profit there is decrease of 3.35% . if we go to overall figure in the profit & loss statement we can say condition of Tata motors in this year as compare to last year is good.

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But as compare to other companies in the market of automobiles the condition of this company is not so good it will take some time to recover to come in the competition level of other key players like Maruti Suzuki,Mahindra etc.

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