Equity Valuation of

TATA Motors
Presented by:
Amit Mukherjee
Ritu Singh
Tomar
Richi
Shrivastava
Keshri. N.
 Agenda
Fundamental
Analysis Equity valuation
• Introduction to • Estimated future
TATA Motors growth (calculation
• Global Overview of ‘g’)
• Domestic Overview • Expected return on
• Company Analysis equity (CAPM
Analysis ‘k’ )
• Current financials
• Calculation FCFE
• Past performance
• Intrinsic Value
• Future plans
• Conclusion
 TATA Motors Ltd
Founded: 1945 Products:
Founder: JRD Tata Automobiles and
Headquarters : Engines
Mumbai, India Revenue :▲ USD 9.07
billion (2006)
Key people:
Ratan Tata, Net income:▲ USD
Chairman $474.0 million
Parent: Tata Group (2006)
• Tata Daewoo
Subsidiaries:
Website:
Jaguar Cars
http://www.tatamot
Land Rover
 TATA Motors At-a-
Glance
• Tata Motors Limited is India's largest automobile
company, with revenues of Rs. 32,426 crores (USD
7.2 billion) in 2006-07.
• It is the leader by commercial vehicles in each
segment.

• The company is the world's fifth M&HCV

manufacturer, and the world's second largest
medium and heavy bus manufacturer.

• Annual turnover of over Rs 108 billion.

• The company has manufacturing plants at

Global Automobile
Industry
Asian Automobile market

Growth rate
 Growth potential at
Global Level
• India is on every
major global
automobile player's
roadmap.
See why?
• 4th largest
commercial vehicle
market in the
world.
• 11th largest
passenger car
market in the
 Growth Potential at
Domestic level
• Sales of passenger cars in India is likely to
grow at an average of 14.9% each year to
touch the 2.1 million mark by 2010!
• Increase in automobile
Purchase Trend
• Growing working population
• Increased access to credit and lower interest
loans
• Increased consumer embrace of financial
products
• Upward migration of household income
levels
• Fast paced urbanization to rise from 28% to
Stunning Growth Rates!
India
• Passenger car sales grew
by 10.84% and crossed
the 1 million mark in 2006-
07 and record sales of
1,076,408 vehicles.

• Utility vehicles sales grew

by almost 12.2% in April-
May 2007 and this
segment is expected to
grow at 20% by 2010.

• Multi purpose vehicles

sales grew by almost
21.93% in April-May
 Expected Growth by 2015-
16
Potential Vehicle sales in India in 2015 - 06 ( in mn)

0.87
27.8
2015-16
0.64
2.65

0 10 20 30
Cars CVs Two wheelers Three Wheelers

• Expected to grow at 13% p.a over the next

decade to reach around USD 120 - 159 bn by
2016.
 Exports Potential
to become the Global
Outsourcing Hub
Export of auto compone nts
(USD million )
1,800
1400
25%
1020
625 578 760
456

FY00 FY01 FY02 FY03 FY04 FY05 FY06

• Indian vehicle exports- over 40 % over the

last few years, while Component exports -25
% per annum. Key exporters include:
• Tata Motors , Ashok Leyland, Maruti, M & M
and Hyundai
Government Regulations
& Growth

•Allows automatic approval for foreign

equity investment upto 100% in the
automotive sector.

•Weighted tax deduction of upto 15% for in-

house research and R & D activities.
 Key players of
•
Automobile
Commercial vehicles
sector
• TATA Motors, Ashok Leyland,
Swaraj Mazda, Mahindra &
Mahindra ,Force motors, Eicher
Motors

• Passenger vehicle
• TATA Motors, Maruti Udyog,
Honda Motors, Toyata, Skoda,
Mahindra & Mahindra, GM, Ford,
Hindustan Motors.
 TATA’s Financials Rs in
mn
Particulars Mar ' 08 Mar ' 07 Mar ' 06
Net Sales 35,413 32,067 206022

% age 10.4 35.8 18.27%

growth
Net profit 2,127 2,127 15288.8

%age growth 3.4 21.5 23.6%

B/S as on.. 261182.60 191640.50 163220.50

EPS (Rs.) 52.63 49.65 39.94
CFPS
69.55 64.87 53.54
(Rs.)
Book Value
202.54 177.33 143.58
(Rs.)
DPS (Rs.) 15.00 15.00 13.01
TATA’s SHAREHOLDING
• Indian Promoters : 33.7%
• Foreign collaborators : 0.0%
• Indian inst/Mutual Fund : 14.2%
• FIIs/GDR : 32.8%
• Free float : 19.3%
• Shareholders : 221,403
• Listed on BSE: 500570 (scrip no.)
NSE: TATA Motors
NYSE: TTM
 Projects 2008 & onwards
• Compressed Air
Car
• Tata Nano
• Low cost low
carbon vehicle
• Land rover &
Jaguar
• Electric vehicles
 Some facts of
performance
• The company has incurred a capex of Rs
30bn till date and expects to spend
another Rs 5-7bn in Q4FY08E.

• Tata Motors Ltd’s net sales grew by 4.2%

y-o-y while its net profit fell by 2.8% y-o-y.

• Tata Nano was expected to be on the

roads sometime in October,2008, but it is
not.
 Contnd…..
• Expected CV (Trucks) volume growth
forecast by 13% for FY08-10E.

• Expect large orders even from company

like DTC (Delhi Transport Corporation),
which is ordering 8,000 buses ($1bn order)
in anticipation of the 2010 Commonwealth
Games.

• Planning to acquire Foreign Brands

 Expected Growth Rate
‘g’
• On the basis of Global, domestic &
companies past growth and projected cash
flows, we estimate that ‘g’ will be 6.55 in
year 09, 10.2% in year 10 & constant
thereafter.
Y/E March FY2007 FY2008 FY2009E FY2010E
(Rs cr)
Net Sales 32,067 35,413 38,366 42,202
% chg 35.8 10.4 8.3 10.0
Net Profit 2,127 2,053 1,921 2,116
% chg 21.5 3.4 6.5 10.2
EPS (Rs) 38.3 40.0 34.3 44.9
 Calculation of ‘k’
• Re= Rf+b(Rm-Rf)
• Rf=6%
• Rm=18-20% (or average 19%)
• B=0.8

• So, Re=6+0.8(19-6)
=16.4%
 Future Cash flows
Particulars 2008 2009 2010
(FCFE) (FCFE)@6.55 (FCFE)@10.2%
Cash flow per 69.55 74.11 81.67
share (given)
Value at terminal (V2) =81.67/(.164-
year 0.066)
=81.67/0.098
=833.37

Present value =74.11/(1+0.06 =833.37/(1+0.164

6) )^2
=69.52 =617.3

Intrinsic value =69.52+617.3

=686.82
 Conclusion
• Current market price Rs. 500.15(NSE) &
500(BSE)
• Intrinsic value Rs. 686.82

• Undervalued.

• Buy Tata’s share, because it is

underperforming due to its declining profit
& sales figures in the last few years
(because of heavy capital expenditure in
some projects and foreign acquisitions, its
Thank You