the_indian_automobile_industry_-_copy

8/7/2019 The_Indian_Automobile_Industry_-_Copy

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Financial Ratio Analysis of Tata Motors Limited

(Financial Management Assignment)

Submitted to:- Submitted by:-

Mr. Mayank Upadhyay Abhishek Kapoor

Asher BenJainik Shah

Neha Bhardwaj

Punit Ahir

Siddhartha Jajodia


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Profile of Indian Automobile Industry

It contributes about 4% in India`s Gross Domestic Product (GDP).

It accounts for 5% of India`s Industrial Production.

Indian automobile industry stands at 11 million vehicles at present.

India is largest manufacturer of two- wheeler in the world and is the second

largest two wheeler market in the world.

It ranks fourth in the commercial market vehicle in the world

Car production in India is ninth in the world with annual production of 2.3

million in 2008.

In 2009, India emerged as 4th largest exporter of automobile.

Indian automobile industry has also become an out sourcing hub for

automobile companies worldwide, as indicated by the zooming automobile

exports from the country.


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Segment Share in5-yearCAGR*

Two-wheelers 75.4% 8.8 %

Passenger 16.4% 16.7 %

Three-wheelers 4.5 10.4 %

Commercial 3.7 12.6 %

A Glance at production growth in India

Share of automotive segments (2008-09)

Tata motors at large deals with wide range of Passenger and commercial

vehicles.

Passenger Vehicles (PVs) segment is dominated by cars.

The domestic Indian passenger vehicles market has grown at a

CAGR of 12.6 per cent over the last seven years to reach 1.55 million


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units in 2008-09.

Passenger cars, which accounted for 78.6 per cent of volumes, grew at a CAGR of 15 per

cent.

Domestic sales in 2008-09 did not increase significantly over sales in 200708; however,sales did not drop either.

Production trend in India (Numbers of vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Passenger

Vehicles

723,330 989,560 1,209,87

6

1,309,300 1,545,223 1,777,583 1,838,697

Passenger car constitute more than

3/4th of domestic market of PVs.

Remaining are multi-utility vehicles

and sports-utility vehicles.


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Commercial Vehicles (CVs) segment is dominated by Indian players

Production trend (Number of vehicles)

Category 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Commercial

Vehicles

203,697 275,040 353,703 391,083 519,982 549,006 417,126

Break up of Industry by segment (2008-09)

Market share of Key-players (2008-09)


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Tata Motors Ltd.: The Company is the largest commercial vehicle manufacturer in

the country.

It is market leader in goods and passenger vehicle market.

LCV segment is dominated by Tata motors

Its major acquisitions include:-

Daewoo Commercial Vehicle Company, South Korea,2004.

Hispano Carrocera,Europe,2005

Jaguar Cars and Land Rover (27 March 2008).

It has major Joint Ventures with:-

Marcopolo, Brazil for bus body building

Fiat for diesel Engine .


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Important Developments include launch of Tata Nano (2008), Tata Ace (2005),

Compressed air car in France and Electric Vehicles in Norway.

Tata motors accounts for 62% of commercial vehicles exports.

FINANCAL ANALSIS:- TATA MOTORS LIMITED

Directors Report

2006-

07

2007-

08

2008-

09

1 Gross Revenue 31884.

69

33093.

93

28599.

272 Net Revenue(excluding excise

duty)

27535.

24

28730.

82

25660.

793 Total Expenditure (net) 24221.

52

25638.

5

23908.

354 Operating

Profit

3313.7

2

3092.3

2

1752.4

45 Other Income 245.19 483.18 925.97

6 Profit before Interest, Depreciation, Exceptional

Items & tax

3558.9

1

3575.5 2678.7

17 Intere

st(a) Gross

Interest

389.86 541.56 1073.1

(b) Transfer to capital Account/Interest

Received

-76.79 -

259.19

-

399.42 Net Interest 313.07 282.37 673.68


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(to the extent not written off or adjusted)

12

Total Assets(Net)

11665.72

15095.74

26425.64

Profit and Loss Account

2006-07

2007-08

2008-09

Rs. Incrores

Income

1 Sales of product and other income fromoperations

31884.69

33093.93

28599.27

Less - Excise

Duty

4349.9

5

4363.1

1

2938.4

827535.

2428730.

8225660.

792 Dividend of other

income245.19 483.18 925.97

27780.43

29214 26586.76

Expenditure

3 Manufacturing of otherexpenses

24798.57

26769.9

24824.37

4 Expenditure transferred to capital & other Accounts -

577.05

-

1131.4

-

916.0224221.

5225638.

523908.

35

Profit before Interest, Depreciation, ExceptionalItems & tax

3558.91

3575.5 2678.41

5 Product DevelopmentExpenditure

85.02 64.35 51.17

6 Depreciation 586.29 652.31 874.54

7 Interest of discounting charges 313.07 282.37 673.68

Profit before, Exceptional Items& tax

2574.53

2576.47

1079.02

8 National Exchange loss/gain(net)

-65.26

Provision for diminution in value ofinvestment

1.09

Employee SeparationCost

0.26

Profit Before 2573.1 2576.4 1013.7


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Tax 8 7 6

9 Tax Expenses 659.72

-547.55

-12.5

Profit After Tax 1913.46

2028.92

1001.26

10 Balance Brought Forward from PreviousYear 776.76 1013.83 1383.07Credit taken from Dividend Distribution Tax fromprevious year

15.29

Amount forAppropriations

2690.22

3042.75

2399.62

Shares

38.4544

38.5438

44.0481

Financial Ratios

2006-07

2007-08

2008-09

1 Current Ratio 1.38 0.97 0.89

2 Quick Ratio 1.27 0.87 0.75

3 Inventory Turnover Ratio 8.05 10.51 10.31

4 Debt-to-Equity Ratio 0.58 0.80 1.08


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5 Operating Profit Margin 12.03 10.76 6.83

6 Net Profit Margin 6.95 7.06 3.90

7 Earnings PerShare

Basic 49.76 52.64 22.73

Calculating Ratios for 2008-09

1)

2)

3)

4)

5)

6)

7)


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Interpretation of financial Ratios

Current Asset Ratio (CAR)

The current asset ratio came down from .97 in 2008 to .89for 2009. This can be directly related to decrease in cash and

bank balance from 2397.31 (08) to 1141.82 (09) and also on

account of the increased current liabilities from 8643.67 (08) to

8958.25 (09). The company has chosen not to keep ideal cash

and manage their stock with the increase in their debt

receivables. In the year 2007 the companys debtor were


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comparatively 50% lower than 2009. This means the company is

doing push marketing and they want their product to be sold

anyhow. They also were able to manage an increase in their

credits as the figures have been increasing every year.

Inventory Turnover Ratio (ITR)

The value has not changed much from 10.51 (08) to 10.31 (09). This

shows that the company has been able to meet its sales even during tough

times of 08 recessions. They were able to manage this ratio in-spite of heavy

decline in their revenue from net sales. We observe that the company has

very well reduced their inventory with the decline in the sales in the

respective year.

Quick Ratio (QR)


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This clearly shows that the reduction in CAR and QR from 0.87 (08) to

0.75 (09) has been due to short term loans acquired for working capital

which increased the current liability. Cash used to finance acquisitions

(Jaguar and Land Rover), also played the role in reducing current assets. The

total amount paid in cash by Tata forJaguar and Land Rover upon closing is

approximately $2.3 billion.

Debt Equity Ratio (D/E) (Considering equity = share capital + reserve and

surplus)

The value increased from 0.80 to 1.80 for 2009. The loans have

increased from 6280.52 Cr to 13165.56 Cr (almost double) whereas equity

rose only by around 70%. Again reflecting on the Capital raised for

acquisitions.

Operating Profit Margin
http://www.thecarconnection.com/make/jaguarhttp://www.allaboutsuvs.com/make/land-rover,newhttp://www.thecarconnection.com/make/jaguarhttp://www.allaboutsuvs.com/make/land-rover,new


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As mentioned earlier the net sales of the company has declines and for this

reason the scale of operation has also come down giving negative effect on theeconomies of scale. The overall effect showed a decline in 10% sales decline but the

operating profit reduced by 40%. Whereas between the year 2007-08 there was not

much of a difference in the ratio as their sales number was more or less equal.

There was considerable increase in the input price of material when they were at

the peak in the year 2008. Hence their operating profit was very low.

Net profit margin

The company had taken a huge amount of loan in the year 2008. The interest

that has to be paid for the loan amount has increased 3 folds in a single year. This

activity brought a huge change in their PAT. The reports also mention that there

was a loss due to revaluation of foreign currency.


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Preoperative Exp Capitalized -916.02 -8.20 -0.12 -7.22 -0.01

Total Expenses

23,699.53 5,582.62 666.42 819.18 536.09

Operating Profit 1,723.10 470.07 14.37 -99.78 27.04

PBDIT 2,644.39 541.14 52.58 267.16 27.85

Interest 704.92 154.27 3.59 35.21 19.02

PBDT 1,939.47 386.87 48.99 231.95 8.83

Depreciation 874.54 178.41 15.20 41.83 5.84

Other Written Off 51.17 0.00 0.00 0.00 0.00

Profit Before Tax 1,013.76 208.46 33.79 190.12 2.99

Extra-ordinary items 15.29 0.26 -0.05 -0.26 1.16

PBT (Post Extra-ord Items) 1,029.05 208.72 33.74 189.86 4.15

Tax 12.50 18.45 -5.31 65.29 -0.65

Reported Net Profit 1,001.26 190.00 39.00 124.56 4.79

Total Value Addition 4,898.16 1,028.26 152.97 212.94 69.31

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 311.61 133.03 14.05 0.00 1.57

Corporate Dividend Tax 34.09 22.61 2.39 0.00 0.27

Per share data (annualised)

Shares in issue (lakhs) 5,140.08 13,303.38 280.94 131.76 104.87

Earnings Per Share (Rs) 19.48 1.43 13.88 94.54 4.57

Equity Dividend (%) 125.00 100.00 50.00 0.00 15.00

Book Value (Rs) 240.64 15.85 171.17 172.67 92.05

Comparing Ratios

Automobile companies Tata Motors AshokLeyland

SwarajMazda

Mar '09 Mar '09 Mar '09

Current Asset Ratio 0.84 1.29 2.18

Quick Ratio 0.67 0.75 1.25


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Inventory Turnover Ratio 9.25 4.08 3.71

Average Inventory Period (days) 38.90 88.25 97.09

Debtor Turnover Ratio 19.11 9.07 3.28

Average Payment Period (days) 18.84 39.67 109.69

Debt Equity Ratio 25.61 14.75 21.00

EPS 19.48 1.43 4.57

P/E Ratio 40.03 34.97 66.78

Total debt to owners fund 25.61 14.75 21.00

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