Tata Motors

CONTENT          

COMPANY PROFILE COMPANY VISION AND MISSION COMPANY BALANCE SHEET ANALYSIS ANALYSIS OF SOURCES OF FINANCE CAPITAL STRUCTURE OF COMPANY PEER COMPARISION (5 YEARS DATA) ANALYSIS RECOMMENDATIONS AND SUGESSTIONS CONCLUSION REFRENCES

CAPITAL STRUCTURE ANALYSIS REPORT ON

TATA MOTORS

SUBMITTED BY: BABLU PREETY ROHIT SEERA DEEPAK YADAV GOURAV BAINS

SUBMITTED TO: DR. GANGU NAIDU MANDALA

LOVELY PROFESSIONAL UNIVERSITY, PHAGWARA- PUNJAB

 COMPANY PROFILE Tata Motors Group (Tata Motors) is a $45 billion organisation. It is a leading global automobile manufacturing company. Its diverse portfolio includes an extensive range of cars, sports utility vehicles, trucks, buses and defence vehicles. Tata Motors is India’s largest and the only original equipment manufacturer (OEM) offering extensive range of integrated, smart and e-mobility solutions.

Part of the USD100 billion Tata group founded by Jamsetji Tata in 1868, Tata Motors is among the world’s leading manufacturers of automobiles. We believe in ‘Connecting aspirations’, by offering innovative mobility solutions that are in line with customers' aspirations. We are India's largest automobile manufacturer, and we continue to take the lead in shaping the Indian commercial vehicle landscape, with the introduction of leading-edge power trains and electric solutions packaged for power performances and user comfort at the lowest life-cycle costs. Our new passenger cars and utility vehicles are based on Impact Design and offer a superior blend of performance, driveability and connectivity. Our focus on connecting aspirations and our pipeline of tech-enabled products keeps us at the forefront of the market. We have identified six key mobility drivers that will lead us into the future – modular architecture, complexity reduction in manufacturing, connected & autonomous vehicles, clean drivelines, shared mobility, and low total cost of ownership. Our sub-brand TAMO is an incubating centre of innovation that will spark new mobility solutions through new technologies, business models and partnerships. Our mission - across our globally dispersed organisation – is to be passionate in anticipating and providing the best vehicles and experiences that excite our global customers.

 VISION AND MISSION VISION As a high performance organisation, we are, by FY2019  Among the top three in global CV and domestic PV  Achieving sustainable financial performance  Delivering exciting innovations MISSION We innovate mobility solutions with passion to enhance the quality of life. VALUES   

Integrity Teamwork Accountability

 

Customer focus Excellence Speed

 OBJECTIVE OF THE STUDY The following are the objectives of the study:  To assess the changes in proportion of debt and equity.  To determine the capital structure of TATA motors during the study period.

 Research Methodology The study is based on the secondary data which have been collected from various sources viz., published annual reports and records of the company, journal, websites, etc., for the period from 2013-14 to 201718. Ratio analysis and Leverage has been used to analyse the data.

 BALANCE SHEET FROM 2014-2018 Consolidated Balance Sheet of Tata Motors

------------------in Rs. Cr. -----------------Mar 18

Mar 17

Mar 16

Mar 15

Mar 14

EQUITIES AND LIABILITIES Equity Share Capital

679.22

679.22

679.18

643.78

643.78

Total Share Capital

679.22

679.22

679.18

643.78

643.78

Revaluation Reserves

0

0

0

22.87

22.87

Reserves and Surplus

94,748.69

57,382.67

78,273.23

55,595.27

64,936.80

Total Reserves and Surplus

94,748.69

57,382.67

78,273.23

55,618.14

64,959.67

Total Shareholders Funds

95,427.91

58,061.89

78,952.41

56,261.92

65,603.45

Minority Interest

525.06

453.17

432.84

433.34

420.65

61,199.50

60,629.18

50,510.39

56,071.34

45,258.61

6,125.80

1,174.00

4,474.78

1,343.20

1,572.33

Other Long Term Liabilities

13,904.33

28,802.14

17,830.29

9,141.92

2,596.86

Long Term Provisions

10,948.44

9,004.46

7,891.01

15,134.27

12,190.29

Total Non-Current Liabilities

92,178.07

99,609.78

80,706.47

81,690.73

61,618.09

Short Term Borrowings

16,794.85

13,859.94

11,450.78

13,140.14

9,695.86

Trade Payables

72,038.41

57,698.33

57,580.46

57,407.28

57,315.73

Other Current Liabilities

46,432.71

38,263.49

32,173.68

23,688.58

17,373.86

7,953.50

5,807.76

5,844.51

6,036.00

7,970.68

Total Current Liabilities

1,43,219.47

1,15,629.52

1,07,049.43

1,00,272.00

92,356.13

Total Capital And Liabilities

3,31,350.51

2,73,754.36

2,67,141.15

2,38,657.99

2,19,998.32

Tangible Assets

73,867.84

59,594.56

64,927.07

52,326.21

40,694.29

Intangible Assets

47,429.57

35,676.20

41,544.89

31,456.29

23,418.55

Capital Work-In-Progress

16,142.94

10,186.83

6,550.97

9,330.47

10,137.30

Intangible Assets Under Development

23,890.56

23,512.01

19,367.97

19,309.62

23,125.26

1,61,330.91

1,28,969.60

1,32,390.90

1,12,422.59

97,375.40

Non-Current Investments

5,651.65

5,296.77

4,533.98

1,240.50

1,114.39

Deferred Tax Assets [Net]

4,158.70

4,457.34

3,957.03

2,733.20

2,347.08

495.41

753.66

503.88

14,948.31

13,268.84

23,624.55

17,483.92

15,071.89

858

5,068.45

1,95,377.67

1,57,634.61

1,57,217.48

1,36,899.59

1,24,152.99

Current Investments

15,161.10

15,041.15

19,233.04

14,096.24

9,572.28

Inventories

42,137.63

35,085.31

32,655.73

29,272.34

27,270.89

Long Term Borrowings Deferred Tax Liabilities [Net]

Short Term Provisions

Fixed Assets

Long Term Loans And Advances Other Non-Current Assets Total Non-Current Assets

Trade Receivables

28,294.95

20,885.67

13,570.91

12,579.20

10,574.23

Cash And Cash Equivalents

34,613.91

36,077.88

30,460.40

32,115.76

29,711.79

2,279.66

710.45

1,117.10

10,746.44

14,055.24

13,485.59

8,319.29

12,886.49

2,948.42

4,660.90

Total Current Assets

1,35,972.84

1,16,119.75

1,09,923.67

1,01,758.40

95,845.33

Total Assets

3,31,350.51

2,73,754.36

2,67,141.15

2,38,657.99

2,19,998.32

Short Term Loans And Advances Other Current Assets

 NET WORTH OF TATA MOTORS     

Tata Motors Ltd. has used only two sources of finance to finance its assets and working capital Tata Motors Ltd. is authorized capital to issue a paid up capital of Rs.679.32cr. The net worth of the company is also increasing over the years. This shows the company is getting benefitted through the increase in equity share capital. The net worth of company is calculated as: Net Worth= Equity Share capital + Reserves Surplus – (Dr. Balance of P/L account + Misc. Expenditure not written off, if any) YEAR NET WORTH (rs. in cr.)  2014  65603.45  2015  56261.92  2016  78952.41  2017  58061.89  2018  95427.91

 SOURCE OF DEBT   

Working capital borrowings from short term loans and trade payables Term Loan from bank, financial institutions Unsecured loan and Secured Loan YEAR DEBT CAPITAL (rs. In cr.)  2014  54954.47  2015  69211.48  2016  61961.17  2017  74489.12  2018  77994.35

 CURRENT ASSETS TO PROPRIETOR’S FUND The purpose of this ratio is to calculate the percentage of shareholders’ funds invested in current assets. There is no ‘rule of thumb’ for this ratio. Depending upon the nature of the business there may be different ratios for different firms.

YEAR

CURRENT ASSETS

SHAREHOLDER RATIO IN FUND PERCENTAGE 2014 67556.91 65603.45 1.02 2015 73967.30 56261.92 1.31 2016 76687.04 78952.41 0.97 2017 85238.74 58061.89 1.47 2018 105046.49 95427.91 1.1 INTERPRETATION: From the above table, it is found that the current assets to proprietor’s fund ratio show a fluctuating trend. The trend has occurred because the ratio is higher in the year 2017with 1.47% and it is lower in the year 2016 with 0.97%. The value of proprietor’s fund had been remained more or less same during the first three years of the study. Therefore, the value of current assets should be increased and kept constant in order to overcome the fluctuating trend and to have a good financial performance in future.

 FIXED ASSETS TURNOVER RATIO This ratio measures the company’s return on their investment in property, plant and equipment by comparing its net sales with fixed assets. It is the relationship between sales or cost of goods sold and fixed/capital asset employed in the business. YEAR RATIO (TIMES) 2014 2.44 2015 2.43 2016 2.68 2017 2.67 2018 2.30 INTERPRETATION: From the above table, it is depicted that the fixed assets turnover ratio is increasing in the year 2016 with 2.68 times whereas decreasing in the year 2018 with 2.30 times. It has been found during the study that the ratio fluctuates. Hence, there had been a poor performance of Tata Motors Ltd for the last three years, as it has not properly utilized its fixed assets in generating the revenue.

 Capital gearing ratio The term “capital gearing” is used to describe the relationship between equity share capital including reserves and surpluses to preference share capital and other fixed interest – bearing loans. YEAR 2014

NETWORTH 65603.45

LONG TERM DEBT 45,258.61

RATIO (TIMES 1.44

2015

56261.92

56,071.34

1.03

2016

78952.41

50,510.39

1.56

2017

58061.89

60,629.18

0.95

2018

95427.91

61,199.50

1.55

INTERPRETATION: From the above table, it is noticed that the capital gearing ratio shows a fluctuating trend. The ratio is higher in the year 2016 with 1.56 times and it is lower in the year 2017 with 0.95 times. There had been a little change in the value of equity capital over the period of study.

Therefore, the ratio had depicted a healthier position of the company because the equity and reserves are more sufficient to meet out the fixed bearing expenses.

 DEBT EQUITY RATIO Debt Equity ratio, is also known as External – Internal Equity ratio which is calculated to measure the relative claims of outsiders and the owners (i.e. shareholders) against the firm’s asset. The two basic components of the ratio are outsider’s funds (external equities) and shareholder’s funds (internal equities). YEAR DEBT EQUITY RATIO 2014 0.84 2015 1.23 2016 0.78 2017 1.28 2018 0.82 INTERPRETATION: From the above table, it is found that the debt equity ratio shows a fluctuating trend. The ratio is increasing in the year 2017 with 1.28 times and it is decreasing in the year 2016 with 0.78 times. There had been a sudden change in the value of outsider’s fund and shareholders fund in the year 2017 when compared to other years of the study. Hence, the expected debt equity ratio will depend upon the future borrowings of the Tata Motors Ltd.

 LEVERAGE The term leverage is commonly used to describe the firm’s ability to use fixed cost assets or funds to increase the return to its owners i.e. equity shareholders. It is the power and relationship between two inter-related variables and these variables can be of output, sales, cost and profit.

 FINANCIAL LEVERAGE Financial Leverage is known as trading on equity and it is used to magnify the earnings of the shareholders. Financial leverage is associated with financial activities and it results from the presence of fixed financial charges in the income with the firm’s EBIT. = EARNING BEFORE INTEREST AND TAX/ EARNING BEFORE TAX YEAR EBIT EBT RATIO (TIMES) 2014 24588.13 18868.97 1.30 2015 21887.27 21702.56 1.00 2016 20865.20 14125.77 1.48 2017 12438.24 9314.79 1.33 2018 13861.68 11155.03 1.24 INTERPRETATION: From the above table, it is noted that. The financial leverage is higher in the year 2016 with 1.48 times and it is lower in the year 2015 with 1.00 times. It had been found during the study that the financial leverage show a fluctuating trend. Hence, the Tata Motors Ltd should try to lower the degree of financial leverage in order to lower the financial risk in the future

 OPERATING LEVERAGE Operating leverage may be defined as “the firm’s ability to use operating costs to magnify the effects of changes in sales on its earnings before interest and taxes”. =SALES/ EARNING BEFORE INTEREST AND TAX YEAR SALES EBIT RATIO 2014 230677.10 24588.13 9.381645 2015 260734.33 21887.27 11.9126 2016 273045.60 20865.20 13.08617 2017 269692.51 12438.24 21.68253 2018 294619.18 13861.68 21.25422 From the above table, it is found that the operating leverage is increasing in the year 2017 with 21.68times and it is decreasing in the year 2014 with 9.38 times. It has been found from the study period that the operating leverage shows a fluctuating trend. Hence, in future, the Tata Motors Ltd should use the maximum level of operating costs in order to meet the future effects of changes in sales on its earnings before interest and taxes.

 FINDINGS AND SUGGESTIONS OF THE STUDY 







The current assets to proprietor’s fund ratio are used to calculate the percentage of shareholders fund invested in current assets. The ratio is higher in the year 2017with 1.47% and it is lower in the year 2016 with 0.97%. The value of proprietor’s fund had been remained more or less same during the first three years of the study. Therefore, the value of current assets should be increased and kept constant in order to overcome the fluctuating trend and to have a good financial performance in future. The fixed assets turnover ratio is increasing in the year 2016 with 2.68 times whereas decreasing in the year 2018 with 2.30 times. It has been found during the study that the ratio fluctuates. Hence, there had been a poor performance of Tata Motors Ltd for the last three years, as it has not properly utilized its fixed assets in generating the revenue. The capital gearing ratio shows a fluctuating trend. The ratio is higher in the year 2016 with 1.56 times and it is lower in the year 2017 with 0.95 times. There had been a little change in the value of equity capital over the period of study. The ratio is increasing in the year 2017 with 1.28 times and it is decreasing in the year 2016 with 0.78 times. There had been a sudden change in the value of outsider’s fund and shareholders fund in the year 2017 when compared to other years of the study. Hence, the expected debt equity ratio will depend upon the future borrowings of the Tata Motors Ltd.

LEVERAGES 



The financial leverage is higher in the year 2016 with 1.48 times and it is lower in the year 2015 with 1.00 times. It had been found during the study that the financial leverage show a fluctuating trend. Hence, the Tata Motors Ltd should try to lower the degree of financial leverage in order to lower the financial risk in the future The operating leverage is increasing in the year 2017 with 21.68times and it is decreasing in the year 2014 with 9.38 times. It has been found from the study period that the operating leverage shows a fluctuating trend. Hence, in future, the Tata Motors Ltd should use the maximum level of operating costs in order to meet the future effects of changes in sales on its earnings before interest and taxes.

 PEER COMPARISION The comparison of Tata Motors Ltd. with its competitors company which is under as: 1. Tata Motors 2. Ashok Leyland 3. Eicher Motors 4. Force Motors 5. SML Isuzu  Comparison with Sales over a Year 70000 60000

58831.41

50000 TATA MOTORS 40000 30000

ASHOK LEYLAND EICHER MOTORS 26247.91

FORCE MOTORS SML ISUZU

20000 10000

8957.51 3430.19

1135.05

0 SALES (IN CRORE)

Above the chart shows that major the part of the market covered by a Tata Motors in the form sales of its product. From the data we got to know about half of the market covered by a Tata motors in compare to other companies. The main reason of covered this much part of market is Tata motor have variety of products as compare to other companies in the form of cars, buses, truck and defence vehicles etc.