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FINANCIAL ACCOUNTING

Ratio Analysis of Tata Motors

Tata Motors
Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs.70,938.85 crores (USD 14 billion) in 2008-09. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance with Fiat in 2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon (Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is establishing a new plant at Sanand (Gujarat). The companys dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. Tata Motors, the first company from India's engineering sector to be listed in the New York Stock Exchange (September 2004), has also emerged as an international automobile company. Through subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea, Thailand and Spain. It was Tata Motors, which developed the first indigenously developed Light Commercial Vehicle, Indias first Sports Utility Vehicle and, in 1998, the Tata Indica, India's first fully indigenous passenger car. In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the world have been looking forward to. The Tata Nano has been subsequently launched, as planned, in India in March 2009. A development, which signifies a first for the global automobile industry, the Nano brings the comfort and safety of a car within the reach of thousands of families. The standard version has been priced at Rs.1 lac. Through its subsidiaries, the company is engaged in engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.

Balance Sheet for Tata Motors

Balance Sheet of Tata Motors

------------------- in Rs. Cr. ------------------Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 361.79 361.79 0.00 0.00 3,749.60 0.00 4,111.39 489.81 2,005.61 2,495.42 6,606.81 Mar '05 Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs) 6,611.95 3,454.28 3,157.67 538.84 2,912.06 1,601.36 811.32 345.26 2,757.94 2,831.16 1,659.78 7,248.88 0.00 6,142.74 1,126.06 7,268.80 -19.92 18.16 6,606.81 1,450.32 113.65 7,971.55 4,401.51 3,570.04 951.19 2,015.15 2,012.24 715.78 327.66 3,055.68 5,964.61 791.77 9,812.06 0.00 6,673.61 1,215.04 7,888.65 1,923.41 14.12 8,473.91 2,185.63 143.94 8,775.80 4,894.54 3,881.26 2,513.32 2,477.00 2,500.95 782.18 535.78 3,818.91 6,208.53 290.98 10,318.42 0.00 6,956.88 1,364.32 8,321.20 1,997.22 10.09 10,878.89 5,196.07 177.59 10,830.83 5,443.52 5,387.31 5,064.96 4,910.27 2,421.83 1,130.73 750.14 4,302.70 4,831.36 1,647.17 10,781.23 0.00 10,040.37 1,989.43 12,029.80 -1,248.57 6.05 14,120.02 5,590.83 202.70 13,905.17 6,259.90 7,645.27 6,954.04 12,968.13 2,229.81 1,555.20 638.17 4,423.18 5,909.75 503.65 10,836.58 0.00 10,968.95 1,877.26 12,846.21 -2,009.63 2.02 25,559.83 5,433.07 240.64 382.87 382.87 0.00 0.00 5,127.81 26.39 5,537.07 822.76 2,114.08 2,936.84 8,473.91 Mar '06 385.41 385.41 0.00 0.00 6,458.39 25.95 6,869.75 2,022.04 1,987.10 4,009.14 10,878.89 Mar '07 385.54 385.54 0.00 0.00 7,428.45 25.51 7,839.50 2,461.99 3,818.53 6,280.52 14,120.02 Mar '08 514.05 514.05 0.00 0.00 11,855.15 25.07 12,394.27 5,251.65 7,913.91 13,165.56 25,559.83 Mar '09

Profit and Loss account for Tata Motors


Profit & Loss account of Tata Motors ------------------- in Rs. Cr. ------------------Mar '05 Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 12,245.28 14,633.02 237.81 1,039.34 592.64 890.21 620.27 -282.43 258.51 1,143.13 671.31 1,061.07 740.99 -308.85 19,879.56 327.41 1,367.83 872.95 1,505.23 1,051.49 -577.05 24,427.42 20,891.33 325.19 1,544.57 904.95 2,197.49 964.78 -1,131.40 25,696.91 18,801.37 304.94 1,551.39 866.65 1,652.31 1,438.89 -916.02 23,699.53 20,262.61 23,490.55 3,063.44 403.98 144.00 3,401.92 852.41 256.91 17,199.17 20,088.63 31,089.69 4,425.44 26,664.25 1,114.38 349.68 28,128.31 33,123.54 4,355.63 28,767.91 734.17 -40.48 29,461.60 28,538.20 2,877.53 25,660.67 921.29 -238.04 26,343.92 Mar '06 Mar '07 Mar '08 Mar '09

17,747.15 21,197.95

15,343.12 18,199.18

Mar '05

Mar '06

Mar '07

Mar '08

Mar '09

Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

2,000.05 2,404.03 234.30 2,169.73 450.16 67.12 1,652.45 -1.54 1,650.91 415.50 1,236.95 3,097.84 0.00 452.19 63.42 3,617.52 34.19 125.00 113.65

2,146.36 2,998.77 350.24 2,648.53 520.94 73.78 2,053.81 0.00 2,053.81 524.93 1,528.88 3,566.16 0.00 497.94 69.84 3,828.34 39.94 130.00 143.94

2,586.51 3,700.89 455.75 3,245.14 586.29 85.02 2,573.83 -0.07 2,573.76 660.37 1,913.46 4,547.86 0.00 578.07 98.25 3,853.74 49.65 150.00 177.59

3,030.52 3,764.69 471.56 3,293.13 652.31 64.35 2,576.47 0.00 2,576.47 547.55 2,028.92 4,805.58 0.00 578.43 81.25 3,855.04 52.63 150.00 202.70

1,723.10 2,644.39 704.92 1,939.47 874.54 51.17 1,013.76 15.29 1,029.05 12.50 1,001.26 4,898.16 0.00 311.61 34.09 5,140.08 19.48 125.00 240.64

RATIO ANALYSIS
Sr. No. Ratios Formula Year Ended Mar08 Year ended Mar09 Explanation
Higher the current ratio better is the situation and the ideal value is 2:1. Tata Motors current ratio is less than 1 which indicates more liabilities than assets. A higher liquid ratio indicates that there are sufficient assets available with the organisation which can be converted in the form of cash almost immediately to pay off those liabilities which are to be paid off almost immediately. It indicates the capability of organisation to achieve maximum sales with the minimum investment in fixed assets. Higher the ratio, the better. It indicates the capability of organisation to achieve maximum sales with the minimum investment in current assets. Higher the ratio, the better. It indicates the capability of organisation to achieve maximum sales with the minimum investment in working capital. Higher the ratio, the better. It indicates the capability of organisation to achieve maximum sales with the minimum investment in inventory. Higher the ratio, the better.

1.

Current ratio

Current Assets/ Current Liabilities

0.64

0.44

2.

Liquid ratio

Liquid assets/liquid liabilities

0.66

0.58

3.

Fixed Assets turnover ratio

Net sales/ fixed assets

2.69

1.88

4.

Current assets turnover ratio

Net sales/ current assets

6.68

5.8

5.

Working capital turnover ratio

Net sales/ working capital

5.68

3.68

6.

Inventory/ Stock turnover ratio

Net sales/Closing inventory

3.52

4.60

7.

Capital turnover ratio

Sales/capital employed

0.76

0.60

8.

Proprietary ratio

Fixed assets/ owners fund

0.54

0.60

9.

Fixed Assets/Capit al employed ratio

Fixed assets*100/capital employed

32%

26%

10.

Interest Coverage ratio

Profits before interest and taxes/ Interest charges

10.70

7.84

11.

Debt service Coverage ratio

(Net profit after taxes + Depreciation + Interest on term loans)/(Interest on term loans + Installments of term loans

0.47

0.35

12.

Gross profit ratio

Gross profit * 100/net sales

15.28%

16.10%

It indicates the efficiency of the organisation with which the capital employed is being utilized. Higher the ratio, the better. Both these figures indicate that the owners funds are exceeding the fixed assets which indicate that a part of owners funds is invested in the current assets also. A low value of this ratio in both cases indicates that a major portion of the long term funds are invested in current assets as compared to fixed assets. A high ratio as indicted by the 2 figures is favorable as it indicates the protection available to the lenders of long term capital in the form of funds available to pay the interest charges. It gives indication about the capability of Tata Motors to meet the obligations of long term borrowing. A very low value of ratio means insufficient earning capacity of organisation to meet the obligations of long term borrowing. A low value shown by the 2 figures indicates that this organisation is not able to produce or purchase at a low cost. It can be increased by either adjusting the sales price or production cost or by increasing volume of products having high gross profit margin. It indicates that portion of sales available to the owner after considering all types of

13.

Net profit ratio

(Net profit after taxes) * 100/net sales

15.14%

12.40%

14.

Operating ratio

(Manufacturing cost of goods sold+ operating expenses)*100/Net sales

83.52%

81.16%

15.

Return on Asset

Net profit * 100 /assets (Net profit + Interest on long term sources)/capital employed

36.13%

26.87%

16.

Return on capital employed

0.73

0.57

17.

Return on Shareholders funds

Net profit after taxes * 100/ Total shareholders funds

0.14

0.08

expenses and costs. The lower figures alongside indicate lower profitability of the business. A high ratio as seen alongside indicates that only a small margin of sales is available to meet the expenses in the form of interest, dividend and other non-operating expenses. A lower value is generally desirable. It measures profitability of investments in the firm. Higher value is preferred which is not the case as per figures shown. It measures profitability of capital employed in the firm. Higher value is preferred and the situation of Mar08 was much better than Mar09. It measures if the firm has earned sufficient returns for its shareholders or not. Higher the ratio, the better the situation which is not the case for Tata Motors in both the years. It measures the profits available to the equity shareholders on a per share basis. A higher capital to noncurrent assets ratio indicates that it is easier to meet the business' debt and creditor commitments. An increase in the fixed costs to total assets ratio may indicate higher fixed charges, possibly resulting in greater instability in operations and earnings.

18.

Earnings per share

(Net profit after taxes- preference dividend)/ Number of equity shares outstanding Owners equity/ Non-current assets

52.63

19.48

19.

Capital to non-current assets ratio

3.51

4.22

20.

Fixed costs to total assets

Fixed costs/ Total assets

1.09

1.06