Tata Motors

Financial Analysis of Tata Motors
2005 2010
TATA MOTORS -FINANCIAL ANALYSIS
Maninder Saini (10810033) Mohit Goyal (10810033) Mohit Jain (10810034) Navly Agrawal (10810037) Nimit Kaul (10810038) Ragini Rathi (10810046) MBA- 1st Year
Indian Institute Of Technology, Roorkee
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Contents
Acknowledgement ........................................................................................................... 4 Disclaimer ........................................................................................................................ 5 1. 2. Executive Summary .................................................................................................. 6 Introduction ............................................................................................................... 7 2.1. Tata Groups: Overview.......................................................................................... 7 2.2. Overview of automotive sector in India .................................................................. 9 2.3.Tata Motors .......................................................................................................... 11 2.4. Chronological Company History Tata Motors .................................................. 13 2.5 Corporate Structure 21 3. Tata Motors Business ............................................................................................. 22 3.1.Competitor Analysis ............................................................................................. 23 4. Financial Analysis ................................................................................................... 26 4.1. 4.2. 4.3. 4.4. 4.4.1. 4.4.2. 4.4.3. 5. 6. 7. Balance Sheet .................................................................................................. 26 Income Statement ............................................................................................ 27 Profit Analysis ................................................................................................... 28 Comparative Analysis ....................................................................................... 31 Capital Structure............................................................................................ 31 Asset Composition ........................................................................................ 32 Income Statement ......................................................................................... 32
Jagaur Land Rover..34 Tata Nano..39 Some Key Ratios .................................................................................................... 41 7.1. 7.2. P-E Ratio .......................................................................................................... 41 Net Profit Margin............................................................................................... 41
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7.3. 74. 8. 9. ROIC & ROE .................................................................................................... 42 Asset & Inventory Turnover Ratios ................................................................... 42
Conclusion .............................................................................................................. 43 Future Outlook 44
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Financial Analysis of Tata Motors Acknowledgement

We would like to extend our sincere thanks to Prof. V.K. Nangia for providing us his valuable guidance and advice during the course of the project. We would also like to thank all those people who have helped us, directly or indirectly, during the course of the project.
Maninder pal Singh Mohit Goyal Mohit Jain Navly Agarwal Nimit Kaul Ragini Rathi
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Financial Analysis of Tata Motors Disclaimer

The analysis and conclusions were made on the information available to us. This Project has been done as part of Academic evaluation. We are in no way legally liable for the recommendations given and the stakeholders are requested to take a decision considering the risks associated.
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1. Executive Summary
The Financial Analysis of Tata Motors Limited for the period 2006-10, is done by us , a
group constituting: Maninder Pal Singh, Mohit Goyal, Mohit Jain, Navly Agrawal, Nimit
Kaul, Ragini Rathi - students of MBA 1st yr (Class of 2010-12) , Department of Management Studies, Indian Institute of Technology- Roorkee. This financial analysis of Tata Motors Ltd. is done as part of our Financial Accounting assignment under the curriculum of the course. This assignment is aimed at introducing the students to the basic concepts and applications of Financial Accounting in the industry. In this particular case, Tata Motors Ltd. was the business entity chosen to analyze. The analysis and study involved thorough examination and verification of all the related Annual Reports, Balance Sheets, Profit & Loss account, Cash-Flow statements, Auditors Report and Directors Report. During the course of the assignment the use and significance of various financial terms was emphasized, also all the various values and ratios were calculated and derived at so as to make recommendations as per the analysis .
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2.INTRODUCTION 2.1 TATA GROUP
Founded by Jamsetji Tata in 1868, Tatas early years were inspired by the spirit of nationalism. It pioneered several industries of national importance in India: steel, power, hospitality and airlines. The Tata group comprises over 90 operating companies in seven business sectors: communications and information technology, engineering, materials, services, energy, consumer products and chemicals. The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries. The total revenue of Tata companies, taken together, was $67.4 billion in 2009-10, with 57 per cent of this coming from business outside India. Tata companies employ around 395,000 people worldwide. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics. Every Tata company or enterprise operates independently. Each of these companies has its own board of directors and shareholders, to whom it is answerable. There are 28 publicly listed Tata enterprises and they have a combined market capitalisation of about $103.67 billion (as on November 11, 2010), and a shareholder base of 3.4 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Indian Hotels and Tata Communications. In tandem with the increasing international footprint of Tata companies, the Tata brand is also gaining international recognition. Brand Finance, a UK-based consultancy firm, recently valued the Tata brand at $9.92 billion and ranked it 51st among the world's Top 100 brands. Tata companies have always believed in returning wealth to the society they serve. Twothirds of the equity of Tata Sons, the Tata promoter company, is held by philanthropic trusts that have created national institutions for science and technology, medical research, social studies and the performing arts. The trusts also provide aid and
Indian Institute Of Technology, Roorkee Page 7

assistance to non-government organisations working in the areas of education, healthcare and livelihoods. Tata companies also extend social welfare activities to communities around their industrial units. The combined development-related
expenditure of the trusts and the companies amounts to around 4 per cent of the net profits of all the Tata companies taken together. Going forward, Tata is focusing on new technologies and innovation to drive its business in India and internationally. Anchored in India and wedded to traditional values and strong ethics, Tata companies are building multinational businesses that will achieve growth through excellence and innovation, while balancing the interests of shareholders, employees and civil society.
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2.2 Overview of the Automobile sector in India
The automotive industry is one of the largest industries in India and is the key driver for the growth in economy. The contribution of the automotive industry to GDP was 5 per cent. In the same year the automotive industry produced more than 11 million vehicles registering a growth of 13.56 per cent and achieving a turnover of USD 34 billion. With regard to international trade, exports earnings were USD 2.76 billion in the year 2006 2007 and have been growing at a CAGR of approximately 30 per cent for the last five years. However, even though automotive exports were USD 2.28 billion in 20052006, they constituted only 0.3 per cent of global automotive trade in the same year. Owing to its deep forward and backward linkages with other sectors in the economy, the automotive industry has a strong multiplier effect on the growth of the economy. India is emerging as a source of high value and advanced quality engineering products and services for multinational companies. Among other industries, the automotive industry in India is understood to be the most dynamic. It has been experiencing strong growth rates after de-licensing of the industry in 1991, when major economic reforms took place in India.
The automotive industry in India produces a wide range of vehicles like passenger cars, utility vehicles, commercial vehicles, two-wheelers, three-wheelers and tractors. Currently, there are approximately 15 manufacturers of passenger cars and utility vehicles, 9 manufacturers of commercial vehicles, 16 manufacturers of two-wheelers and three-wheelers and 14 manufacturers of tractors. The Indian automotive industry is one of the worlds fastest growing automotive industries growing at a Compounded Annual Growth Rate (CAGR) of approximately 17 per cent over the last five years. It is now the eleventh largest manufacturer of passenger cars, fourth largest manufacturer of commercial vehicles and the second largest manufacturer of two-wheelers in the world.
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Largest manufacturers in the automotive industry
The largest Indian passenger car manufacturers include Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Hindustan Motors. Presence of foreign players such as Mercedes-Benz, Fiat, General Motors and Toyota is also growing in this segment. Recently, the passenger car segment has also seen the entry of other global majors such as BMW, Audi, Volkswagen and Volvo. Major Indian manufacturers of commercial vehicles are Tata Motors, Ashok Leyland, Eicher Motors, Mahindra & Mahindra and Force Motors. Like the passenger car segment, this segment has also seen foreign companies such as MAN, ITEC, Mercedes- Benz, Scania and Hyundai entering the market. Two-wheeler manufacturing is dominated by Indian companies like Hero Honda, Bajaj Auto and TVS. Foreign players in this segment include Honda, Yamaha and Piaggio. Three-wheeler manufacturing is also led by Indian companies that include Bajaj Auto, Force Motors and Mahindra & Mahindra.
Passenger cars
Commercial vehicles
Two-wheelers
Three-wheelers
Maruti Suzuki Tata Motors Mahindra Mahindra Hindustan Motors
Ashok Leyland Tata Motors & Eicher Motors
Hero Honda Bajaj Auto TVS
Bajaj Auto Piaggio Mahindra Mahindra &
Swaraj Mazda
Royal Motors
Enfield TVS Motors
Honda Toyota Volkswagen General Motors Ford Audi
Volvo MAN ITEC Scania Mercedes-Benz Hyundai
Kinetic Motors LML Suzuki Motors Yamaha Motors
Tata Motors India Force Motors
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2.3 TATA MOTORS
Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs. 92,519 crores (USD 20 billion) in 2009-10. 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. The company's 24,000 employees are guided by the vision to be "best in the manner in which we operate best in the products we deliver and best in our value system and ethics." Established in 1945, Tata Motors' presence indeed cuts across the length and breadth of India. Over 5.9 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 power trains. The company's 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 is also expanding its international footprint, established through exports since 1961. The company's commercial and passenger vehicles are already being marketed in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and South America. It has franchisee/joint venture assembly operations in Kenya, Bangladesh, Ukraine, Russia, Senegal and South Africa. The foundation of the company's growth over the last 50 years is a deep understanding of economic stimuli and customer needs, and the ability to translate them into customerdesired offerings through leading edge R&D. The company today has R&D centres in
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Pune, Jamshedpur, Lucknow, Dharwad in India, and in South Korea, Spain, and the UK. Tata Motors is equally focused on environment-friendly technologies in emissions and alternative fuels. . It has developed electric and hybrid vehicles both for personal and public transportation. It has also been implementing several environment-friendly technologies in manufacturing processes, significantly enhancing resource conservation 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. Tata Motors is committed to improving the quality of life of communities by working on four thrust areas employability, education, health and environment. The activities touch the lives of more than a million citizens. The company's support on education and employability is focused on youth and women. They range from schools to technical education institutes to actual facilitation of income generation. In health, their intervention is in both preventive and curative health care. The goal of environment protection is achieved through tree plantation, conserving water and creating new water bodies and, last but not the least, by introducing appropriate technologies in their vehicles and operations for constantly enhancing environment care. With the foundation of its rich heritage, Tata Motors today is etching a refulgent future.
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2.4 Chronological Company History: TATA MOTORS
1945
Tata Engineering and Locomotive Co. Ltd. were established to manufacture locomotives and other engineering products.
1948
Steam road roller introduced in collaboration with Marshall Sons (UK).
1954
Collaboration with Daimler Benz AG, West Germany, for manufacture of medium commercial vehicles. The first vehicle rolled out within 6 months of the contract.
1959
Research and Development Centre set up at Jamshedpur.
1961
Exports begin with the first truck being shipped to Ceylon, now Sri Lanka.
1966
Setting up of the Engineering Research Centre at Pune to provide impetus to automobile Research and Development.
1971
Introduction of DI engines.
1977
First commercial vehicle manufactured in Pune.
1983
Manufacture of Heavy Commercial Vehicle commences.
1985
First hydraulic excavator produced with Hitachi collaboration.
1986
Production of first light commercial vehicle, Tata 407, indigenously
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designed, followed by Tata 608.
1989
Introduction of the Tata mobile 206 - 3rd LCV model.
1991
Launch of the 1st indigenous passenger car Tata Sierra. TAC 20 crane produced. One millionth vehicle rolled out.
1992
Launch of the Tata Estate.
1993
Joint venture agreement signed with Cummins Engine Co. Inc. for the manufacture of high horsepower and emission friendly diesel engines.
1994
Launch of Tata Sumo - the multi utility vehicle. Launch of LPT 709 - a full forward control, light commercial vehicle. Joint venture agreement signed with M/s Daimler - Benz / Mercedes Benz for manufacture of Mercedes Benz passenger cars in India.
Joint venture agreement signed with Tata Holset Ltd., UK for manufacturing turbochargers to be used on Cummins engines.
1995
Mercedes Benz car E220 launched.
1996
Tata Sumo deluxe launched.
1997
Tata Sierra Turbo launched. 100,000th Tata Sumo rolled out.
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1998

Tata Safari - India's first sports utility vehicle launched. 2 millionth vehicles rolled out. Indica, India's first fully indigenous passenger car launched.
1999
115,000 bookings for Indica registered against full payment within a week. Commercial production of Indica commences in full swing.
2000
First consignment of 160 Indica's shipped to Malta. Indica with Bharat Stage 2 (Euro II) compliant diesel engine launched. Utility vehicles with Bharat 2 (Euro II) compliant engine launched. Indica 2000 (Euro II) with multi point fuel injection petrol engine launched. Launch of CNG buses. Launch of 1109 vehicle - Intermediate commercial vehicle.
2001
Indica V2 launched - 2nd generation Indica. 100,000th Indica wheeled out. Launch of CNG Indica. Launch of the Tata Safari EX Indica V2 becomes India's number one car in its segment. Exits joint venture with Daimler Chrysler.
2002
Unveiling of the Tata Sedan at Auto Expo 2002. Petrol version of Indica V2 launched. Launch of the EX series in Commercial vehicles. Launch of the Tata 207 DI. 2,00,000th Indica rolled out. 5,00,000th passenger vehicle rolled out. Launch of the Tata Sumo'+' Series Launch of the Tata Indigo.
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Tata Engineering signed a product agreement with MG Rover of the UK.
2003
Launch of the Tata Safari Limited Edition. The Tata Indigo Station Wagon unveiled at the Geneva Motor Show. On 29th July, J. R. D. Tata's birth anniversary, Tata Engineering becomes Tata Motors Limited.
3 millionth vehicles produced. First CityRover rolled out 135 PS Tata Safari EXi Petrol launched Tata SFC 407 EX Turbo launched
2004
Tata Motors unveils new product range at Auto Expo '04. New Tata Indica V2 launched Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment agreement
Indigo Advent unveiled at Geneva Motor Show Tata Motors completes acquisition of Daewoo Commercial Vehicle Company
Tata LPT 909 EX launched Tata Daewoo Commercial Vehicle Co. Ltd. (TDCV) launches the heavy duty truck 'NOVUS' , in Korea
Sumo Victa launched Indigo Marina launched Tata Motors lists on the NYSE
2005
Tata Motors rolls out the 500,000th Passenger Car from its Car Plant Facility in Pune
The Tata Xover unveiled at the 75th Geneva Motor Show Branded buses and coaches - Starbus and Globus - launched
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Tata Motors acquires 21% stake in Hispano Carrocera SA, Spanish bus manufacturing Company
Tata Ace, India's first mini truck launched Tata Motors wins JRD QV award for business excellence. The power packed Safari Dicor is launched Introduction of Indigo SX series - luxury variant of Tata Indigo Tata Motors launches Indica V2 Turbo Diesel. One millionth passenger car produced and sold Inauguration of new factory at Jamshedpur for Novus Tata TL 4X4, India's first Sports Utility Truck (SUT) is launched Launch of Tata Novus Launch of Novus range of medium trucks in Korea, by Tata Daewoo Commercial Vehicle Co. (TDCV)
2006
Tata Motors vehicle sales in India cross four million mark Tata Motors unveils new long wheel base premium Indigo & X-over concept at Auto Expo 2006
Indica V2 Xeta launched Passenger Vehicle sales in India cross one-million mark Tata Motors and Marcopolo, Brazil, announce joint venture to manufacture fully built buses & coaches for India & markets abroad
Tata Motors first plant for small car to come up in West Bengal Tata Motors extends CNG options on its hatchback and estate range TDCV develops South Korea's first LNG-Powered Tractor- Trailer Tata Motors and Fiat Group announce three additional cooperation agreements
Tata Motors introduces a new Indigo range
2007
Construction of Small Car plant at Singur, West Bengal, begins on

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New 2007 Indica V2 range is launched Tata Motors launches the longwheel base Indigo XL, India's first stretch limousine
Common rail diesel (DICOR) engine extended to Indigo sedan and estate range
Tata Motors and Thonburi Automotive Assembly Plant Co. (Thonburi), announce formation of a joint venture company in Thailand to manufacture, assemble and market pickup trucks.
Roll out of 100,000th Ace Tata-Fiat plant at Ranjangaon inaugurated Launch of a new Upgraded range of its entry level utility vehicle offering, the Tata Spacio.
CRM-DMS initiative crosses the 1000th location milestone Launch of Magic, a comfortable, safe, four-wheeler public transportation mode, developed on the Ace platform Launch of Winger, Indias only maxi-van Fiat Group and Tata Motors announce establishment of Joint Venture in India
Launch of the Sumo Victa Turbo DI, the new upgraded range of its entrylevel utility vehicle, the Sumo Spacio
Tata Motors launches Indica V2 Turbo with dual airbags and ABS Launch of new Safari DICOR 2.2 VTT range, powered by a new 2.2 L Direct Injection Common Rail (DICOR) engine.
Rollout of the one millionth passenger car off the Indica platform.
2008
Ace plant at Pantnagar (Uttarakhand) begins production. Indica Vista the new generation Indica, is launched. Tata Motors' new plant for Nano to come up in Gujarat. Latest common rail diesel offering- the Indica V2 DICOR, launched.
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Indigo CS (Compact Sedan), worlds first sub four-meter sedan, launched. Launch of the new Sumo -- Sumo Grande, which combines the looks of an SUV with the comforts of a family car.
Tata Motors unveils its People's Car, Nano, at the ninth Auto Expo. Xenon, 1-tonne pick-up truck, launched in Thailand. Tata Motors signs definitive agreement with Ford Motor Company to purchase Jaguar and Land Rover.
Tata Motors completes acquisition of Jaguar Land Rover. Tata Motors introduces new Super Milo range of buses. Tata Motors is Official Vehicle Provider to Youth Baton Relay for The III Commonwealth Youth Games Pune 2008. Indica Vista the second generation Indica, is launched. Tata Motors launches passenger cars and the new pick-up in D.R. Congo.
2009
Tata Marcopolo Motors, Dharwad plant beings production Tata Motors launches Nano - The People's Car Introduction of New world standard truck range Launch of premium luxury vehicles - Jaguar XF, XFR and XKR and Land Rover Discovery 3, Range Rover Sport and Range Rover from Jaguar and Land Rover in India
Tata Nano wins the Indian Car of the Year (ICOTY) Award Tata Motors launches the Sumo Grande MK II Tata Motors begins distribution of Prima World truck Tata Motors acquires remaining 79% in Hispano Carrocera. Tata Motors launches the next generation all-new Indigo MANZA. FREELANDER 2 launched in India. Tata Motors introduces the all new Tata 407 Pickup, Tata Super Ace and Tata Ace EX.
First Jaguar Land Rover showroom opens in India. Ravi Kant to become Non-executive Vice-Chairman of Tata Motors on
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retirement, P.M. Telang to become Managing Director India Operations.
Tata Nano draws over 2.03 lakh bookings
2010
Tata Ace becomes India's first 1-lakh brand in goods commercial vehicles. Appointment of Mr. Carl-Peter Forster as Managing Director of Tata Motors.
Jaguar Land Rover announces opening of its Dealership in New Delhi Tata Motors to construct heavy truck plant in Myanmar under Government of Indias Line of Credit.
Tata Motors declared as the Commercial Vehicle Maker of the Year. Tata Motors Passenger Car Division launches Tata Motors Service Edge for leading edge customer service.
Tata Motors displays Tata Nano EV at the 80th Geneva Motor Show. Chief Minister of Punjab inaugurates Tata Motors supported State Institute of Automotive and Driving Skills.
Jaguar Land Rover announces Dr Ralf Speth as Chief Executive Officer. Tata Motors appoints Mr. Carl-Peter Forster as Group CEO. Tata Motors Group displays the widest range of products and environment-friendly technologies at Auto Expo 2010.
Tata Motors launches Magic Iris On 26th April 2010, Tata Motors sold its 4 millionth Commercial Vehicle.
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2.5 Corporate Structure
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3. Tata Motors Business
Passenger vehicles: It includes 1. Passenger Cars: The Indica Family, Indigo Family, Nano and fiat cars.
2. Utility Vehicles: Aria, safari, Sumo family and xenon XT.
Commercial Vehicles: It includes 3. Trucks: Prima and construck in medium and heavy commercial vehicles and TL 4x4 in light commercial vehicles.
4. Commercial Passenger Carriers: Buses, Winger, Magic.
Total Sales
633,862 vehicles
Commercial Vehicles
373,842 Vehicles
Passenger Vehicles
260,020 vehicles
H &M Commercial Vehicles

155,161 Vehicles
Light Commercial Vehicles(LCV)

216,681 Vehicles
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COMMERCIAL VEHICLES
TABLE: SALES FIGURES (MILLION UNITS) FROM 2006-2010
FY 05-06 Industry 391166 245022 Tata Motors Ashok leyland (62.6%) 61655 (15.7%) 84489 Others (21.7%)
FY 06-07 517317 334238 (64.7%) 83094 (16.06%) 99985 (19.24%)
FY 07-08 558977 352785 (63.2%) 83307 (14.9%) 122885 (21.9%)
FY 08-09 415724 265373 (63.8%) 54431 (13.09%) 95920 (23.11%)
FY 09-10 582538 373842 (64.2%) 63926 (10.9%) 144770 (24.9%)
* (%) is market share for that particular year.
(Source: Annual Reports)
The sales of the industry are growing year after year except for 2009 where the sales declined drastically as a result of global meltdown. The industry as well as company sales declined in FY08-09. The company has been able to maintain a constant market share over years. Tata motors sales declined by 17.2 % in FY08-09 in which domestic sales declined by 15.2% to 265,373 vehicles, while exports declined by 33.2% to 26,620 vehicles as a result of the recessionary trends in most markets. During the downturn, the Company has increased its market share in trucks. The sales picked up again 2009-10, attributed significantly to the growth in the Index of Industrial Production (IIP) which grew steadily from a very low growth in the initial part of the year to significantly higher growth towards the end of the year. Cumulatively, the IIP growth rate for 2009-10 was 10.4% as against 2.8% for the previous year. As a part of the stimulus package to help the automotive industry during crisis in the previous year as also to modernize the public transportation in the cities, the Government of India announced its intention to procure modern city buses under the JnNURM scheme. The Company also completed the delivery of the 1,625 low floor entry Marcopolo buses to
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Delhi Transport Corporation (DTC) in 2009-10, in addition to 650 buses supplied in the previous year. The Companys commercial vehicle exports grew moderately by 4.7% to 27,878 vehicles. It significantly improved its market share in commercial vehicles, driven by the enormous market acceptance of the Ace 0.75-tonne pickup vehicle in 2006-07. The market share of Ashok Leyland has declined over the years 2006 -2010.
PASSENGER VEHICLES
TABLE: SALES FIGURES (MILLION UNITS) FROM FY 2005-2010
FY 05-06 Industry 1318933 209107 Tata Motors (15.8%) 561822 Maruti Suzuki (42.6%) 548004 Others (41.6%)
FY 06-07 1575235 246042 (16.5%) 673924 (42.78%) 655269 (41.62%)
FY 07-08 1750347 232864 (13.3%) 764842 (43.6%) 752641 (43.1%)
FY 08-09 1521421 207512 (13.6%) 792167 (52%) 521742 (34.4%)
FY 09-10 1899144 260020 (13.7%) 1018365 (53.6%) 620759 (32.7%)
(Source: Annual Reports)


In 2010 Passenger vehicle sales were 260,020 vehicles, highest ever, achieving a growth of 25.3% over previous year and a market share of 13.7% (stable compared to 13.6% in the previous year). The Company continues to be amongst the top three players in the passenger vehicle market which has over 25 players. The growing sales of the new generation Indica Vista and successful launch and market response for the Indigo Manza mainly contributed to the growth. The growth in market share in 2007 is attributed to TATA Indicas sales at 144,690 nos. were the highest for any year in the domestic market with a growth of 30%, mainly due to the wide acceptance of the new petrol (XETA) range and a facelift introduced in the last quarter of the fiscal.
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4. FINANCIAL ANALYSIS 4.1. BALANCE SHEET
Mar 06 Reserves Surplus Gross Block Investments Net current assets Total Assets and 5154.2 7971.55 2015.15 2545.95 9096.45 6484.34 8775.8 2477 2784.05 11665.72 7453.96 10830.83 4910.27 -296.38 15095.74 11716.1 13905.17 12968.13 -943.82 26425.64 14394.87 18416.81 22336.9 -5834.61 33100.02 Mar 07 Mar 08 Mar 09 Mar 10
(Source: Annual Reports) Reserves and surplus: During the span of last 5 years the reserves and surplus of Tata Motors grew at a healthy rate. This bears the testimony to the stability and high financial strength of the Company. As on March 31, 2009, the Ordinary Share Capital of the Company stood at Rs. 449.83 crores as compared to Rs. 385.50 crores as on March 31, 2008 and A Ordinary Share Capital of Rs. 64.18 crores, raised during the year by Rights Issue. Gross Block: Increased year on year because of the acquisition of jaguar land rover, which includes the ownership of three major manufacturing plants. A plant was constructed for manufacture of small car NANO at Singur. Investment: Increased significantly over years. The Company continued to make additional long term and strategic investments. 2008: The Company invested Rs. 600 crores in its 100% subsidiary Tata Motors Finance Limited to further strengthen the vehicle financing activities. The Company also invested Rs. 601.59 crores in Fiat India Automobiles Private Limited for manufacturing Fiat and Tata cars and Fiat power trains. The amount invested in various mutual funds as at
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March 31, 2008 was Rs. 790.79 crores as against Rs. 51.99 crores as at March 31, 2007 representing surplus cash parked for future use.
2009: The Company invested a total of Rs. 8,330 crores in equity and preference shares of TML Holding (Pte) Ltd. Singapore which in turn acquired the business of Jaguar Land Rover. The Company has also made further investments of Rs. 100 crores in Tata Motors Finance Ltd., to further strengthen the vehicle financing activity of the Company. An investment of Rs. 115 crores was made in TML Distribution Company Ltd which would work towards further strengthening the Distribution and Sales network of the Company. During the year an additional investment of Rs.117.95 crores was made in Fiat Indi Automobiles Ltd. The company also sold off its investments in Mutual Funds, where surplus cash was parked last year, for meeting the requirements. 2010: The Company has invested Rs.10,575.60 crores in equity and preference shares of TML Holdings (Pte) Ltd, Singapore, which in turn prepaid the bridge loan taken for acquisition of Jaguar and Land Rover business. The Company sold part of its
investments in Tata Steel Ltd and 20% stake in Telco Construction Equipment Co. Ltd. Total Assets: Over the last five years the total assets have been increasing. The major growth is seen in the years 2009 and 2010 mainly due to the increasing size of the company on account of the acquisition of jaguar land rover and various investments.
4.2 INCOME STATEMENT
Mar 06 Gross sales % sales growth Less excise duty Net sales Other Income 24293 3401 20891 0
Mar 07 31884 31.2% 4349 27535 245
Mar 08 33093 3.79% 4363 28730 483
Mar 09 28599 -13.57% 2938 25660 925
Mar 10 38364 34.14% 2771 35593 1853

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Total income % income growth 20891 27780 32.9% 29214 5.16% 26586 -8.99% 37446 40.8%
Sales of company grew positively over years other than 2009, where The Company saw a negative growth due to the global slowdown. The industry growth declined resulting in decrease in overall sales by 5%. Net sales were not affected much in 2009 due to decreased excise duty.
In 2010 due to the recovery the company was able to grow positively again. The sales of jaguar land rover increased to 193,982 vehicles as compared to 167,348 vehicles in 2008-09 leading to 40.8% growth over the previous year. Both brands improved their performance impressively mainly due to the very positive customer response to its newly launched luxury sedans and the fact that the Company has succeeded in achieving a significant reduction in cost with improved operational efficiencies. There was a 25% growth in passenger vehicle segment and 40% in commercial vehicle segment. During the year Tata Motors launched its all-new second-generation Indigo Manza sedan to join the new Indica Vista hatchback launched last year. Both have been well-received in the market.
In2007, the automotive industry recovered from a slowdown in 2006.the sales bounced back impressively. In particular, the commercial vehicles segment, which saw a decline in growth rates over the last two years, grew by 33%.The passenger vehicle segment was favorably impacted by a reduction in excise duty on small cars and increased consumer spending. This is being reflected by a 31.2% growth in sales in 2007 over 2006.
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4.3 PROFIT ANALYSIS
Mar 06 Gross sales % sales growth Total income % income growth Total expenditure %change expenditure Profit before tax %change in operating profit in 24293 20891 18022 2868 -
Mar 07 31884 31.2% 27780 32.9% 24221 34.39% 3558 24.05%
Mar 08 33093 3.79% 29214 5.16% 25638 5.85% 3575 0.48%
Mar 09 28599 -13.57% 26586 -8.99% 23908 -6.74% 2678 -25.09%
Mar 10 38364 34.14% 37446 40.8% 31414 31.39% 6031 125.20%
(Source: Annual Reports) As clear from the figures in the above table the profit grew over years with an exception in 2009 where the profits fell below the previous years. The major reason of the fall is due to the decrease in sales as a result of economic slowdown. Expenditure: During 2007, construction of the new manufacturing plant (jointly owned with Fiat) at Ranjangaon was on progress. Construction work was commenced at the plant site at Singur in West Bengal. There continue to be pressures on margins arising from rising prices of raw materials like steel, non-ferrous metals, rubber and engineering plastics. In 2009, the expenditure decreased as a result of less demand due to global meltdown. In 2010, Net Raw Material consumption including processing charges increased by 31.4% to Rs.25,512.10 crores from Rs.19,416.64 crores in 2008-09, due to increase in vehicle volumes. Material cost as a % of net turnover decreased to 71.7% from 75.7% for the last year. The employee cost increased by 18.4% to Rs.1,836.13 crores from
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Rs.1,551.39 crores in 2008-09, mainly due to normal annual increments/promotions and increase in headcount. The manufacturing and other expenses as a percentage of net turnover have remained at 11.4% for both the years. In absolute terms, the expenses have increased to Rs.4,066.54 crores in 2009 10 from Rs.2,909.26 crores in 2008-09. The increase is due to variable costs on account of increase in volumes, such as sales incentives, warranty, freight etc. Jaguar and land improved their performance impressively mainly due to the very positive customer response to its newly launched luxury sedans. The profit grew by 125.20% in 2010 due to Whopping sales in 2010. Profit after tax FY 06 Tata Motors Ashok Leyland 56778 32732 67639 44129 65968 46931 34570 19000 99145 42367 05- FY 06-07 FY 07-08 FY 08-09 FY 09-10
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2008-09 was a difficult year faced by the automotive sector globally. The spread of the economic downturn of the Western world significantly affected business environment in India as well. The Company faced significant pressure in its domestic and overseas markets. In view of the fall in demand in the domestic and international markets, the Company's turnover for the year declined by 13.6% to Rs. 28,599 crores. The Profit After Tax was Rs. 1,001 crores, a decline of 50.7% over the last year.
4.4 Comparative Analysis 4.4.1 Capital Structure

| Common Size Statement |
Maruti Tata Motors Suzuki

Share Capital Reserves and surplus Secured loans Unsecured loans
Ashok Leyland 133.03 3,535.72 711.57 1568.87 5,949.14
Maruti Tata Motors Suzuki 1.81 45.57 24.51 28.12 100.00 1.14 92.37 0.21 6.28 100.00
Ashok Leyland 2.24 59.43 11.96 26.37 100.00
570.6
144.5
14,394.87 11,690.6 7,742.6 8,883.31 26.5 794.9
TOTAL LIABILITIES
31,591.38 12,656.5
Figures in Crores Rs
Tata Motors is the leading commercial vehicle company followed by Ashok Leyland. Tata Motors captures nearly 62% of the total market share in commercial vehicles. In passenger vehicles Maruti Suzuki leads the market with 45% market share followed by Tata Motors with 16% market share. The total funds ratio for Tata Motors and Maruti Suzuki is 1.265 while for Tata Motors and Ashok Leyland is 4.07. This shows the monopoly of Tata Motors in the commercial vehicle segment and the close competition in passenger vehicle segment. Tata Motors has the least %age of reserves amongst the companies and the highest %age of unsecured loans. Maruti Suzuki is in the strongest position amongst the companies followed by Ashok Leyland and Tata Motors. Also, the

Debt-Equity ratio for Tata Motors is 0.53 while that of Maruti is 0.07 and of Ashok Leyland is 0.95. Thus Maruti offers the best position for investment followed by Tata Motors and then Ashok Leyland.
4.4.2 Asset Composition

Tata Motors 11,203.89 5,232.15 22,336.90 -1,508.64 -5,672.92 31,591.38 Maruti Suzuki 5,024.70 387.60 7,176.16 -137 204.6 12,656.5 Ashok Leyland 4,249.56 561.47 326.15 -384.54 1,191.38 5,949.19 Tata Motors 35.47 16.56 70.71 -4.78 -17.6 100.00 Maruti Suzuki 39.7 3.06 56.7 Ashok Leyland 71.43 9.44 5.48
Net Block Capital WIP Investments Net Deferred tax Net Current Assets TOTAL ASSETS
-1.08 -6.46 1.62 20.03 100.00 100.00 Figures in Crores Rs
High reserves and surplus held by Tata Motors gives strong confidence to its partners, suppliers and distributors. Thus, it enjoys good credit from its trading partners which helps to carry out the operations with negative working capital. Almost entire profits retained by Tata Motors are put into investments. Tata Motors has 71% of its total assets put into investments as compared to 56% and 5.48% by Maruti Suzuki India Ltd and Ashok Leyland Ltd. respectively. The company assets have immensely grown in from FY08. The company investments has grown almost 10 times in last three years which clearly shows the strategy of expansion and capturing more and more market by sales .
5.4.2 Income Statement

| Tata Motors 38,364 24,905.83 362.62 1,807.76 1,806.02 Maruti Ashok Suzuki Leyland 31,947 8,035 22,363.50 5,463.49 216.6 538 308.9 44.47 667.26 90.35 Common Size Statement | Tata Maruti Ashok Motors Suzuki Leyland 100.00 100.00 100.00 64.92 70.00 68.00 0.9452 4.71 4.71 0.6779 1.68 0.97 0.5534 8.30 1.12
Sales Turnover Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses
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Selling and Administration Expenses Profit before Tax 1,929.42 2,122.37 642.58 5.03 6.64 8.00
2,829.54
3,592.5
544.77
7.38
11.24
6.78
Figures in Crores Rs
The income statement clearly shows that major expenses for all the automobiles companies are majorly for the purchase of raw material. The Tata motors manages to earn less profits than its competitor but the major reasons behind that was loss in sale of investments of Rs 850 crores and a loss of 250 crores in doubtful loans adding up to Rs 3014 crores whereas Maruti and Ashok Leyland just face a loss of Rs 312 crores and Rs 10.98 crores respectively which creates the major difference in profits for the companies. But overall Tata has earned a much higher profits through it manufacturing and sales.
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5. JAGUAR LAND ROVER
On June 2, 2008, the Company completed the acquisition of Jaguar Land Rover from Ford Motor Company of U.S. (Ford) for a net consideration of US$ 2.3 billion (on a cash free, debt free basis) in an all cash transaction out of the purchase consideration. Jaguar and Land Rover are global premium automotive businesses encompassing engineering, design, manufacture and marketing of Jaguar luxury performance cars and Land Rover premium all-terrain vehicles. The purchase consideration included the ownership by Jaguar and Land Rover of necessary Intellectual Property Rights, 3 major manufacturing facilities, 2 advanced design and engineering centers in U.K., a worldwide network of 20 national sales companies and a minimum assured capital allowance of approximately US$ 1.1 billion for future tax set-offs. WHY ACCQUIRE JLR?
1. Long term strategic commitment to automotive sector. 2. Opportunity to participate in two fast growing auto segments (premium and small
cars) and to build a comprehensive product portfolio with a global footprint immediately.
3. Increased business diversity across markets and product segments. 4. Unique

opportunity to move into premium segment with access to world class iconic brands. Land Rover provides a natural fit above TMLs Utility Vehicles/SUV/Crossover offerings for the 4x4 premium category. Jaguar offers a range of Performance/Luxury vehicles to broaden the brand portfolio.
5. Long-term
services.
benefits from component sourcing, low cost engineering and design
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Tata Motors acquired JLR on a debt free basis which resulted in all the debts of JLR not being transferred to Tata Motors. As the Jaguar Land Rover segment was facing losses continuously since the last 2-3 years the present owners Ford decided to sell the brand. This opportunity for Tata Motors, depended 90% on the Indian market to extend its market internationally with the two globally renowned brand names.
JAGUAR LAND ROVER ACQUISITION STRUCTURE
TML had raised a 15 month bridge loan of $3bn to finance the acquisition Board approval was obtained to rise about Rs.92bn ($2,300mn) Rs.96bn ($2,400mn) (through issue of equity / equity linked instruments to refinance bridge loan.
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3 simultaneous but unlinked Rights Issues of about Rs.72bn ($1,800mn) of the following securities I. Equity shares upto Rs.22bn ($550mn). II. A Equity shares carrying differential voting rights upto Rs.20bn ($500mn). III. 5 year 0.5% Convertible Preference Shares (CCPs) upto Rs.30bn, optionally convertible into A Equity Shares after 3 years but before 5 years from the date of allotment (upto $750mn). IV. Approx USD 500/600mn was raised through issue of securities in the foreign markets. V. Jaguar Land Rover also tied up with Ford for supply of engines, stampings and other components on a long term basis for its business as also for transition support in areas of auto financing, IT, accounting and access to Ford's test facilities. The Jaguar Land Rover acquisition was routed through the Companys 100% subsidiary, Jaguar Land Rover Limited, U.K., which had availed a short term bridge loan facility of US$ 3 billion from a syndication of banks and guaranteed by the Company. The Company prepaid part of the said facility out of proceeds of a Rights Issue and certain divestments and the balance outstanding as on March 31, 2009 was US$ 2.02 billion. For repayment of the said amount, the Company in May 2009 raised resources through further divestments and issued Secured Non-Convertible Credit Enhanced Rupee Debentures in four tranches, having tenors up to 7 years, aggregating Rs.4,200 crores on a private placement basis. The balance facility of US$ 1 billion was rolled over and guaranteed by the Company, by extending the final maturity up to December 2010.
Sales figures of JLR Year No. of units(000) 2007 2008 292 125 2009 167 2010 194
The global meltdown and high fuel prices, especially after September 2008 with vehicle financing and drying up demand, impacted auto industry worldwide, including Jaguar

Land Rover. The volumes over the 10 months post acquisition reduced by 32% as compared to the comparable period in the previous year resulting in a Loss before tax of GB 281 million. In response Jaguar Land Rover took prompt action to reduce inventory, improve working capital, and reduce investments and payroll costs including more than 2000 job losses. Jaguar XF, which was launched in 2008, witnessed an excellent response in the market during the year.
Jaguar Land Rover achieved sale of 193,982 vehicles as compared to 167,348 vehicles in 2008-09 (in 10 months since Tata Motors acquisition of the business in June 2008). Jaguar Land Rover continued to enhance its product offerings through an all new XFR, powertrain offerings and 2010 model year vehicles. The new Jaguar XJ was unveiled in London in July 2009 and had its public debut at the Frankfurt Motor Show in September 2009.
The main impact on sales of Jaguar Land Rover was during the fiscal year 2008-2009 when recession hit across the industry. The automobile sector went down by 18% and the demand for luxury vehicles plummeted down. Losses also occurred due to retention of large inventory at that time.
In 2009-2010 sales picked up pace as the effect of recession reduced and demand for luxury and Rover vehicles started increasing. Also because of the launch of NANO the overall profits of the company increased with NANO bringing 2.03 lakh fully paid bookings.
Highlights for each brand and their future plans are summarized below:Jaguar The newly launched XF and XJ luxury sedans have been welcomed by customers in the market. Jaguar cars are regaining the confidence of customers as being reliable, in addition to being high-performance, with great road-handling and occupant safety. The Company is considering widening the product range of Jaguar cars by introducing a station wagon, a new entry-level Jaguar, and a new roadster.

Land Rover / Range Rover The Range Rover continues to be the gold standard for off road vehicles. Work is underway to revamp and refresh the entire model range. The new Range Rover EVOQUE will be a bold design evolution in SUVs. Fuel-efficient start/stop and hybrid vehicles will also be introduced progressively. The current range of vehicles has seen resurgence in demand, and the challenge before the Company today is to deliver enough vehicles to meet market demand. China has emerged as the thirdlargest global market for Land Rover/Range Rover and studies are underway to consider options to increase market penetration in China, India and other developing markets.
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6. TATA Nano
Seeing an opportunity in the great number of Indian families with two-wheeled rather than four-wheeled vehicles, Tata Motors began development of an affordable car in 2003. The purchase price of this no frills auto was brought down by dispensing with most nonessential features, reducing the amount of steel used in its construction, and relying on low-cost Indian labor. The introduction of the Nano received much media attention due to its low price. The Nano's development was foreshadowed by the 2005 success of the affordable, 4wheeled Tata Ace truck. The choice of Singur was made by the company among six sites offered by the state government. The project faced massive opposition from displaced farmers. The unwilling farmers were given political support by West Bengal's opposition leader Mamata Banerjee. Banerjee's "Save Farmland" movement was supported by celebrity environmental activists like Medha Patkar, Anuradha Talwar andArundhati Roy. Banerjee's movement against displacement of farmers was also supported by several Kolkata based intellectuals like Aparna Sen, Kaushik Sen, Shaonli Mitra and Suvaprasanna. Ultra left activists also shared the platform with Banerjee's Trinamool Party. The Tatas finally decided to move out of Singur on 3 October, 2008. Ratan Tata blamed violence by Banerjee and her supporters for the pullout decision. On 7 October 2008, the Tatas announced that they would be setting up the Tata Nano plant in Sanand, Gujarat.
Cost cutting features

The Nano's design implements many cost-reducing innovations.
The Nano's trunk is only accessible from inside the car, as the rear hatch does not open. One windscreen wiper instead of the usual pair . No power steering, unnecessary due to its light weight Three lug nuts on the wheels instead of the usual four Only one wing mirror No radio or CD player No air conditioning
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No airbags 623cc engine has only 2 cylinders
The Sanand facility has the capacity to manufacture 2.5 lakh units annually, which can subsequently be increased to 5 lakh units. Tata Motors today opened its brand new plant here, set up at a cost of Rs 2,000 crore to manufacture Rs 1 lakh car Nano. Tata Motors, which first chose Singur in West Bengal for setting up the mother plant, pulled out of the site in October 2008 following violent protests over land acquisition. Tatas, by then, had already spent over Rs 1,000 crore in Singur.per annum.
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7. PERFORMANCE ANALYSIS
7.1. P-E Ratio
PE ratio = Market price of each share / Earnings per share Tata motors: = 20.46 Maruti Suzuki: = 16.58 Ashok Leyland: = 19.00 Inference: Investors are paying more for each unit of income when compared to Maruti and Ashok Leyland.
7.2. NET PROFIT MARGIN
Net profit margin (%) = Net profit/ total income *100
Company Tata Motors Ashok Leyland Maruti Suzuki
2006-07 7% 9.08% 5.27%
2007-08 7% 8.23% 2.80%
2008-09 4% 5.26% 5.8%
2009-10 6% 7.82% 5.21&
(Source: www.capitaline.com) Tata Motors has performed well but Maruti net profit is more in last 4 yrs. The major losses incurred by Tata Motors are majorly in their investments which is far greater than incurred by Maruti and Ashok Leyland. The profits earned by Tata by their manufacturing and sales are far greater than the other two companies. So Tata has great efficient operations and manufacturing but their investments are not as efficient as Maruti.

7.3. ROIC & ROE Return on Investment Capital (ROIC) Ratio = Net profit /Capital Employed Return on Equity (ROE) Ratio = Net profit / Equity Capital Over-all Performance Measuring Ratios (in terms of %): Ratio ROIC ROE 2004-05 26.51 27.60 2005-06 26.63 27.85 2006-07 24.97 25.87 2007-08 7.76 8.18 2008-09 13.94 14.97
(Source: Annual Reports) 7.4. ASSET & INVENTORY TURNOVER RATIOS Asset Turnover Ratio = Cost of Sales / Total Assets Inventory Turnover Ratio = Cost of Sales / Average Stock Carried Ratios measuring efficiency in the use of resources: Ratio Asset Turnover Inventory Turnover 2005-06 2.30 10.38 2006-07 2.36 11.01 2007-08 1.90 11.86 2008-09 0.97 11.51 2009-10 1.08 12.12
The asset turnover ratio in FY09 has dropped drastically by approx 1%. This is due to acquisition of JLR which raises the total assets by about Rs 10000 crores but as sales fell down the ratio fells down.
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8. CONCLUSION
TATA MOTORS is the market leader in the commercial vehicles, while it stands second in the passenger vehicle segment after Maruti Suzuki. Here we have zeroed down on certain areas where we may see certain actions from Hero Honda in the near future.
Tata Motors has taken steps to capture the market of small cars by launching NANO and plans to capture some of Marutis market share. To further capture the small car industry Tata can concentrate more on R&D in the small car field.
The Jaguar Land Rover of Tata Motors is one of the current growing segments. After its revival it has a promising future with the Tata Group. Tata Motors should concentrate its investments on developing newer and efficient models of JLR so as to capture the foreign market and play amongst the big players.
Tata Motors has to concentrate on passenger vehicle segment due to the current high growth of 32.8%. Also passenger vehicle exports being the highest in the automobile exports would enable Tata Motors to gain more revenue if they concentrate on passenger vehicle segment.
The automobile industry has grown by 32.38% which is a very high growth rate. Tata Motors on the other hand has registered growth rate of 41% which is significantly higher than the industry average. 39% of this growth has been due to the growth in domestic market alone. Hence Tata Motors depends highly on Indian Market. We would suggest that Tata Motors should broaden its area of sales and start concentrating on global markets so as to reduce its dependency on the Indian market and adding to the benefits, become a global brand name.
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9. FUTURE OUTLOOK
Recognizing that scale and market growth are essential, Tata Motors has, in addition to its domestic growth, viewed international expansion as an important strategic factor. With the acquisition of Jaguar/Land Rover, Daewoo Commercial Vehicle Company Limited, Hispano Carrocera S.p.A. Spain, and a major bus joint venture with Marco Polo of Brazil, Tata Motors expects to be in a position to offer a much wider product range in passenger cars and commercial vehicles in an increasing number of international markets. The operational strategy would be to leverage the Companys strengths in the design and development of products for the base of the pyramid, namely, addressing the oftenunserved large potential market at the low end, while also growing in the higher priced segment. The Company also plans to undertake several joint initiatives which will leverage the respective strengths and economies of its various domestic and overseas establishments.
In 2010-11, global growth is expected to be more than 4% as compared in 2009-10. The Indian economy is expected to grow by 8.8% according to the IMF World Economic Outlook. Other structural factors being favourable, this augurs well for the Indian automotive sector. Key markets for Jaguar Land Rover such as China, Russia, and Middle East are expected to grow, while the UK, USA is expected to recover moderately. Commercial vehicle industry continues to be highly dependent on the developments in infrastructure and manufacturing activity in the country. With increase in the Government spending on infrastructure and increase in the industrial production, the commercial vehicle industry is expected to do well in the next year. With recovery in the global markets, there is expected to be an increase in the commodity prices, in turn increasing the input costs. Interest rates and liquidity may be affected as a result of inflationary pressures. The competition in both commercial and passenger vehicle segments is expected to intensify in the next year. On the above background, the Company will continue to focus on retaining its advantage of rich product portfolio, market reach and penetration and the Tata brand, in order to be close to its customers. The Company will continue to introduce to the market, new

products and variants, some of which have already been unveiled at the Delhi Auto Expo this year. These will offer superior value to the customers and improve the Companys market position. Aggressive cost reduction will be accentuated to offset the increase in input costs. The Company will also aggressively pursue opportunities in the International markets as they recover from the downturn. Jaguar Land Rover will continue to focus on cost reductions to improve its cost base and competitive positioning in the market. It will also focus on increasing its presence in the emerging markets such as China and Middle East along with launching new products and variants and new technology initiatives for emission level reductions.
Opportunities Road development: Continued improvement in road infrastructure in coming years is expected to have a positive effect on automobile sales. According to Ministry for Road, Transport and Highways, the government will spend about Rs.1,000 billion over future years, with a target of building 20 km of road every day. Rural connectivity is expected to correspondingly improve which would expand significantly the population/markets/supply sources participating in the overall economic growth. Improvement in road infrastructure at a faster pace will facilitate swifter transportation of goods and passengers, and would in turn create a demand for safer, reliable and faster vehicles. With its wide range of goods and passenger transportation vehicles ranging from 0.75 tonne load carrier to large haulage tractors (49T) for goods movement, buses and coaches for public transportation and passenger cars and utility vehicles for personal transportation, the Company is poised to gain significantly with these.
Population Dividend and Increase in income levels: India has the youngest population in the world, with about 65% under the age of 35. Further, about 63% of the Indian population is in the working age group (19 64 years). The income levels in India, have more than doubled in the last seven years as indicated by Per Capita Income. It is predicted that the Per Capita Income in India, would
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continue to increase with comparatively higher saving rate. Growing middle income level population and rise in their average income levels all augur well for the automotive industry, both in terms of personal transportation needs as well as goods movement.
Growing consumer culture: In India, the demand for a better lifestyle has enhanced consumption levels and rapid growth in several segments like retail chains, cellular phones and cable and satellite television. Proliferation of mobile phones and satellite televisions is leading to urbanization of mindset and consumerism in rural people. With increasing desire for leading urban lifestyle, per capita movement between villages and urban centres is expected to witness an explosive growth in the coming year, which will lead to huge demand for passenger carriers and buses. Consumerism is also expected to lead to an increase in car penetration from the current levels of 8 per thousand towards the 500+ levels witnessed in the developed countries. The Company, with its wide portfolio is expected to benefit from improvement in lifestyle and higher aspiration levels in passenger cars and potential growth in freight movement.
Rural Market Growth: As per the recent report by Accenture Consulting, rural spending is now less dependent on farm income, with less than 50% of the rural income being contributed by farm income. The increase in procurement prices and improved access to finance and institutional credit has brought greater wealth to rural households. Policy measures such as the waiver of agricultural loans and the National Rural Employment Guarantee Scheme (NREGS), which guarantees 100 days of employment to one member of every rural household, and increased government spending in rural areas, have helped to reduce rural underemployment and raised rural income levels. It is estimated that compared with 48% of motorcycles sales in the rural areas, only 11% of cars/UVs sales are today contributed by the rural market, which indicates a potential growth opportunity in this market. The Company has planned affordable transport solutions and distribution channels to leverage the opportunities presented by this market.
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International Business: India continues to be a cost competitive source for the automotive industry globally, both for vehicles and components. Indias manufacturing base continues to benefit from these scale economies coupled with technology/quality improvements. The Company has opportunities to increase its exports significantly, particularly with the new and contemporary product offerings in commercial vehicles and passenger cars. The Company is also setting up/ exploring manufacturing footprint overseas, which would combine these advantages with local operations and sourcing in these markets.
Risks Hardening of interest rates and other inflationary trends: Further hardening of consumer interest rates could have an adverse impact on the automotive industry. Increase in inflation could also have a negative impact on automobile sales in the domestic market. Fuel Prices: As compared to the volatility in international oil prices in 2008-09 (from a high of US$145 per barrel in June 2008 to a low of US$30 per barrel), the fuel price has remained high at about US$85 in 2009-10. In India the fuel prices are subsidized by the Government and going forward may be decontrolled. Higher fuel prices will force the consumers to think of alternative transportation solutions or defer purchases. The Companys product programmes encompass initiatives to improve fuel efficiency of its products and investing in programmes for development of alternative solutions. The Kirit Parikh committee
recommendations that the retail prices of petrol and diesel to be market determined and that an additional excise duty of Rs.80,000 per car to be levied on diesel cars, if implemented, could adversely impact demand. Input Costs: With many economies coming out of recession, prices of commodity items like steel, non-ferrous, precious metals, rubber and petroleum products are expected to rise significantly. Whilst the Company continues to pursue cost reduction initiatives, increase in price of input materials could severely impact the Companys profitability to the extent that the same are not absorbed by the market
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through price increases and/or could have a negative impact on the demand in the domestic market. Government Regulations: Stringent emission norms and safety regulations could bring new complexities and cost increases for automotive industry, impacting the Companys business. WTO, Free Trade Agreements and other similar policies could make the market, more competitive for local manufacturers. In the international markets, many of which have stricter norms of regulations related to emission, safety, noise, technology etc, the Company competes with international players which have global brand image, larger financial capability and multiple product platforms. These factors may impact demand of the Companys products in international markets. Global Competition: The global automotive manufacturers present in India have been expanding their product portfolio and enhancing their production capacities. To counter the threat of growing global competition, the Company has planned to bridge the quality gap between its products and foreign offerings while maintaining its low cost product development/sourcing advantage. Exchange Rates: Operations are subject to risk arising from fluctuations in exchange rates with reference to countries in which they operate. These risks primarily relate to fluctuations of Pound to US Dollar, Japanese Yen and Euro, and fluctuations of Indian Rupee against Pound, US Dollar and Euro. They import capital equipment, raw materials and components and also sell their vehicles in various countries. These transactions are denominated in foreign currencies, primarily the U.S. dollar and Euro. Moreover, they have outstanding foreign currency denominated debt and hence are sensitive to fluctuations in foreign currency exchange rates. They have experienced and expect to continue to experience foreign exchange losses and gains on obligations denominated in foreign currencies in respect of their borrowings and foreign currency assets and liabilities due to currency fluctuations. Although they engage in currency hedging as per their policy in order to decrease their foreign exchange exposure, the weakening of rupee against the dollar or other major foreign currencies may have an adverse effect on their cost of borrowing and consequently may increase their

financing costs, which could have a significant adverse impact on their results of operations. New Project Execution: Intensifying competition, reducing product life cycles and breadth of the Companys product portfolio, necessitates the Company to continuously invest in new products, upgrades and capacity enhancement programme. Though the Company employs sophisticated techniques and processes to forecast the demand of new products yet the same is subject to margin of error. Timely introduction of new products, their acceptance in the market place and managing the complexity of operations across various manufacturing locations, would be the key to sustain competitiveness.
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