PROJECT ON

RATIO ANALYSIS OF TATA MOTORS

AS A PART OF
PARTIAL FULFULLMENT OF
MBA

SUBMITTED BY:
SHAHTAJ KHAN

BATCH:
MBA 2016-18 (BLOCK-I)

MODULE:
FINANCIAL ACCOUNTING AND ANALYSIS

MODULE LEADER:
Dr. MEGHNA DANGI

ACKNOWLEDGEMENT
I take this opportunity to express my profound gratitude and deep regards to my guide (Mrs.
Meghna Dangi) for her exemplary guidance, monitoring and constant encouragement
throughout the project.
I am obliged to my batch mates for the valuable information provided by them in their
respective fields. I am grateful for their cooperation during the period of my assignment.

--Shahtaj Khan

TABLE OF CONTENTS
About Tata Motors
Company Profile
Ratio Analysis
LIQUIDITY RATIOS

Current Ratio

Quick Ratio

TURNOVER / ACTIVITY RATIOS

Fixed Asset Turnover Ratio

Working Capital Turnover Ratio

Capital Employed Turnover Ratio

PROFITABILITY RATIOS

Gross Profit

Net Profit ratio

Return on Equity

Return on Asset

Asset Turnover Ratio

Profit Margin Ratio

LONGTERMSOLVENCY RATIOS

Debt Equity Ratio

Liability to Equity Ratio

CAPITAL MARKET STANDING

Price Earnings Ratio

Dividend Yield

Limitations
Conclusion
Bibliography

4
6
7
8

10

13

19

21

25
26
27

ABOUT TATA MOTORS

Tata entered the commercial vehicle sector in 1954 after forming a joint venture with
Daimler-Benz of Germany. After years of dominating the commercial vehicle market in
India, Tata Motors entered the passenger vehicle market in 1991 by launching the Tata Sierra,
a multi utility vehicle. Tata subsequently launched the Tata Estate (1992; a station wagon
design based on the earlier 'TataMobile' (1989), a light commercial vehicle), the Tata Sumo
(1994; LCV) and the Tata Safari (1998; India's first sports utility vehicle).
Tata launched the Indica in 1998, the first fully indigenous Indian passenger car. Although
initially criticized by auto analysts, its excellent fuel economy, powerful engine, and an
aggressive marketing strategy made it one of the best-selling cars in the history of the Indian
automobile industry. A newer version of the car, named Indica V2, was a major improvement
over the previous version and quickly became a mass favourite. Tata Motors also successfully
exported large numbers of the car to South Africa. The success of the Indica played a key role
in the growth of Tata Motors.
In 2004, Tata Motors acquired Daewoo's South Korea-based truck manufacturing unit,
Daewoo Commercial Vehicles Company, later renamed Tata Daewoo.
On 27 September 2004, Tata Motors rang the opening bell at the New York Stock Exchange
to mark the listing of Tata Motors.
In 2005, Tata Motors acquired a 21% controlling stake in the Spanish bus and coach
manufacturer Hispano Carrocera Tata Motors continued its market area expansion through
the introduction of new products such as buses (Starbus and Globus, jointly developed with
subsidiary Hispano Carrocera) and trucks (Novus, jointly developed with subsidiary Tata
Daewoo).
In 2006, Tata formed a joint venture with the Brazil-based Marcopolo, Tata Marcopolo Bus,
to manufacture fully built buses and coaches.

In 2008, Tata Motors acquired the English car maker Jaguar Land Rover, manufacturer of the
Jaguar and Land Rover from Ford Motor Company.
In May 2009, Tata unveiled the Tata World Truck range jointly developed with Tata
Daewoo; the range went on sale in South Korea, South Africa, the SAARC countries, and the
Middle East at the end of 2009.
Tata acquired full ownership of Hispano Carrocera in 2009.
In 2009, its Lucknow plant was awarded the "Best of All" Rajiv Gandhi National Quality
Award.
In 2010, Tata Motors acquired an 80% stake in the Italian design and engineering company
Trilix for 1.85 million. The acquisition formed part of the company's plan to enhance its
styling and design capabilities.
In 2012, Tata Motors announced it would invest around 6 billion in the development of
Futuristic Infantry Combat Vehicles in collaboration with DRDO.
In 2013, Tata Motors announced it will sell in India, the first vehicle in the world to run on
compressed air and dubbed "Mini CAT".
In 2014, Tata Motors introduced first Truck Racing championship in India "T1 Prima Truck
Racing Championship".
On 26 January 2014, the Managing Director Karl Slym was found dead. He fell from the
22nd floor to the fourth floor of the Shangri-La Hotel in Bangkok, where he was to attend a
meeting of Tata Motors Thailand.
On 2 November 2015, Tata Motors announced Lionel Messi as global brand ambassador at
New Delhi , to promote and endorse passenger vehicles globally

COMPANY PROFILE
Tata Motors is part of the USD 100 billion Tata group founded by Jamsetji Tata in 1868.
Sustainability and the spirit of giving back to society is a core philosophy and good
corporate citizenship is strongly embedded in our DNA. Tata Motors is Indias largest
automobile company. Where they try to bring to the customer a proven legacy of thought
leadership with respect to customer-centricity and technology. By driving the transformation
of the Indian commercial vehicle landscape by offering customers leading edge auto
technologies, packaged for power performances and lowest life-cycle costs. New passenger
cars are designed for superior comfort, connectivity and performance. What keeps TATA
Motors at the forefront of the market is our focus on future-readiness and our pipeline of
tech-enabled products. Design and R&D centres located in India, the UK, Italy and Korea
strive to innovate new products that achieve performances that will fire the imagination of
GenNext customers. Across the globally dispersed organisation that TATA Motors is today,
there is one thing that energises and drives all our people and our activities and that is their
mission to be passionate in anticipating and providing the best vehicles and experiences that
excite our customers globally.

RATIO ANALYSIS

LIQUIDITY RATIOS

Current Ratio

Quick Ratio

TURNOVER / ACTIVITY RATIOS

Fixed Asset Turnover Ratio

Working Capital Turnover Ratio

Capital Employed Tunover Ratio

PROFITABILITY RATIOS

Gross Profit

Net Profit ratio

Return on Equity

Return on Asset

Asset Turnover Ratio

Profit Margin Ratio

LONG TERMSOLVENCY RATIOS

Debt Equity Ratio

Liability to Equity Ratio

CAPITAL MARKET STANDING

Price Earning Ratio

Dividend Yield

LIQUIDITY RATIOS

CURRENT RATIO:
Current Ratio = Current Assets / Current Liabilities

Year
Total
Current
Assets
Total
Current
Liabilities
Current Ratio

March'16

March'15

March'14

March'13

March'12

10,705.91

8,572.97

5,305.38

6,739.06

10,134.96

17,751.06
0.6

20,370.63
0.42

13,334.13
0.39

18,797.53
0.48

21,104.61
0.62

Current Ratio
0.7
0.6
0.5
0.4
Current Ratio

0.3
0.2
0.1
0
March'16 March'15 March'14 March'13 March'12

INTERPRETATION
The higher the ratio, the more protected are the short term creditors. This indicates that the
company is in a position to pay off its creditors. If the ratio is less than ideal which is 2:1,
then the working capital is less than required.
In 2016, 2015, 2014, 2013&2012 the ratio has gone up in 2016 to 0.62:1 respectively. The
Current ratio of company is almost stable but can be a big threat to the company which will
harm their day to day activities of the company in long run.

QUICK RATIO :
Quick Ratio = (Current Assets (Stock + Prepaid Expense))/Current Liabilities
Year
Total
Current
Assets
Inventories
Quick Assets
Quick Liabilities
Quick Ratio

March'16

March'15

March'14

March'13

March'12

10,705.91

8,572.97

7,674.97

6,739.06

10,134.96

4,902.20
5,803.71
17,751.06
0.33

4,802.08
3,770.89
20,370.63
0.19

4,672.81
3,004.08
16,909.30
0.177

3,862.53
2,876.53
18,797.53
0.27

4,455.03
5,679.93
21,101.61
0.41

Quick Ratio
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
March'16

March'15

March'14

March'13

March'12

INTERPRETATION
Liquid Ratio is a better test of financial liquidity because it places more emphasis on
immediate conversion of assets into cash than the current ratio. A liquid ratio of 1:1 is
considered satisfactory and ideal. Here, the liquid ratio is below ideal ratio which indicates
below satisfactory performance. The overall result for the ratio is not satisfactory. Till 2016
companies liquidity ratio is under control because the maximum level they have reached is
0.33 that is of previous financial year 2015-2016. So can say that companys financial
liquidity position is better.

TURNOVER / ACTIVITY RATIO

FIXED ASSET TURNOVER :
Fixed Asset Turnover Ratio = Net Sales / Fixed Assets

Year
Net Sales
Fixed Assets
Fixed
Assets
Ratio

Turnover

March'16
42,369.82
22,244.86

March'15 March'14 March'13

36,294.74 34,319.28 44,765.72
21,824.02 21,169.43 20,208.54

March'12
54,306.56
19,056.19

1.904

1.663

2.849

1.621

2.215

Fixed Assets Turnover Ratio

3
2.5
2
fixed Assets Turnover
Ratio

1.5
1
0.5
0
1

INTEPRETATION
The company has not shown a symmetrical performance in accordance to the industrial
performance, with an average fixed asset turnover ratio of 4.44. However, a low figure of
fixed asset turnover ratio can be traced down to the fact that either the sales of the company
are fairly low or the company has made a huge investment recently, which is indeed the case
with Tata Motors.

10

WORKING CAPITAL TURNOVER RATIO :

Working Capital Turnover Ratio = Net Sales / Working Capital

Year

March'16

March'15 March'14 March'13

March'12

Net Sales

42,369.82

36,294.74

34,319.28

44,765.72

54,306.56

Working Capital

5,232.15

3,799.03

6,355.07

4,752.80

4,036.67

8.09

9.55

5.4

9.41

13.45

Working Capital Turnover

Ratio

Working Capital Turnover Ratio

14
12
10
8

Working Capital Turnover

Ratio

6
4
2
0
1

INTERPRETATION
The aforementioned graph shows an uneven working capital turnover ratio as recorded by the
company. Their current liabilities account for almost double of their current assets. Also the
accounts receivables of the company is very high in comparison to its competitors. The
numbers took a nosedive, proving the in-efficiency of the management in utilizing its
working capital to generate sales and poor operational activities of the company.

11

CAPITAL EMPLOYED TURNOVER RATIO :

Capital Employed Turnover Ratio = Net Sales / Capital Employed

Year

March'16

March'15 March'14 March'13

March'12

Net Sales

42,369.82

36,294.74

34,319.28

44,765.72

54,306.56

Capital Employed

31,762.07

24,743.03

20,358.05

16,823.06

10,356.82

1.33

1.46

1.685

2.66

5.243

Capital Employed Tunover

Ratio

Capital Employed Tunover Ratio

6
5
4
Capital Employed Tunover
Ratio

3
2
1
0
1

INTERPRETATION
The aforementioned graph shows a steady performance of the company in terms of Capital
Employed Turnover Ratio, except in year 2012. In 2012 the net sales of the company was
excessively high and was mainly propelled by the overwhelming increase of 136% in the
sales made by Jaguar Land Rover. Owing to this, Tata Motors was able to record a peak in its
Capital Employed Turnover

12

PROFITABILITY RATIO
GROSS PROFIT:
Gross Profit = Gross Profit / Net Sales * (100)
Or
Gross Profit = Net Sales + Closing Stock Purchases Direct Expense
Or
Gross Profit = Net Sales - COGS

Year

March'16

Gross Profit
-0.32
Margin

March'15

March'14

March'13

March'12

-10.58

-8.59

-0.22

4.73

Gross Profit Margin

6
4
2
0
-2

-4

5
Gross Profit Margin

-6
-8
-10
-12

INTERPRETATION
Gross profit ratio shows the relation between gross profit and sales. That means how much
proportion of gross profit in sales.

13

NET PROFIT RATIO:

Net Profit Ratio = Net Profit / Net Sales * 100

Year
Net Profit

March'16

March'15

March'14

March'13

March'12

0.55

-13.05

0.0097

0.0067

0.0228

Net Profit
2
0
-2

-4
-6

Net Profit

-8
-10
-12
-14

INTERPRETATION:
Net profit ratio shows the relationship of PAT with the sales. This ratio is in 2016, it is
0.55%, in 2015 it is -13.05%, in 2014 it is 0.0097%, in 2013 it is 0.0067%, in 2012 it is
0.228% which means PAT is always near to 3% to 5%. Because of Tax charges is increasing
year by year.

14

RETURN ON EQUITY:
Year
Net Profit
Equity
Return
Equity

on

March'16
2,77,299.90
679.18

March'15
2,66,840.71
643.78

March'14
2,35,517.45
643.78

March'13
1,92,057.88
638.07

March'12
1,68,020.44
634.75

408.28

414.49

365.835

300.998

264.703

Return on Equity
450
400
350
300
250
200
150
100
50
0

Return on Equity

Interpretation:
Return on equity is a measure of profitability that calculates how many Rupees of profit a
company generates with each rupee of shareholders' equity. Here return on equity is moderate
to high.

15

RETURN ON ASSET:
Year
Net Profit
Total Asset
Return on Asset

March'16
2,77,299.90
52,426.25
5.289

March'15
2,66,840.71
49,943.17
5.342

March'14
2,35,517.45
49,943.17
4.715

March'13
1,92,057.88
49,734.42
3.861

March'12
1,68,020.44
52,184.77
3.219

Return on Asset
6
4
2
0

Return on Asset

Interpretation:
Return on assets is an indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings. It is 5.289 in 2016 as compared to 3.219 in 2012

16

ASSET TURNOVER RATIO:

Year
Net Sales
Total Assets
Asset Turnover Ratio

March'16
42,369.82
52,426.25
0.808

March'15
36,294.74
49,943.17
0.726

March'14
34,288.11
49,943.17
0.686

March'13
44,765.72
49,734.42
0.9

March'12
54,306.56
52,184.77
1.04

Asset Turnover Ratio

1.2
1
0.8
0.6
0.4

Asset Turnover Ratio

0.2
0

Interpretation:
Asset turnover ratio is the ratio of the value of a company's sales or revenues generated
relative to the value of its assets. The Asset Turnover ratio can often be used as an indicator
of the efficiency with which a company is deploying its assets in generating revenue. It keeps
fluctuating every year as assets keep increasing.

17

PROFIT MARGIN RATIO:

Year
Net Profit
Net Sales
Profit Margin

March'16
2,77,299.90
42,369.82
6.54

March'15
2,66,840.71
36,294.74
7.35

March'14
2,35,517.45
34,288.11
6.86

March'13
1,92,057.88
44,765.72
4.29

March'12
1,68,020.44
54,306.56
3.09

3,00,000.00
2,50,000.00
2,00,000.00
1,50,000.00
1,00,000.00
50,000.00
0.00
March'16

March'15

March'14

March'13

March'12

Interpretation:
The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a
profitability ratio that measures the amount of net income earned with each of sales generated
by comparing the net income and net sales of a company.

18

LONG TERM SOLVENCY RATIO

DEBT EQUITY:
Debt Equity = Debt / Equity * 100
Debt = Long Term Debts
Equity Shareholders Fund
Year
Debt equity

Mar 16
17.9241

Mar 15
19.258

Mar 14
6.14806

Mar 13
34.1147

Mar 12
14.9435

Debt equity
35
30
25
20

Debt equity

15
10
5
0
Mar 16

Mar 15

Mar 14

Mar 13

Mar 12

INTERPRETATION
The debt ratio is fluctuating very frequently. As we can see in diagram that it is going up and
down year by year and at highest level at 2016. Because decrease in CE more than total debt.
In Tata motors Capital Employed is more than the Total debts. So the ratio is decreasing from
in last financial year.

19

LIABITLITY TO EQUITY:

Year
Total Liabilities
Total Equity
Liability to Equity
Ratio

March'16 March'15 March'14 March'13 March'12

36,384.89 34,920.69 33,669.31 33,380.22 30,613.89
679.18
643.78
643.78
638.07
634.75
53.571

54.243

52.299

52.314

48.229

Liability to Equity Ratio

55
54
53
52
51
50
49
48
47
46
45

Liability to Equity Ratio

Interpretation:
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated
by dividing a company's total liabilities by its stockholders' equity. The D/E ratio indicates
how much debt a company is using to finance its assets relative to the amount of value
represented in shareholders' equity

20

CAPITAL MARKET STANDINGS

PRICE EARNING RATIO:

Year
Market Price Per
Share
Earningg Per Share
Price Earning Ratio

March'16 March'15 March'14 March'13 March'12

10

10

10

10

10

0.68
14.705

-14.72
-0.679

-15
-0.666

1.03
9.708

0.93
10.752

Price Earning Ratio

16
14
12
10
8

Price Earning Ratio

6
4
2
0
-2

Interpretation:
P/E is short for the ratio of a company's share price to its per-share earnings. As the name
implies, to calculate the P/E, you simply take the current stock price of a company and divide
by its earnings per share (EPS): P/E Ratio = Market Value per Share. The price has increased
from negative to positive which is relatively high.

21

DIVIDEND YIELD:

Year
Dividend Per Share
Market Price Per
Share
Dividend Yield

March'16 March'15 March'14 March'13 March'12

25
0
0
100
100
10

10

10

10

10

2.5

10

10

Dividend Yield
10
9
8
7
6
5
4
3
2
1
0

Dividend Yield

Interpretation:
Dividend expressed as a percentage of a current share price. The firm has a yield of 2.5.

22

Standalone Balance Sheet

Mar 16

Mar 15

Mar 14

Mar 13

Mar 12

12 mths

12 mths

12 mths

12 mths

12 mths

Total Share Capital

679.18

643.78

643.78

683.07

623.89

Equity Share Capital

679.18

643.78

643.78

683.07

623.89

Share Application Money

2.29

Preference Share Capital

Reserves

21,666.03

14,195.94

18,510.00

18,473.46

Networth

22,345.21

14,839.72

19,153.78

19,111.53

Secured Loans

3,717.42

4,803.26

4,450.01

5,877.72

6,915.77

Unsecured Loans

10,322.26

15,277.71

10,065.52

8,390.97

4,095.86

Total Debt

14,039.68

20,080.97

14,515.53

14,268.69

11,011.63

Total Liabilities

36,384.89

34,920.69

33,669.31

33,380.22

30,613.89

Gross Block

29,204.83

27,973.79

26,130.82

25,190.73

23,676.46

Less: Revaluation Reserves

22.87

22.87

22.87

23.31

23.75

Less: Accum. Depreciation

13,440.86

12,190.56

10,890.25

9,734.99

8,656.94

Net Block

15,741.10

15,760.36

15,217.70

15,432.43

14,995.77

Capital Work in Progress

6,480.89

6,040.79

6,355.07

4,752.80

4,036.67

Investments

18,711.46

16,987.17

18,458.42

19,934.39

20,493.55

Inventories

4,902.20

4,802.08

3,862.53

4,455.03

4,588.23

Sundry Debtors

1,568.46

1,114.48

1,216.70

1,818.04

2,708.32

Cash and Bank Balance

452.08

944.75

226.15

462.86

1,840.96

Total Current Assets

6,922.74

6,861.31

5,305.38

6,735.93

9,137.51

Loans and Advances

4,547.19

4,270.67

4,374.98

5,305.91

5,832.03

Total CA, Loans & Advances

11,469.93

11,131.98

9,680.36

12,041.84

14,969.54

Current Liabilities

13,393.95

12,282.33

13,334.13

16,580.47

20,280.82

Provisions

2,624.54

2,717.28

2,708.11

2,200.77

3,600.82

Total CL & Provisions

16,018.49

14,999.61

16,042.24

18,781.24

23,881.64

Net Current Assets

-4,548.56

-3,867.63

-6,361.88

-6,739.40

-8,912.10

Total Assets

36,384.89

34,920.69

33,669.31

33,380.22

30,613.89

Sources Of Funds

Application Of Funds

23

Standalone Profit & Loss account

Mar 16

Mar 15

Mar 14

Mar 13

Mar
12

Sales Turnover

46,646.67

39,524.34

37,758.00

49,319.73

59,220.94

Excise Duty

4,276.85

3,229.60

3,469.89

4,554.01

4,914.38

Net Sales

42,369.82

36,294.74

34,288.11

44,765.72

54,306.56

Other Income

1,769.71

1,477.66

3,293.17

1,672.00

-11.16

Stock Adjustments

-22.94

878.82

-371.72

143.60

623.84

Total Income

44,116.59

38,651.22

37,209.56

46,581.32

54,919.24

Raw Materials

30,043.29

28,367.83

26,040.59

33,764.40

41,081.79

Power & Fuel Cost

402.36

395.88

392.09

484.66

550.89

Employee Cost

3,026.75

3,091.46

2,877.69

2,837.00

2,691.45

424.61

437.47

428.74

425.76

234.25

6,134.33

6,118.40

5,088.43

5,689.19

6,194.47

Total Expenses

40,031.34

38,411.04

34,827.54

43,201.01

50,752.85

Operating Profit

2,315.54

-1,237.48

-911.15

1,708.31

4,177.55

PBDIT

4,085.25

240.18

2,382.02

3,380.31

4,166.39

Interest

1,481.11

1,611.68

1,337.52

1,387.76

1,218.62

PBDT

2,604.14

-1,371.50

1,044.50

1,992.55

2,947.77

Depreciation

2,453.75

2,603.22

2,070.30

1,817.62

1,606.74

Profit Before Tax

150.39

-3,974.72

-1,025.80

174.93

1,341.03

PBT (Post Extraord Items)

150.39

-3,974.72

-1,025.80

174.93

1,341.03

Tax

-83.84

764.23

-1,360.32

-126.88

98.80

234.23

-4,738.95

334.52

301.81

1,242.23

9,988.05

10,043.21

8,786.95

9,436.61

9,671.06

61.00

0.00

648.56

645.20

1,280.70

12.00

0.00

93.40

79.03

183.02

33,956.80

32,186.80

32,186.80

31,901.16

31,735.47

0.69

-14.72

1.04

0.95

3.91

25.00

0.00

100.00

100.00

200.00

65.80

46.10

59.51

59.91

61.77

Expenditure

Other
Manufacturing
Expenses
Miscellaneous
Expenses

Reported
Profit
Total
Addition

Net
Value

Equity Dividend
Corporate
Dividend Tax
Per share data
(annualised)
Shares in issue
(lakhs)
Earning Per Share
(Rs)
Equity Dividend
(%)
Book Value (Rs)

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LIMITATIONS

The current financial situation of its recently acquired firms like

Corus and Land Rover-Jaguar is very big headache for the company and it should be
back to the track in the near future.
The high ratio of debt equity ratio is also weakness of the company.
The small car segment is still not good for the company due to maruti-suzuki so, it
need to tap this section also.
The CV segment is becoming highly competitive by new player like Volvo,and rival
M&M are coming with new products to cater the TATA in the market as the rural
area has given thumps up to M&M during this year

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CONCLUSION
Tata Motors is far more aggressive option. The company is an automobile manufacturer with
a massive market share in India and control of the global Land Rover and jaguar brands. The
company is highly leveraged and demand for automobile is highly dependent on economic
conditions. However, it is made shift from focusing on its domestic market to operating on a
global scale. Tata motors should take benefit from taking knowledge and skills from its
global brands and applying that in its domestic business. This should allow Tata to compete
more effectively as the Indian car market expands with an expanding customer class. It
should also allow the company to branch out its home market nameplates. It seems that Tata
motors have this recipe for success and only time will tell where this car manufacturer will
head next.

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BIBLIOGRAPHY
http://www.moneycontrol.com/
http://www.tatamotors.com/

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