PROJECT REPORT ON TATA MOTORS Ratio Analysis

Submitted to:Prof. F M A khan Submitted By: Abhishek Vashishth Amol Srivastava Ashish Kumar SECTION-B

ABOUT TATA MOTORS

Tata Motors Limited is India's largest automobile company, with consolidated revenues of Rs. 92,519 crores (USD 20 billion) in 200910. 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.

ABOUT ASHOKA LAYLAND For over five decades, ashok Layland has been the technology leader in Indias commercial vehicle industry, moulding the country's commercial vehicle profile by introducing technologies and product ideas that have gone on to become industry norms. From 18 seater to 82 seater double-decker buses, from 7.5 tonne to 49 tonne in haulage vehicles, from numerous special application vehicles to diesel engines for industrial, marine and genset applications, ashok leyland offers a wide range of products.Eight out of ten metro state transport buses in india are from ashok leyland. With over 60 million passengers a day, ashok leyland buses carry more people than the entire Indian rail network!

ABOUT INDUSTRY

The Automobile industry in India is the seventh largest in the world with an annual production of over 2.6 million units in 2009. In 2009, India emerged as Asia's fourth largest exporter of automobiles, behind Japan, South Korea and Thailand. By 2050, the country is expected to top the world in car volumes with approximately 611 million vehicles on the nation's roads. Following economic liberalization in India in 1991, the Indian automotive industry has demonstrated sustained growth as a result of increased competitiveness and relaxed restrictions. Several Indian automobile manufacturers such as Tata Motors, Maruti Suzuki and Mahindra and Mahindra, expanded their domestic and international operations. India's robust economic growth led to the further expansion of its domestic automobile market which attracted significant India-specific investment by multinational automobile manufacturers. In February 2009, monthly sales of passenger cars in India exceeded 100,000 units.

PROFITABILITY RATIO 1).OPERATING PROFIT MARGIN(%)

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10 TATA ASHOKA INDUSTRY 10.68 10.08 8.15 9.7 9.32 7.73 10.53 10.09 8.04 6.71 7.66 6.05 11.74 10.23 8.56

Analysis: - Operating profit margin indicates how effective a company is at controlling the cost and expenses associated with their normal business operations. From the above we can see that the operating profit of Tata in year 06 to 08 is more than its competitor Ashoka and the industry too, it means that Tata has a higher operating margin than others in the industry is generally doing better as long as the gains didn't come by piling on debt or taking highly risky speculations with shareholders' money. But in the year 09 the operating profit margin fall short may be because of the recession in the Indian economy. In 10 Tatas operating profit margin becomes highest as compared to the past years and the industry and Ashoka.

2).GROSS PROFIT MARGIN (%)

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 12.21 10.08 8.41 11.19 9.66 7.99 8.26 7.86 5.10 3.30 4.77 3.81 8.84 7.49 6.21

Analysis: - The Gross Profit Margin Ratio Indicates How Efficiently A Business Is Using Its Materials And Labour In The Production Process. It Shows The Percentage Of Net Sales Remaining After Subtracting Cost Of Goods Sold. A High Gross Profit Margin Indicates That A Business Can Make A Reasonable Profit On Sales, As Long As It Keeps Overhead Costs In Control. From the above we can see that, In the year2006, 2007,2008 & 2010 Tata is having more gross profit margin than Ashoka and the industry which means that Tata is making responsible profit on sales in the given years. But in the year 2009 the gross profit margin of the total industry declines including Tata and ashoka, it may be due to recessionary trends in the Indian marker. 3).NET PROFIT MARGIN(%)
MAR'06 TATA ASHOKA INDUSTRY 7.73 6.05 7.63

MAR'07 MAR'08 MAR'09 MAR'10

6.94 6.96 3.77 6.28

5.94 5.83 3.04 5.66

4.50 4.57 3.99 5.5

Analysis:- Net profit margin comperes the net income of the firm with total sales achieved. So from above we can observe that from 06 to08 that is having more net profit margin than Ashoka and the industry too because Tata is more effective in converting the revenue into actual profit. But in the year 09 the net profit margin of the total industry decreases including Tata and Ashoka because of the recession in the indian economy, but again in 10 Tata is having more net profit margin then Ashoka and industry. But as compared to the previous years it is still less.

4).RETURN ON CAPITAL EMPLOYED(%)

TATA ASHOKA INDUSTRY

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

26.47 25.82 18.96 6.41 9.66

21.95 23.82 23.12 8.78 12.89

26.73 21.08 18.83 10.16 7.55

Analysis:- The return on capital employed ratio tells us how much profit the company Earns from the investment the shareholder have made in the company. A measure of return the company is realising from its capital. The return of capital employed represents the efficiency with which capital being utilized to generate revenue. From above we observe that in year 06 and 07 Tata is having more return on capital employed then Ashoka this shows that Tata is more efficient in converting the capital in generating revenue than Ashoka but in the year08 the ROCE start decreasing and becomes very less in year 09. In the year 10 the ROCE again starts increasing and in the same year the ROCE of Tata is more than the industry.

5).RETURN ON NET WORTH(%)

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 27.74 23.57 35.81 27.96 23.58 22.91 25.98 22.30 20.82 8.09 9.05 13.04 14.96 18.27 11.95

Analysis: -Return on net worth ratio is the ratio of net income after taxes to total end of the year net worth. This ratio indicates the return on stockholder's total equity. From the graph we can see that in 2006 Tata is having good returns on stock holders equity as compared to the Ashoka but not as good as the industry. In year 2007 and 2008 Tata is having excellent returns as compared to Ashoka and the industry. In 2009 there is the decreasing trend in the whole industry. In 2010 this ratio again starts increasing but Tata is lacking behind its competitor Asho

LIQUDITY AND SOLVENCY RATIO

6).CURRENT RATIO
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10 TATA ASHOKA INDUSTRY 1.07 0.85 1.02 0.86 0.86 0.94 0.64 0.82 3.54 0.44 4.24 1.77 0.62 1.19 0.97

Analysis:-Current ratio shows the short term financial soundness of the business .higher the ratio means better capacity to meet current obligation. The ideal current ratio is 2:1. From above u interpret that in 2006 Tata is more financially sound then the industry and its competitor Ashoka. In 2007 Tata and Ashoka is having same ability to meet their current obligations, but the industry is having more current ratio than both. In 2008, 2009 &2010 Tata is lacking in the current ratio in comparison to the industry but Ashoka is having advantage over other

7).QUICK RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 0.97 0.72 0.85 0.92 0.75 0.91 0.66 0.70 0.79 0.58 4.27 1.65 0.46 1.14 0.87

Analysis: - This quick ratio is fairly stringent measure of liquidity. It is based on those current assets which are highly liquid quick ratio of 1:1 is considered as ideal. Higher the quick ratio betters the short term financial position. From above we can see that Tata is not able to maintain the ideal quick ratio i any of the years taken in to consideration. Ashoka is having highest short term financial position in 2009 as compared to the whole industry in any of the year taken in to consideration.

8).DEBT EQUTY RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 0.53 0.39 0.46 0.59 0.47 0.77 0.80 0.43 0.77 1.06 0.01 0.88 1.11 0.03 1.10

Analysis: - this ratio judges the long term financial position and soundness of the financial policies of the firm. In general lower the debts equity ratio higher the degree of the protection enjoyed by the lenders. From above we can see that from year 2006 to 2008 Tata give good protection to it lenders. But not more than its competitor Ashoka who is providing very good amount of protection to its lenders in all the years taken in to consideration except in year 2009 in which it was very excellent. In 2010 Tata is not able to provide good level of protection to its lenders as compared to the others in the industry.

MANGEMENT EFFICIENCY RATIO

9).INVENTORY TURNOVER RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10 TATA ASHOKA INDUSTRY 10.32 10.34 8.32 11.02 11.77 9.11 14.44 12.63 10.46 13.47 42.03 16.93 13.07 19.61 7.96

Analysis:- This ratio measures how fast stock is moving through the firm and generate sales .The higher the ratio, the more efficient management of inventory and vice versa. From the above we can see that Tatas inventory turnover ratio is increasing at increasing rate over the years taken into consideration. In year 2008 Tata is having the highest ratio in comparison with others. In the year 2009 ashoka shows the highest ratio among all the years taken in to consideration and among the whole industry. In 2008 Tata inventory management is the most efficient than others.

10).DEBTORS TURNOVER RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 26.31 11.97 13.70 35.60 12.83 16.75 30.08 13.42 15.90 19.11 9.51 10.35 18.02 73.71 25.63

Analysis:- The ratio indicates the economy and efficiently in collection the amount due from debtors. Higher the ratio, better it is since it indicates that debt are being collected more quickly. From 2006 t0 2009 Tatas debtors turnover ratio shows that Tata is very good in recovering debts more quickly as compared to the others in the industry. But in the year 2010 Ashoka has shown the highest debtors turnover ratio among all the years taken in to consideration and any one in the industry.

1).FIXED ASSETS TURNOVER RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 5.00 6.29 11.97 5.01 8.21 11.09 2.69 4.34 6.05 1.88 5.88 5.69 1.93 2.94 2.54

Analysis: -

Fixed asset ratio is a financial ratio of net sales to fixed assets. The fixed-asset turnover ratio measures a company's ability to generate net sales from fixed-asset investments - specifically property, plant and equipment (PP&E) - net of depreciation. A higher fixed-asset turnover ratio shows that the company has been more effective in using the investment in fixed assets to generate revenues. From the above we can say that the investment fixed asset utilization in generating sales is not as good as the industry in all the years taken in to consideration. But if we talk about Tata alone then Tata is not using its investment in fixed assets for generating sales as effectively it can.

12).TOTAL ASSET TURNOVER RATIO

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 2.40 2.64 3.80 2.49 2.99 3.12 2.06 2.70 2.69 1.02 1.54 1.72 1.13 1.65 1.36

Analysis: - The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. Companies with low profit margins tend to have high asset turnover, those with high profit margins have low asset turnover. So from the above we can see that in 2006 & 2007 industry is having high asset turnover ratio than both Tata and Ashoka. From this we can assume that Tata is having higher profit margin then the industry or also little bit more than Ashoka. In 2008, 2009 & 2010 the total asset turnover ratio are less than that in 2006 & 2007.this shows that the profit margins of Tata are increasing over the years.

CASH FLOW INDICATOR RATIO

13).DIVIDEND PAYOUT RATIO NET PROFIT
MAR'06 MAR'07 MAR'08 MAR'09 MAR'10 TATA ASHOKA INDUSTRY 37.13 55.66 33.91 35.34 51.31 69.36 32.51 49.80 42.76 34.52 81.91 46.33 44.28 54.92 47.43

Analysis :- Dividend pay-out ratio net profit is the fraction of net income a firm pays to its stockholders in dividends Form above we can see that Tata is giving dividends to its shareholders out of net profit which is more than the industry but not more than Ashoka in year 2006 and from 2007 to 2010 Tata paid good amount of net profit as dividends but it is less than both the industry and Ashoka

14).DIVIDEND PAYOUT RATIO CASH PROFIT

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 26.73 40.16 26.40 26.16 38.23 47.02 24.02 36.11 27.77 17.94 42.24 28.54 29.02 37.06 31.10

Analysis :- From the above we can see that Tata is giving less amount of cash dividend to its shareholders as compared to Ashoka in the years taken into consideration. In 2006 Tatas dividend pay-out ratio is more than the industry. And from 2007 to 2010 this ratio of Tata motors is very less than the entire industry

15).EARNING PER SHARE

MAR'06 MAR'07 MAR'08 MAR'09 MAR'10

TATA ASHOKA INDUSTRY 39.94 2.68 35.73 49.65 3.33 22.69 52.63 3.53 23.48 19.48 1.43 14.70 39.26 3.18 19.16

Analysis:-EPS.Total earnings divided

the number of shares outstanding. Companies often use a weighted average of shares outstanding over the reporting term. Tata is having highest earning per share over the period under consideration. In 2009 the earning per share of tat declines heavily by 37% may be due to the recessionary trends in the market. Its competitor Ashoka in having very less earning per share in all the years taken into consideration.

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