PROJECT ON

RATIO ANALYSIS OF TATA MOTORS

AS A PART OF
PARTIAL FULFULLMENT OF
MBA

SUBMITTED BY:
KRISHNA KEDIA (012014008)

BATCH:
MBA 2014-16 (BLOCK-I)

MODULE:
FINANCIAL ACCOUNTING

MODULE LEADER:
MRS. 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.

--Krishna Kedia














TABLE OF CONTENTS

Topic Page Number
Executive Summary
1
Industry Overview
2
Company Overview
3-5
Ratio Analysis
1. Liquidity Ratios
Current Ratio
Quick Ratio
2. Turnover Ratios
Fixed Asset Turnover Ratio
Current Asset Turnover Ratio
Working Capital Turnover Ratio
Capital Employed Turnover Ratio
3. Solvency Ratios
Debt-Equity Ratio
Proprietary Ratio
4. Profitability Ratios
Gross Profit Margin
Net Profit Ratio
5. ROI Ratios
Return on Asset
Return on Capital Employed
Return on Equity
EPS & DRP
6-27
Conclusion 28
References 29-31
Annexures 32-35



























EXECUTIVE SUMMARY
The automobile sector of any country contributes immensely towards national growth. Such is the
case in India where the Indian Automobile Industry accounts for almost 9% of the nations GDP.
Being the industry leader, Tata Motors has been the oldest and one of the most efficient performers
of this sector. An SBU owned by Tata Sons, Tata Motors has been one of the most preferred
options for the investors. Before making an investment, every investor would be interested in
knowing the past performance of the company, so as to predict their future returns and the risks
associated with the company. This report talks about the financial ratios of Tata Motors over the
period of last five years and tries to offer a birds eye view of the companys fundamentals till
date.
Tata Motors was not left unaffected by the global economic meltdown of 2007-08, which
overshadowed the automobile sector throughout the world. Since 2010-11, the performance of the
company has gone down substantially. One of the reasons was the drop in the sales by 24%, which
was caused due to an increases in the excise duty by the government. It was during this period
when Tata motors launched one of its most promising project, Tata Nano, which did not perform
as per the companys expectations. An increase in the fuel prices during this period added to the
companys woes, since it made the buyers more skeptical towards their purchases. The company
also made a big investments by acquiring Jaguar Land Rover during this period. The company did
bounce back after 2011, but has still struggling to build the momentum that they need to set
themselves to the path of profitability. The company has been struggling a little in terms of creating
assets for the business or generating profits for its investors. Still, the investors continue to show
faith in the company since the DPR of the company has been growing constantly. Thus, the
investors perceive it as a slow but steady growing stock which is bound to earn them great profits
if not immediately, but definitely. The company continues on this trail and looking at the current
performances of the company, it can been observed that the company will soon revive from the
impact of the economic depression and regain its momentum and again become one of the main
investment options for the potential investors.


INDUSTRY OVERVIEW
The Automotive industry is the key driver of any growing economy. A sound transportation system
plays a pivotal role in a countrys rapid economic and industrial development. The well-developed
Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles.
The automobile industry comprises automobile and auto component sectors. It includes passenger
cars; light, medium and heavy commercial vehicles; multi-utility vehicles such as jeeps, scooters,
motorcycles, three-wheelers and tractors; and auto components like engine parts, drive and
transmission parts, suspension and braking parts, and electrical, body and chassis parts.
Indias automotive industry is now worth $34 billion and expected to grow $145billion in another
ten years. The Indian automotive industry is growing at a very high rate with sales of more than
one million passenger vehicles per annum. The overall growth rate is 10-15 per cent annually.
India is the worlds second largest manufacturer of two-wheelers, fifth largest manufacturers of
commercial vehicles as well as largest manufacturer of tractors. It is the fourth largest passenger
car market in Asia and home to the largest motorcycle manufacturer. Major players in this sector
include Tata, Mahindra, Daewoo Motor India, Hyundai Motors India and General Motors India,
Maruti, Ashok Leyland, Bajaj, Hero Honda, Ford, Fiat and few other players.
The Indian auto components industry is worth $10 billion. Indigenous firms like Bharat Forge,
Sundaram Fasteners, Minda Industries and Gabrial India Ltd. are in the limelight. There is a boom
in the auto components segment because of strong demand and robust economy. Also, the industry
has strong forward and backward linkages with almost every other engineering segment. The
component production range includes engine parts 31%, drive transmission and steering parts
19%, suspension and braking parts 12%, electrical parts 10%, equipments 12%, body and chassis
9% and others 7%.
Indian companies are very optimistic. The Auto Components Manufacturers Association (ACMA)
along with McKinsey has pegged domestic demand for components at $20-25 billion in 2015 from
$1.4 billion in 2004-05. This would take the overall industry size to $40-45 billion by 2015 in
India. The Indian automotive industry has made rapid strides since de-licensing witnessing the
entry of several new manufacturers with state-of-the-art technology.
COMPANY OVERVIEW
Tata Motors was established in 1945 as Tata Engineering and Locomotive Co. Ltd. to manufacture
locomotives and other engineering products. It is India's largest automobile company, with
standalone revenues of Rs. 25,660.79 crores (USD 5.5 billion) in 200809. 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 23,000 employees are guided by the vision to be 'best in the manner in which they
operate best in the products they deliver and best in their value system and ethics.'
Tata Motors' presence indeed cuts across the length and breadth of India. Over 4 million Tata
vehicles ply on Indian roads, since the first rolled out in 1954. The company's manufacturing base
in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh),
Pantnagar (Uttarakhand) and Dharwad (Karnataka). Following a strategic alliance with Fiat in
2005, it has set up an industrial joint venture with Fiat Group Automobiles at Ranjangaon
(Maharashtra) to produce both Fiat and Tata cars and Fiat powertrains. The company is
establishing a new plant at Sanand (Gujarat). The 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, the first company from India's engineering sector to be listed in the New York Stock
Exchange (September 2004), has also emerged as an international automobile company. Through
subsidiaries and associate companies, Tata Motors has operations in the UK, South Korea,
Thailand and Spain. Among them is Jaguar Land Rover, a business comprising the two iconic
British brands that was acquired in 2008.
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 and Senegal.
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. With over 2,000 engineers and scientists, the company's Engineering
Research Centre, established in 1966, has enabled pioneering technologies and products. The
company today has R&D centers in Pune, Jamshedpur, Lucknow, in India, and in South Korea,
Spain, and the UK.
In January 2008, Tata Motors unveiled its People's Car, the Tata Nano, which India and the world
have been looking forward to. The Tata Nano has been subsequently launched, as planned, in India
in March 2009. A development, which signifies a first for the global automobile industry, the Nano
brings the comfort and safety of a car within the reach of thousands of families. The standard
version has been priced at Rs.100, 000 (excluding VAT and transportation cost).
Designed with a family in mind, it has a roomy passenger compartment with generous leg space
and head room. It can comfortably seat four persons. Its monovolume design will set a new
benchmark among small cars. Its safety performance exceeds regulatory requirements in India. Its
tailpipe emission performance too exceeds regulatory requirements. In terms of overall pollutants,
it has a lower pollution level than twowheelers being manufactured in India today. The lean
design strategy has helped minimize weight, which helps maximize performance per unit of energy
consumed and delivers high fuel efficiency. The high fuel efficiency also ensures that the car has
low carbon dioxide emissions, thereby providing the twin benefits of an affordable transportation
solution with a low carbon footprint.
The years to come will see the introduction of several other innovative vehicles, all rooted in
emerging customer needs. Besides product development, R&D is also focusing on environment
friendly technologies in emissions and alternative fuels.
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, highprecision tooling and plastic
and electronic components for automotive and computer applications, and automotive retailing
and service operations.
True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate
Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in
community and social initiatives on labor and environment standards in compliance with the
principles of the Global Compact. In accordance with this, it plays an active role in community
development, serving rural communities adjacent to its manufacturing locations.
AWARDS & ACCOLADES
Tata Motors among Indias most Trusted Brand in cars
Tata Motors wins award at the Bangkok International Motor Expo
Tata Motors Investor Relations ranked first in India
Nirmal Gram Puraskar awarded to Potka panchayat.
Tata Motors bags the NDTV Profit Business Leadership Award 2008
Tata Motors awarded the Top Exporter Trophy by EEPC
CVBU Pune wins Rajiv Gandhi National Quality Award for 2007.
PCBU bags Handa Golden Key Award.
Tata Motors receives Uptime Champion Award 2007
Aggregates Business, CVBU, bags 'Best Supplier Award' from ECEL
'NDTV Profit' Business Leadership Award
Tata Motors bags National Award for Excellence in Cost Management.
Tata Motors' TRAKIT bags silver award for 'Excellence in Design'
Tata Motors Pune CVBU has bagged the 'Golden Peacock National Quality Award
Tata Motors was awarded four prestigious honours, at the 'CNBC TV18 Autocar.
Tata Motors chosen as India's Most Trusted Brand in Cars.
Business today selects Mr. P.P. Kadle as India's Best CFO in 2005.
Pune Foundry Division bags prestigious Green Foundry Award.
Tata Motors is 'Commercial Vehicle Manufacturer of the Year'.
ACE bags 'Best Commercial Vehicle Design' at the BBCTop Gear Awards.
Jamshedpur bags National Energy Conservation Award for the fourth consecutive year. Tata
Motors bags the prestigious' CIIEXIM Bank award' for business excellence.
Tata Motors receives JRD QV awards for Business Excellence.
'Car Maker of the Year' Award for Tata Motors.
Tata Motors is 'Commercial Vehicle Manufacturer of the Year'.
TNS Voice of the Customer Award for Indica Diesel.
'CFO of the Year Award 2004' awarded to Mr Praveen P Kadle, Executive Director
Tata Motors wins the prestigious 'Corporate Platinum' Award Tata Motors wins 'Golden
Peacock Award' for Corporate Social Responsibility.
RATIO ANALYSIS
LIQUIDITY RATIOS
It is the ratio that measures a companys ability to fulfill its short term debt obligations or the
ability of a company to pay off its short term liability, if and when they take a fall.
In case of Liquidity Ration, higher the ratio, higher is the margin of safety to pay off its current
liabilities and other short term borrowings. Liquidity ration greater than 1, signposts its sound
financial health.
The liquidity ratios are an outcome of dividing cash and other liquid assets (current assets) by the
short term borrowings (current liabilities). They show the number of times the short term debt
obligations are covered by the cash and liquid assets. If the value is superior to 1, it means the
short term obligations are abundantly covered.
The most common Liquidity Ratios are Current Ratio and Acid Test Ratio/Quick Ratio. The
aforementioned ratios are readily being used by short term creditors, bankers, government
agencies, Bankruptcy analysts and mortgage originators. Using these ratios they analyze and
forecast the financial wellbeing of a company and determine their stand accordingly.
CURRENT RATIO
It is the ratio that measures a companys ability to meet its debts over the period of next 12 months,
by comparing the companys current assets and current liabilities.
Current Ratio = Current Assets / Current Liabilities
2010 2011 2012 2013 2014
Current Assets 5,939.67 8,923.19 9,137.51 6,735.93 5,305.38
Current Liabilities 16,909.30 16,271.85 20,280.82 16,580.47 13,334.13
Current Ratio 0.351266463 0.54838202 0.45054934 0.40625688 0.39787973


INTERPRETATION
With an industrial average of 1.23, the average (over 5 years) current ratio of Tata Motors is 0.4
which is fairly low in immediate comparison. The ideal current ratio for automobile sector in India,
for the last decade, has been between 0.88-1.4. A low figure in Current ratio does not necessarily
mean that the company is underperforming, though it may raise some financial concerns for the
stakeholders of the company and may make the company less attractive for the investors. However,
a strong operating cash flow and the slow cash conversion cycle of the company provide a
reasonable explanation for its Current Ratio being low. The aforementioned graph depicts that the
Current Ratio of Tata Motors saw a quantum jump in 2010-11 from 0.35 to 0.54. However, since
then it has been moving at an even pace of 0.4 until the last financial year.
ACID TEST RATIO / QUICK RATIO
It is the ratio that indicates the companys ability to cover all its current liabilities using its current
or short term assets, without selling its inventory. Ideally, the Quick Ratio should be 1:1, however,
it differs from sector to sector. Quick ratio specifies whether the assets that can be quickly
converted into cash are sufficient to cover current liabilities.
Quick Ratio = Liquid Assets / Liquid Liabilities
0
0.1
0.2
0.3
0.4
0.5
0.6
2010 2011 2012 2013 2014
Current Ratio
2010 2011 2012 2013 2014
Quick Assets 1442.85 2280.9 4549.28 4334.96 3004.08
Quick Liabilities 13334.13 16580.47 20280.82 16271.85 16909.3
Quick Ratio 0.10820728 0.13756546 0.2243144 0.26640855 0.17765845


INTERPRETATION
The aforementioned graph depicts that the company is far from what is considered an ideal figure
for quick ratio which is 1:1. However, considering the industry average of 0.19, the company has
not been doing too badly either. This shows that the company relies too much on inventory or other
assets to pay its short-term liabilities. It also shows that the company has fast moving inventories.
In comparison to its immediate competitor, Mahindra & Mahindra, whose average quick ratio is
0.8, the company is a little down played with an average of 0.18.




0
0.05
0.1
0.15
0.2
0.25
0.3
2010 2011 2012 2013 2014
Quick Ratio
TURNOVER RATIOS
Turnover ratios are also acknowledged as activity or efficiency ratios. It often refers to the
companys ability to translate different accounts within their balance sheets into cash or sales.
Companies will normally try to turn their manufacture into cash or sales as fast as possible because
this will, in general, lead to greater revenues. Such ratios are frequently used when performing
fundamental analysis of the company.
There are various types of Turnover Ratios, namely:-
1. Inventory turnover ratio
2. Debtors turnover ratio
3. Average collection period
4. Total assets turnover ratio
5. Fixed assets turnover ratio
6. Capital employed turnover ratio

FIXED ASSET TURNOVER RATIO
Fixed assets turnover ratio is also called as the ratio of sales to fixed assets. It indicates how
efficiently the fixed assets are being used by the company. It measures the efficiency with which
the company has been using its fixed assets to generate sales.
Fixed Asset Turnover Ratio = Net Sales / Fixed Assets
2010 2011 2012 2013 2014
Net Sales 35,373.29 47,088.44 54,306.56 44,765.72 34,319.28
Fixed Assets 16,436.04 17,475.63
19,056.19
20,208.54 21,169.43
Fixed Asset
Turnover Ratio
2.15217838 2.69452031 2.84981206 2.21518823 1.62117166


INTERPRETATION
Since there are no standard guidelines about the best level of Fixed Asset Turnover Ratio, it must
be compared over the years for the same company. 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. Since its purchase of Jaguar Land Rover in 2008, which
accounted for a huge overseas investment by the firm, the fixed asset turnover ratio arises from
just over 2. Subsequently, the figure skyrocketed until 2012 due to the overwhelming sales of Tata
Nano. It than took a nosedive due to a dip in the sales of automobile sector by 24% which hit the
company really bad. Further, the company also announce a major investment of 15000-2000 crores
in the heavy duty vehicle segment, which further pulled the figure for the fixed asset turnover ratio
to 1.6. However, this does not prove that the company has been performing badly since this ratio
is an arbitrary figure and not an absolute one.



0
0.5
1
1.5
2
2.5
3
2010 2011 2012 2013 2014
Fixed Asset Turnover Ratio
WORKING CAPITAL TURNOVER RATIO
It is a metric equating the reduction of working capital to generate of sales over a given period.
This provides some useful information as to how effectively a company is using its working capital
to generate sales. A company utilizes its working capital to fund operations and acquire inventory.
These operations and inventory are then converted into sales revenue for the company. The
working capital turnover ratio is used to analyze the relationship between the money used to fund
operations and the sales generated from these operations.
Working Capital turnover Ratio = Net Sales / Working Capital
2010 2011 2012 2013 2014
Net Sales 35,373.29 47,088.44 54,306.56 44,765.72 34,319.28
Working Capital 5,232.15 3,799.03 4,036.67 4,752.80 6,355.07
Working Capital
Turnover Ratio
6.76075609 12.3948587 13.4533068 9.41880996 5.40029929


0
2
4
6
8
10
12
14
16
2010 2011 2012 2013 2014
Working Capital Turnover Ratio
Series1
INTERPRETATION
The aforementioned graph shows an uneven working capital turnover ratio as recorded by the
company. In comparison to its immediate competitor, Mahindra & Mahindra, the company has a
fairly low value for its working capital turnover ratio. The primary reason for this is the
insufficiency of working capital with 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. Since 2012, 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.

CAPITAL EMPLOYED TURNOVER RATIO
The capital employed turnover ratio reveals the association between the shareholders' investment
in the business and the turnover that the management has been able to generate from it. A high
capital turnover ratio designates the ability of the organization to achieve supreme sales with least
amount of capital employed. Higher the capital turnover ratio better it is.
Capital Employed Turnover Ratio = Net Sales / Capital Employed
2010 2011 2012 2013 2014
Net Sales 35,373.29 47,088.44 54,306.56 44,765.72 34,319.28
Capital Employed 14,520.39 18,379.64 10,356.82 16,823.06 20,358.05
Capital Employed
Turnover Ratio
2.43611156 2.56198924 5.24355545 2.66097369 1.68578425

Capital Employed (Total Assets - Current Liabilities)
2010 2011 2012 2013 2014
Total Assets 31429.69 34651.49 30637.64 33403.53 33692.18
Current Liabilities
16,909.30 16,271.85 20,280.82 16,580.47 13,334.13
Capital Employed 14,520.39 18,379.64 10,356.82 16,823.06 20,358.05



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 Ratio.











0
1
2
3
4
5
6
2010 2011 2012 2013 2014
Capital Employed Turnover Ratio
Series1
SOLVANCY RATIOS
They measure the capacity of a company to compensate its long term debt and the interest on it.
Solvency ratios, help the business owner conclude the chances of the firm's long-term survival.
These ratios are of interest to long-term creditors and shareholders. These groups are concerned
with the long-term health and survival of business firms. Solvency ratios have to attest that
business can service their debt or pay the interest on their debt as well as pay the principal when
the debt matures.

DEBT-EQUITY RATIO
It is the ratio of total liabilities of a business to its shareholders' equity. It is a leverage ratio and
measures the degree to which the assets of the business are financed by the debts and the
shareholders' equity of a business.
Debt-Equity Ratio = Total Debts / Shareholders Fund
2010 2011 2012 2013 2014
Debt 16,625.91 14,638.19 11,011.63 14,268.69 14,515.53
Shareholder's
Fund
14,779.15 20,013.30 19,626.01 19,134.84 19,176.65
Debt Equity
Ratio
1.12495712 0.731423 0.561073 0.745692 0.756938

Shareholder's Fund (Share Capital + Reserves)
2010 2011 2012 2013 2014
Share Capital 570.6 637.71 634.75 638.07 643.78
Reserves
14,208.55 19,375.59 18,991.26 18,496.77 18,532.87
Shareholder's Fund
14,779.15 20,013.30 19,626.01 19,134.84 19,176.65


INTERPRETATION
The lower the value of debt equity ratio, the better it is since it a figure highlighting the amount of
assets provided by the shareholders and creditors. Thus it indicates the soundness of long-term
financial policies of the company. In comparison to an industrial average of 2.61, the Debt-Equity
ratio of Tata Motors if fairly low since it was highest recorded at 1.2 in 2010 and came down
substantially to 0.56 in 2012. Tata Motors achieved the aforementioned results by slashing down
their total debt figures from 16,625 crores to 11,011 crores. An increase in the sales of Jaguar Land
Rover by 136% is what propelled the company to achieve such overpowering results. Since then,
the Debt-Equity Ratio rose to 0.74 due to drop in sales of automobile in Indian markets due to
increase in excise duty which led to a drop in the sales by 24%.

PROPREITARY RATIO
Also known as Equity Ratio or the Net Worth to Total Assets Ratio, it is the ratio of shareholders'
funds to total assets. A high ratio indicates that the firm has adequate amount of equity to upkeep
the functions of the business.
Proprietary Ratio = Shareholders funds / Total Assets

0
0.2
0.4
0.6
0.8
1
1.2
2010 2011 2012 2013 2014
Debt Equity Ratio
Series1
2010 2011 2012 2013 2014
Shareholder's Equity
570.6 637.71 634.75 638.07 643.78
Total Assets
31429.69 34651.49 30637.64 33403.53 33692.18
Proprietary Ratio 0.01815481 0.018404 0.020718 0.019102 0.019108


INTERPRETATION
The Proprietary Ratio for Tata Motors is very low which indicates that the business may be making
use of too much debt or trade payables, rather than equity, to support operations.








0.0165
0.017
0.0175
0.018
0.0185
0.019
0.0195
0.02
0.0205
0.021
2010 2011 2012 2013 2014
Propreitory Ratio
Series1
PROFITABILITY RATIOS
It is a measure of profitability, which measures a company's performance. Profitability is the
ability to make a profit, and a profit is what is left over from income earned after the company
has deducted all costs and expenses related to earning the income
Types of Profitability Ratios:-
Common profitability ratios used in analyzing a company's performance include gross profit
margin (GPM), operating margin (OM), return on assets (ROA), return on equity (ROE), return
on sales (ROS), and return on investment (ROI).
GROSS PROFIT MARGIN
It shows the proportion of profits spawned by the sale of products or services, before selling and
administrative expenses. In addition, it reveals the capability of a business to create sellable
products in a cost-effective way. The ratio is of great significance, especially when traced on a
trend line, to see if a business can continue to provide products to the marketplace for which
customers are willing to pay.
Gross Profit ratio = Gross Profit / Net Sales
2010 2011 2012 2013 2014
Gross Profit Margin 8.47 7.01 4.73 -0.22 -8.59


-10
-8
-6
-4
-2
0
2
4
6
8
10
2010 2011 2012 2013 2014
Gross Profit Margin
Series1
INTERPRETATION
A business's ultimate goal is to raise its profit margins. However, decreasing the gross profit
margin temporarily may be beneficial in the long run. The company may decrease its gross profit
margin by lowering the cost of the goods it sells or by using higher quality, and thus more
expensive, materials to make the goods. Lower prices attract new customers, which may eventually
raise profit margins. Likewise, higher quality goods retains customers, which also can raise profit
margins in the future.

NET PROFIT RATIO
It is the ratio of after-tax profits to net sales. It discloses the remaining profit after all costs of
production, administration, and financing have been subtracted from sales, and income taxes
documented. As such, it is one of the finest measures of the overall performance of a firm,
particularly when shared with an evaluation of how well it is spending its working capital.
Net Profit Ratio = Net Profit / Net Sales
2010 2011 2012 2013 2014
Net Profit
2240.08 1811.82 1242.23 301.81 334.52
Net Sales
35373.29 47088.44 54306.56 44765.72 34319.28
Net Profit Ratio 0.063327 0.038477 0.022874 0.006742 0.009747



0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
2010 2011 2012 2013 2014
Net Profit Ratio
Series1
INTERPRETATION
Owing to the poor performance of the automotive sector in India, the Net Profit Ratio has taken a
nosedive for Tata Motors. Since 2010, it has come down from 6% to 2% in 2012 and further
decreased to less than 1%. The paramount reason was the decrease in the sales by 24% due to a
hike in excise duty. Since 2009, the post-recession era, the economy is in a downturn causing it to
take a plunge which further led to reduction of sale and increase in the Input costs. Thus, the profit
margin of the company took a great hit.
























OVERALL PROFITABILITY / ROI RATIOS
This ratio is also named as Return on Investments (ROI) or Return on Capital Employed
(ROCE). It shows the percentage of return on the total capital employed in the business. This ratio
processes the relationship between net profit before interest and tax and capital employed.
The objective of calculating this ratio is to find out how efficiently the long term funds supplied
by the creditors and the shareholders have been used.

RETURN ON ASSETS
It is the ratio of annual net income to total assets of a business during a financial year. It processes
efficiency of the business in using its assets to produce net income. It 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.
Return on Assets = Net Income / Total Assets
2010 2011 2012 2013 2014
Net Profit After Tax
2240.08 1811.82 1242.23 301.81 334.52
Total Assets
31429.69 34651.49 30637.64 33403.53 33692.18
Return on Assets 0.07127274 0.0522869 0.040546 0.00903527 0.00992871


0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
2010 2011 2012 2013 2014
Return On Assets
Series1
INTERPRETATION
The aforementioned graph shows that the Return on Assets has constantly gown down since 2010
to 2014. It was mainly because of the fact that the net income of the company fell substantially
from 2,240 crores in 2010 to 334 crores in 2014 due to the poor performance of the automotive
sector, drop in the sales and increase in the excise duty.


RETURN ON CAPITAL EMPLOYED
Return on capital employed or ROCE is a profitability ratio that processes how efficiently a
company can spawn profits from its capital employed by equating net operating profit to capital
employed.
ROEC = EBIT / Capital Employed
2010 2011 2012 2013 2014
EBIT
4075.79 3580.22 2559.65 1562.69 311.72
Capital Employed
31,405.06 34,651.49 30,637.64 33,403.53 33,692.18
Return On Capital
Employed
0.13 0.10 0.08 0.05 0.01
Capital Employed (Equity Share Capital + Preference Share Capital + Reserves + Long
Tem Debts - Fictitious Assets)
2010 2011 2012 2013 2014
Equity Share Capital 570.6 637.71 634.75 638.07 643.78
Preference Share Capital 0 0 0 0 0
Long Term Debts 16625.91 14638.19 11011.63 14268.69 14515.53
Reserves
14,208.55 19,375.59 18,991.26 18,496.77 18,532.87
Capital Employed
31,405.06 34,651.49 30,637.64 33,403.53 33,692.18



INTERPRETATION
In the wake of demand slump due to prolonged slowdown in the economy, the company has not
been able to make adequate profits. Weak consumer sentiment, subdued infrastructure activity,
tight financing environment with high interest rate continued to impact the performance of the
automobile industry and the company. Though the profits have been dropping, the capital
employed has held its position firmly. This shows that the investors and other financial institutions
that have pooled in money, have positive sentiments regarding the company, which again reflects
the strong goodwill and strong fundamentals of the company. ROEC has come down from 13% to
almost 1% within a span of five years. Similar is the situation with the other automobile giants in
the Indian automotive sector since no player is immune from such macroeconomic factors
affecting their business.

RETUEN ON EQUITY
This ratio determines the amount of net income reverted as a percentage of shareholders equity.
Return on equity processes a corporation's profitability by enlightening how much profit a
company creates with the money shareholders have invested.

ROE = (NPAT Preference Dividend) / Equity Shareholders Fund
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
2010 2011 2012 2013 2014
Return on Capital Employed
Series1
2010 2011 2012 2013 2014
N.P.A.T - Preference
Dividend 2240.08 1811.82 1242.23 301.81 334.52
Equity Shareholder's Fund
14,779.15 20,013.30 19,626.01 19,134.84 19,176.65
Return On Equity 0.15 0.09 0.06 0.02 0.02

Shareholder's Fund (Share Capital + Reserves)
2010 2011 2012 2013 2014
Share Capital 570.6 637.71 634.75 638.07 643.78
Reserves
14,208.55 19,375.59 18,991.26 18,496.77 18,532.87
Shareholder's Fund
14,779.15 20,013.30 19,626.01 19,134.84 19,176.65


INTERPRETATION
The aforementioned graph depicts that the ROE of the company has come down substantially,
showing no signs of taking off again in the near future. The predominant reason behind this is the
dropping profits of the company, spearheaded by the prolonged economic depression and setback
of the Indian stock markets. The company has a beta of 1.61 which makes it very vulnerable under
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
2010 2011 2012 2013 2014
Return on Equity
Series1
adverse market conditions. A setback in the sales, increase in the excise duty for automobiles,
underperformance by Nano project is what led to a reduced figure of ROE. To revive from this
position, the company needs to increase their sales turnover, widen their margins on sales, avail
cheaper leverage and cut back on their taxes.


EARNING PER SHARE
EPS (Earning per Share) measures the profit earned per share by the shareholders. It is the portion
of a company's profit allotted to each outstanding share of common stock. Earnings per share
serves as a pointer of a company's profitability. Higher the value of EPS, higher is the
attractiveness of the stock to the investors.

EPS = (NPAT Preference Dividend) / Total No. of Equity Shares Outstanding

2010 2011 2012 2013 2014
N.P.A.T - Preference Dividend
2240.08 1811.82 1242.23 301.81 334.52
No. Of Equity Shares
Outstanding 5,705.58 6,346.14 31,735.47 31,901.16 32,186.80
EPS 0.39 0.29 0.04 0.01 0.01

0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
2010 2011 2012 2013 2014
Earning Per Share
Series1
INTERPRETATION
From the aforementioned graph, it can be concluded that the EPS has come down from 0.39 to 0.1
since 2010 to 2014. There could be two possible reasons for decrease in the EPS of a company,
namely, drop in the profit levels or increase in the average number of equity shares outstanding.
Such is the case with Tata Motors, since profits in 2014 have come down to 15% of what it was in
the year 2010 and the average number of equity shares outstanding have increases six folds since
then. This is what has pushed down the levels foe EPS of the company. However, it does not prove
that the company has been performing badly, since EPS is an arbitrary figure which needs to be
compared both within the company and with the competitors, t6aking into consideration the factors
affecting the companys performance.

DIVIDEND PAYOUT RATIO
It is the ratio that depicts the percentage of earnings paid back to the shareholders in the form of
dividend. The amount that is held back by the company is called retained earnings, which is used
for further development of the company.
DPR = Dividend per Share / EPS
2010 2011 2012 2013 2014
Dividend Per Share
0.1506 0.2008 0.0404 0.0202 0.02015
EPS
0.39 0.29 0.04 0.01 0.01
Dividend Payout Ratio 0.39 0.69 1.01 2.02 2.02

0.00
0.50
1.00
1.50
2.00
2.50
2010 2011 2012 2013 2014
Dividend Payout Ratio
Series1
INTERPRETATION
From the aforementioned graph it can be concluded that the since 2010 the DPR has increases
substantially. The company has come a long way since then and the profits of the company have
not been stable either. Still, the company managed to ensure that its investors receive the returns
that they expect and deserve. This makes the company highly attractive in the eyes of the potential
investors who are looking to make an investment in growth stocks. This ratio is the opposite of the
plough-back ratio, in which the company re-invests the earnings that it makes. Since it a slow
growing company, investors expect a higher rate of DPR and the management has made sure that
the expectations of the investors are met by increasing the DPR from 0.69 to 2.02 within a span of
five years.





















RATIO ANALYSIS SUMMARY

RATIO 2009-10 2010-11 2011-12 2012-13 2013-14
Current Ratio 0.35 0.55 0.45 0.40 0.39
Quick Ratio
0.108 0.137 0.224 0.266 0.177
Fixed Asset
Turnover Ratio
2.15 2.69 2.84 2.21 1.62
Working Capital
Turnover Ratio
6.76 12.39 13.45 9.41 5.40
Capital Employed
Turnover Ratio
2.43 2.56 5.24 2.66 1.68
Debt-Equity Ratio 1.12 0.73 0.56 0.74 0.75
Proprietary Ratio 0.018 0.018 0.02 0.019 0.019
G. P. Margin 8.47 7.01 4.73 -0.22 -8.59
N. P. Ratio 0.063 0.038 0.022 0.006 0.009
Return on Asset 0.07 0.05 0.04 0.009 0.009
Return on Capital
Employed
0.13 0.10 0.08 0.05 0.01
Return on Equity 0.15 0.09 0.06 0.02 0.02
Earnings Per Share
(EPS)
0.39 0.29 0.04 0.01 0.01
Dividend Payout
Ratio (DPR)
0.39 0.69 1.01 2.02 2.02

CONCLUSION

The Indian Automobile Industry has grown in leaps and bounds in the last decade. This is
particularly attributed to the rise in the income of the middle class, which consequently led to a
rise in the demand of personalized vehicles. Tata motors was one of the companies that occupied
a huge share of the pie. The company was doing fine doing until 2007, after which it saw a setback
due to the global economic meltdown. Such was the case with the other companies falling under
Indian Automobile Sector. However, since them, the company has revived and has come a long
way. The performance of the company has pepped up from where it was in 2009, which is quite
evident from the Ratio Analysis conducted in the aforementioned sections. This shows that the
fundamentals of the company are strong and the company is bound to perform better in the
foreseeable future.
The company may not be in the most ideal situation present since it is still feeling the after-shocks
of the economic meltdown on 2007-08 and has not been able to revive completely. The core
financial figures like the sales revenue, investment and the total liability of the company had been
impacted to a great extent which had sent a ripples effect, disturbing the other figures. However,
the downfall in the companys performance was not due to any internal factor but because of an
adverse market condition and since then the company has been trying to take off and has been
successful to some extent.
Even after all this, the management of the company has ensured that the shareholders of the
company are not at any disadvantage by disseminating the earnings evenly. Even though the net
profit has come down by 30%, the DPR ratio has been rising constantly. This is what has attracted
more and more investors towards the company. In comparison to its competitors, Tata Motors has
been performing formidably well and will continue to do so owing to its strong fundamentals and
work culture.



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ANNEXURES


Standalone Balance Sheet ------------------- in Rs. Cr. -------------------
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 643.78 638.07 634.75 637.71 570.60
Equity Share Capital 643.78 638.07 634.75 637.71 570.60
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves 18,532.87 18,496.77 18,991.26 19,375.59 14,208.55
Revaluation Reserves 0.00 0.00 0.00 0.00 24.63
Networth 19,176.65 19,134.84 19,626.01 20,013.30 14,803.78
Secured Loans 4,450.01 5,877.72 6,915.77 7,708.52 7,742.60
Unsecured Loans 10,065.52 8,390.97 4,095.86 6,929.67 8,883.31
Total Debt 14,515.53 14,268.69 11,011.63 14,638.19 16,625.91
Total Liabilities 33,692.18 33,403.53 30,637.64 34,651.49 31,429.69
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths


Application Of Funds
Gross Block 26,130.82 25,190.73 23,676.46 21,002.78 18,416.81
Less: Accum. Depreciation 10,890.25 9,734.99 8,656.94 7,585.71 7,212.92
Net Block 15,240.57 15,455.74 15,019.52 13,417.07 11,203.89
Capital Work in Progress 6,355.07 4,752.80 4,036.67 3,799.03 5,232.15
Investments 18,458.42 19,934.39 20,493.55 22,624.21 22,336.90
Inventories 3,862.53 4,455.03 4,588.23 3,891.39 2,935.59
Sundry Debtors 1,216.70 1,818.04 2,708.32 2,602.88 2,391.92
Cash and Bank Balance 226.15 462.86 1,840.96 2,428.92 612.16
Total Current Assets 5,305.38 6,735.93 9,137.51 8,923.19 5,939.67
Loans and Advances 4,374.98 5,305.91 5,832.03 5,426.95 5,248.71
Fixed Deposits 0.00 0.00 0.00 0.00 1,141.10
Total CA, Loans & Advances 9,680.36 12,041.84 14,969.54 14,350.14 12,329.48
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 13,334.13 16,580.47 20,280.82 16,271.85 16,909.30
Provisions 2,708.11 2,200.77 3,600.82 3,267.11 2,763.43
Total CL & Provisions 16,042.24 18,781.24 23,881.64 19,538.96 19,672.73
Net Current Assets -6,361.88 -6,739.40 -8,912.10 -5,188.82 -7,343.25
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 33,692.18 33,403.53 30,637.64 34,651.49 31,429.69

Contingent Liabilities 12,419.30 14,981.11 15,413.62 19,084.08 3,708.33
Book Value (Rs) 59.58 59.98 61.84 315.36 259.03

Standalone Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Income
Sales Turnover 34,319.28 44,765.72 54,306.56 47,088.44 38,173.39
Excise Duty 0.00 0.00 0.00 0.00 2,800.10
Net Sales 34,319.28 44,765.72 54,306.56 47,088.44 35,373.29
Other Income 3,262.00 1,662.33 -11.16 275.85 1,220.86
Stock Adjustments -303.35 143.60 623.84 354.22 606.63
Total Income 37,277.93 46,571.65 54,919.24 47,718.51 37,200.78
Expenditure
Raw Materials 26,040.59 33,764.40 41,081.79 35,047.05 25,366.12
Power & Fuel Cost 392.09 484.66 550.89 471.28 362.62
Employee Cost 2,877.69 2,837.00 2,691.45 2,294.02 1,836.13
Other Manufacturing Expenses 428.74 425.76 0.00 0.00 1,289.60
Selling and Admin Expenses 0.00 0.00 0.00 0.00 2,126.10
Miscellaneous Expenses 5,156.80 5,679.52 6,428.72 4,965.17 1,707.06
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 -740.54
Total Expenses 34,895.91 43,191.34 50,752.85 42,777.52 31,947.09
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Operating Profit -879.98 1,717.98 4,177.55 4,665.14 4,032.83
PBDIT 2,382.02 3,380.31 4,166.39 4,940.99 5,253.69
Interest 1,337.52 1,387.76 1,218.62 1,383.70 1,246.25
PBDT 1,044.50 1,992.55 2,947.77 3,557.29 4,007.44
Depreciation 2,070.30 1,817.62 1,606.74 1,360.77 1,033.87
Other Written Off 0.00 0.00 0.00 0.00 144.03
Profit Before Tax -1,025.80 174.93 1,341.03 2,196.52 2,829.54
Extra-ordinary items 0.00 0.00 0.00 0.00 0.00
PBT (Post Extra-ord Items) -1,025.80 174.93 1,341.03 2,196.52 2,829.54
Tax -1,360.32 -126.88 98.80 384.70 589.46
Reported Net Profit 334.52 301.81 1,242.23 1,811.82 2,240.08
Total Value Addition 8,855.32 9,426.94 9,671.06 7,730.47 6,580.97
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 648.56 645.20 1,280.70 1,274.23 859.05
Corporate Dividend Tax 93.40 79.03 183.02 192.80 132.89
Per share data (annualised)
Shares in issue (lakhs) 32,186.80 31,901.16 31,735.47 6,346.14 5,705.58
Earning Per Share (Rs) 1.04 0.95 3.91 28.55 39.26
Equity Dividend (%) 100.00 100.00 200.00 200.00 150.00
Book Value (Rs) 59.58 59.98 61.84 315.36 259.03



Cash Flow ------------------- in Rs. Cr. -------------------
Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 334.52 301.81 1242.23 1811.82 2240.08
Net Cash From Operating Activities 2463.46 2258.44 3653.59 1505.56 6586.03
Net Cash (used in)/from
Investing Activities
2552.91 991.50 144.72 -2521.88 -11848.29
Net Cash (used in)/from Financing Activities -5033.81 -4045.69 -4235.59 1648.42 5348.49
Net (decrease)/increase In Cash and Cash
Equivalents
-6.89 -714.07 -432.50 635.87 86.23
Opening Cash & Cash Equivalents 205.57 919.64 1352.14 716.27 630.04
Closing Cash & Cash Equivalents 198.68 205.57 919.64 1352.14 716.27