Assignment Financial Management

4/10/2013Manmeet SinghMBA Gen B

Submitted to :

Prof . Sumit Khemka

TATA MOTORS

Graphs of:

NET INCOME COMPARISON(in Crores)with Ashok Leyland & Eicher

2008 2009 2010 2011 20120.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

Ashok LeylandEicher MotorsTata Motors

Graph of

DIVIDEND COMPARISON (in Crores) with Ashok Leyland & Eicher

2008 2009 2010 2011 20120

200

400

600

800

1000

1200

1400

Ashok LeylandEicher MotorsTata Motors

Graph of

P/E ratio and comparison with Ashok Leyland & Eicher Motors

2008 2009 2010 2011 2012

0

10

20

30

40

50

60

70

80

90

Ashok LeylandEicher Motors

Tata Motors

Ashok LeylandEicher MotorsTata Motors

DIVIDEND YIELD and comparison with Ashok Leyland & Eicher Motors

2008 2009 2010 2011 2012

0

1

2

3

4

5

6

7

Ashok LeylandEicher Motors

Tata Motors

Ashok LeylandEicher MotorsTata Motors

DATA OF THE ABOVE CHARTS

NET INCOME COMPARISON (in Crores)with Ashok Leyland & Eicher

DIVIDEND COMPARISON (in Crores) with Ashok Leyland & Eicher

Ashok Leyland

Eicher Motors

Tata Motors

2008 199.77 55.6 578.43

2009 133.03 60.5 311.61

2010 199.55 70.5 859.05

2011 266.07 99.4 1,274.23

2012 266.07 112.23 1,280.70

P/E ratio and comparison with Ashok Leyland & Eicher Motors

Ashok Leyland

Eicher Motors

Tata Motors

2008 17.87 63.5 86.3

2009 14.7 64.65 84.3

2010 9.4 60.3 80.40

2011 12.4 48.3 67.22012 10.76 52.26 75.18

DIVIDEND YIELD and comparison with Ashok Leyland & Eicher Motors

Ashok Leyland

Eicher Motors

Tata Motors

2008 5.5 1.44 2.98

2009 6.33 1.23 3.4

2010 7 1.2 3.50

2011 6.2 1 2.342012 4.56 0.71 1.44

Ashok Leyland

Eicher Motors

Tata Motors

2008 8,165.15 71929,461.6

0

2009 6,241.11 410.5426,343.9

2

2010 7,777.37 498.9737,200.7

8

2011 11,623.29 760.4548,652.9

9

2012 13,526.30 1,116.3154,829.9

0

TATA MOTORS Capital Budgeting Decision

Tata Motors have been consistently paying dividends and hence keeping shareholder interests alive. Moreover, they have been busy establishing new plants to meet their commitment of Nano. The development of Nano itself must have forced them to incur heavy expenses in R&D.

Hence, overall the situation for Tata Motors is not in favor of Debt financing given that mortgage charges against such huge plant and machinery equipment plus the long term interest rates may add large burdens on their already “not so promising” fundamentals.

But, Purchase of Jaguar and Land Rover again has happened at more than 20% of their annual revenues which already must have put them into liquidity troubles. Hence, they may end up bending towards debt financing if they undergo financial distress in the near future.

Also, interest rates of debt financing from 2006 onwards have not been attractive. They have been performing quite well on the NYSE and the Bombay Stock Exchange (SENSEX).

However, their performance in 2009 will determine how much they can continue with equity financing. As per theories discussed above, increase in debt financing will affect their dividend payments as well which may lead to further reduction in equity component.