tata motors

Financial Analysis of Tata Motors

Indian Institute Of Technology, Roorkee

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



Contents

Acknowledgement ........................................................................................................... 4

Disclaimer ........................................................................................................................ 5

1. Executive Summary .................................................................................................. 6

2. 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. Balance Sheet .................................................................................................. 26

4.2. Income Statement ............................................................................................ 27

4.3. Profit Analysis ................................................................................................... 28

4.4. Comparative Analysis ....................................................................................... 31

4.4.1. Capital Structure............................................................................................ 31

4.4.2. Asset Composition ........................................................................................ 32

4.4.3. Income Statement ......................................................................................... 32

5. Jagaur Land Rover………………………………………………………………………..34

6. Tata Nano…………………………………………………………………………………..39

7. Some Key Ratios .................................................................................................... 41

7.1. P-E Ratio .......................................................................................................... 41

7.2. Net Profit Margin ............................................................................................... 41



7.3. ROIC & ROE .................................................................................................... 42

74. Asset & Inventory Turnover Ratios ................................................................... 42

8. Conclusion .............................................................................................................. 43

9. Future Outlook ……………………………………………………………………………44



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



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.



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, Auditor‟s Report and Director‟s 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.



2.INTRODUCTION

2.1 TATA GROUP

Founded by Jamsetji Tata in 1868, Tata‟s 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. Two-

thirds 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



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.



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 2005–2006,

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 world‟s 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.



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 Ashok Leyland Hero Honda Bajaj Auto

Tata Motors Tata Motors Bajaj Auto Piaggio

Mahindra &

Mahindra

Eicher Motors TVS Mahindra &

Mahindra

Hindustan Motors Swaraj Mazda Royal Enfield

Motors

TVS Motors

Honda Volvo Kinetic Motors Tata Motors

Toyota MAN LML India Force Motors

Volkswagen ITEC Suzuki Motors –

General Motors Scania Yamaha Motors –

Ford Mercedes-Benz – –

Audi Hyundai – –



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 customer-

desired offerings through leading edge R&D. The company today has R&D centre‟s in



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.



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



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.



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.



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



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



January 21

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, India‟s 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 entry-

level 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.



Indigo CS (Compact Sedan), world‟s 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



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 India‟s 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.



2.5 Corporate Structure



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



COMMERCIAL VEHICLES

TABLE: SALES FIGURES (MILLION UNITS) FROM 2006-2010

FY 05-06 FY 06-07 FY 07-08 FY 08-09 FY 09-10

Industry 391166 517317 558977 415724 582538

Tata Motors

245022

(62.6%)

334238

(64.7%)

352785

(63.2%)

265373

(63.8%)

373842

(64.2%)

Ashok

leyland

61655

(15.7%)

83094

(16.06%)

83307

(14.9%)

54431

(13.09%)

63926

(10.9%)

Others

84489

(21.7%)

99985

(19.24%)

122885

(21.9%)

95920

(23.11%)

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



Delhi Transport Corporation (DTC) in 2009-10, in addition to 650 buses supplied in the

previous year.

The Company‟s 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 FY 06-07 FY 07-08 FY 08-09 FY 09-10

Industry 1318933 1575235 1750347 1521421 1899144

Tata Motors

209107

(15.8%)

246042

(16.5%)

232864

(13.3%)

207512

(13.6%)

260020

(13.7%)

Maruti Suzuki

561822

(42.6%)

673924

(42.78%)

764842

(43.6%)

792167

(52%)

1018365

(53.6%)

Others

548004

(41.6%)

655269

(41.62%)

752641

(43.1%)

521742

(34.4%)

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 Indica‟s 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.



4. FINANCIAL ANALYSIS

4.1. BALANCE SHEET

Mar 06 Mar 07 Mar 08 Mar 09 Mar 10

Reserves and

Surplus

5154.2

6484.34

7453.96

11716.1

14394.87

Gross Block 7971.55 8775.8 10830.83 13905.17 18416.81

Investments 2015.15 2477 4910.27 12968.13 22336.9

Net current assets 2545.95 2784.05 -296.38 -943.82 -5834.61

Total Assets 9096.45 11665.72 15095.74 26425.64 33100.02


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



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


Gross sales 24293 31884 33093 28599 38364

% sales growth - 31.2% 3.79% -13.57% 34.14%

Less excise duty 3401 4349 4363 2938 2771

Net sales 20891 27535 28730 25660 35593

Other Income 0 245 483 925 1853



Total income 20891 27780 29214 26586 37446

% income growth - 32.9% 5.16% -8.99% 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.



4.3 PROFIT ANALYSIS


Gross sales 24293 31884 33093 28599 38364

% sales growth - 31.2% 3.79% -13.57% 34.14%

Total income 20891 27780 29214 26586 37446

% income growth - 32.9% 5.16% -8.99% 40.8%

Total expenditure 18022 24221 25638 23908 31414

%change in

expenditure - 34.39% 5.85% -6.74% 31.39%

Profit before tax 2868 3558 3575 2678 6031

%change in operating

profit - 24.05% 0.48% -25.09% 125.20%


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



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 05-

06

FY 06-07 FY 07-08 FY 08-09 FY 09-10

Tata Motors 56778 67639 65968 34570 99145

Ashok

Leyland

32732 44129 46931 19000 42367



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 |

Tata Motors

Maruti

Suzuki

Ashok

Leyland Tata Motors

Maruti

Suzuki

Ashok

Leyland

Share Capital 570.6 144.5 133.03

1.81 1.14 2.24

Reserves and surplus 14,394.87 11,690.6 3,535.72

45.57 92.37 59.43

Secured loans 7,742.6 26.5 711.57

24.51 0.21 11.96

Unsecured loans 8,883.31 794.9 1568.87

28.12 6.28 26.37

TOTAL LIABILITIES 31,591.38 12,656.5 5,949.14

100.00 100.00 100.00

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

Maruti

Suzuki

Ashok

Leyland

Tata

Motors

Maruti

Suzuki

Ashok

Leyland

Net Block 11,203.89 5,024.70 4,249.56 35.47 39.7 71.43

Capital WIP 5,232.15 387.60 561.47 16.56 3.06 9.44

Investments 22,336.90 7,176.16 326.15 70.71 56.7 5.48

Net Deferred tax -1,508.64 -137 -384.54 -4.78 -1.08 -6.46

Net Current Assets -5,672.92 204.6 1,191.38 -17.6 1.62 20.03

TOTAL ASSETS 31,591.38 12,656.5 5,949.19 100.00 100.00 100.00


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 | Common Size Statement |

Tata

Motors

Maruti

Suzuki

Ashok

Leyland

Tata

Motors

Maruti

Suzuki

Ashok

Leyland

Sales Turnover 38,364 31,947 8,035 100.00 100.00 100.00

Raw Materials 24,905.83 22,363.50 5,463.49 64.92 70.00 68.00

Power & Fuel Cost 362.62 216.6 44.47 0.9452 0.6779 0.5534

Employee Cost 1,807.76 538 667.26 4.71 1.68 8.30

Other Manufacturing

Expenses

1,806.02 308.9 90.35 4.71 0.97 1.12



Selling and

Administration

Expenses

1,929.42 2,122.37 642.58 5.03 6.64 8.00

Profit before Tax 2,829.54 3,592.5 544.77 7.38 11.24 6.78


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.



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 TML‟s 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 benefits from component sourcing, low cost engineering and design

services.



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.



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 Company‟s 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 2007 2008 2009 2010

No. of units(‘000) 292 125 167 194

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 third-

largest 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.



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, 4-

wheeled 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



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.



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 2006-07 2007-08 2008-09 2009-10

Tata Motors 7% 7% 4% 6%

Ashok Leyland 9.08% 8.23% 5.26% 7.82%

Maruti Suzuki 5.27% 2.80% 5.8% 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 2004-05 2005-06 2006-07 2007-08 2008-09

ROIC 26.51 26.63 24.97 7.76 13.94

ROE 27.60 27.85 25.87 8.18 14.97


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 2005-06 2006-07 2007-08 2008-09 2009-10

Asset Turnover 2.30 2.36 1.90 0.97 1.08

Inventory Turnover 10.38 11.01 11.86 11.51 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.



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 Maruti‟s 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.



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 Company‟s strengths in the design and

development of products for the base of the pyramid, namely, addressing the often-

unserved 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 Company‟s

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



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 under-

employment 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.



International Business: India continues to be a cost competitive source for the

automotive industry globally, both for vehicles and components. India‟s

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 Company‟s 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

Company‟s profitability to the extent that the same are not absorbed by the market



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 Company‟s 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

Company‟s 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 Company‟s 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.

tata motors

Documents

tata motors business

profit analysis

tata nano

tata groups

competitor analysis

comparative analysis

roorkee page

ragini rathi students