A STUDY ON

FINANCIAL PERFORMANCE ANALYSIS

TATA MOTORS LIMITED

A Project report submitted to
Prof: Lisha Dawan

Submitted By

Deepa Chandirrasekar

IIPM GURGAON – SS09-11

Profitability Ratios

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 1
1. Return on Investment (ROI)/Return on Capital Employed
[Operating Profit/Capital Employed]

ROI = Operating Profit x 100

Share Capital + Reserves & Surplus + Long Term Loans

Year 2008 2007 2006 2005

ROI 25.88% 32.43% 33.78% 35.32%

40.00%
35.00%
30.00%
25.00%
20.00% ROI
15.00%
10.00%
5.00%
0.00%

Return On Investments

2. Return On Share Holders Funds

ROSF = Net Profit after Tax & Interest x 100

Share Holders Funds

Year 2008 2007 2006 2005

ROSF 25.88% 27.85% 27.61% 30.09%

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 2
 31.00%
30.00%
29.00%
28.00%
27.00% ROSF
26.00%
25.00%
24.00%
23.00%

Return On Shareholders Funds

3. Return On Total Assets

ROTA = Net Profit after Tax & Interest x 100

Total Assets

Year 2008 2007 2006 2005

ROTA 14.37% 17.59% 18.04% 18.72%

Return On Total Assets

20.00%

15.00%

10.00%

5.00%

0.00%
Year

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 3
 4. Return On Gross Capital Employed

ROGC = Net Profit before Tax & Interest x 100

Total Assets Excluding Fictitious Assets

Year 2008 2007 2006 2005

ROGC 21.26% 27.04% 27.63% 28.51%

Return On Gross Capital Employed

30.00%

20.00%

10.00%

0.00%
Year

5. Earning Per Share

EPS = Net Profit after Tax – Preference Divident x 100

No.Of Equity share

Year 2008 2007 2006 2005

EPS 52.63 49.65 39.93 34.19

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 4
 Equity Per Share

60

40

20

0
Year

6. Price Earning Ratio

PER = Market Price Per Equity Share x 100

Earning Per share

Year 2008 2007 2006 2005

PER 7.60 8.06 10.02 11.70

Price Earning Ratio

15

10

0
Year

7. Gross Profit Ratio

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 5
 GPR = Gross Profit x 100

Net Sales

Year 2008 2007 2006 2005

GPR 29.61% 30.47% 32.01% 32.34%

Gross Profit Ratio

33.00%
32.00%
31.00%
30.00%
29.00%
28.00%
Year

8. Net Profit Ratio

NPR = Net Profit x 100

Net Sales

Year 2008 2007 2006 2005

NPR 12.72% 12.84% 13.89% 13.40%

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 6
 Net Profit Ratio

14.00%

13.50%

13.00%

12.50%

12.00%
Year

9. Operating Cost Ratio

OCR = Operating Cost x 100

Net Sales

= 100 – Net Profit Ratio

Year 2008 2007 2006 2005

OCR 89.94% 88.49% 87.84% 87.92%

Operating Cost Ratio

90.00%

89.00%

88.00%

87.00%

86.00%
Year

10. Pay Out Ratio

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 7
 POR = Dividend Per Equity Share x 100

Earning Per Share

Year 2008 2007 2006 2005

POR 28.51% 30.20% 32.35% 34.31%

Pay Out Ratio

40.00%

30.00%

20.00%

10.00%

0.00%
Year

11. Retained Earning Ratio

RER = Retained Earning Per Share x 100

Earning Per Share

= 1 – Dividend Pay Out Ratio

Year 2008 2007 2006 2005

RER 52.63 49.65 39.93 34.19

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 8
 Retained Earning Per Share

75.00%

70.00%

65.00%

60.00%

55.00%
Year

12. Dividend Yield Ratio

DYR = Dividend Per Share x 100

Market Price Per share

Year 2008 2007 2006 2005

DYR 3.75% - - -
Market Price - Not Available for the year 2007 2006 2005

Dividend Yield Ratio

4.00%

3.00%

2.00%

1.00%

0.00%
Year

Coverage Ratios

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 9
 1. Fixed Charge Cover Ratio

FCCR = Income before Interest & Tax

Interest Charges

Year 2008 2007 2006 2005

FCCR 7.05 7.98 7.98 8.65

Fixed Charge Cover Ratio

10
8
6
4
2
0
Year

2. Debt Service Coverage Ratio

DSCR = Net Profit before Interest & Tax

Interest + Principal Repayment

1- Tax Rate

Year 2008 2007 2006 2005

DSCR
Principal Amount is not available.
TurnOver Ratios

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 10
 1. Fixed Asset Turnover Ratio

FATR = Net Sales Times

Net Fixed Asset

Year 2008 2007 2006 2005

FATR 5.33 7.08 5.77 5.52

Fixed Asset Turnover Ratio

0
Year

2. Working Capital Turnover Ratio

FATR = Net Sales Times

Current Assets – Current Liabilities

Year 2008 2007 2006 2005

WCTR -105.30 9.87 8.09 31.94

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 11
 Working Capital Turnover Ratio

50

-50

-100

-150
Year

3. Debtor Turnover Ratio

DTR = Credit Sales

Average Receivable Accounts

Year 2008 2007 2006 2005

DTR 29.27 40.68 33.54 25.25

Debtor Turnover Ratio

50
40
30
20
10
0
Year

4. Debt Collection Period Ratio

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 12
 DCPR = 12 or 365

Debtors Turnover Ratio

Year 2008 2007 2006 2005

DCPR 0.41 0.29 0.36 0.48

Debtor Collection Period Ratio

0.5
0.4
0.3
0.2
0.1
0
Year

5. Creditor Turnover Ratio

CTR = Total Purchase

Accounts Payable( Raw Material Cost – Sundry Creditors)

Year 2008 2007 2006 2005

CTR 4.34 4.75 5.03 5.26

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 13
 CreditorsTurnover Ratio

0
Year

6. Debt Payment Period

DPP = Average Accounts Payable

Average Monthly Credit Purchase(units in months)

Year 2008 2007 2006 2005

DPP 1.69 1.54 1.42 1.33

Debt Payment Period

1.5

0.5

0
Year

7. Stock/ Inventory Turnover Ratio

STR = Cost of Goods Sold During the Year

Average Inventory

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 14
 Year 2008 2007 2006 2005

STR 3.51 3.35 3.28 3.52

Stock Turnover Ratio

3.6
3.5
3.4
3.3
3.2
3.1
Year

Financial Ratios
1. FIXED ASSET RATIO
FAR = Fixed Assets of the company

Long Term Funds

2. Current Ratio

CR = Current Asset CA

Current Liabilities CL

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 15
3. Liquidity Ratio

Quick Ratio = CA – Inventory

Current Liabilities

4. Debt Equity Ratio

DER = Total Long Term Fund

Shareholders funds

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 16
 Profit & Loss Statement

Particulars Mar 2008 Mar 2007 Mar 2006 Mar 2005 Mar 2004
No of Months 12 12 12 12 12
Gross Sales 330939.3 318194.8 240041.2 204825.7 154935.2
Sales 325218.3 310647 234394.1 202174.2 152087.4
Job Work / Contract
receipts 0 0 0 0 0

Prcessing Charges /
Service Income 0 0 0 0 0
Others operational
income 5721 7547.8 5647.1 2651.5 2847.8
Less :Inter divisional
transfers 0 0 0 0 0
Less: Sales Returns 0 0 0 0 0
Less: Excise 43631.1 43494.5 34019.2 30634.4 22703
Net Sales 287308.2 274700.3 206022 174191.3 132232.2
EXPENDITURE :

Increase/Decrease in Stock 330 -2736.9 -2569.1 -1458.2 1419.8

Opening Balances
Work In Progress 3013.2 2863.1 2644.6 1766.4 1182.2
Finished Goods 0 0 0 0 0

Shares, Units and Bonds 0 0 0 0 0

Other 11030.2 8443.4 5332.9 4752.9 6756.9
Less :
Work In Progress 2960 3013.2 2863.1 2644.6 1766.4
Finished Goods 0 0 0 0 0

Shares, Units and Bonds 0 0 0 0 0

Other 10753.4 11030.2 7683.5 5332.9 4752.9

Raw Materials Consumed 201901.9 193749.3 142638.6 119313 83413.9

Opening Raw Materials 8725.9 7326.9 6300.6 3497.2 2380.7

Purchases Raw Materials 184980.6 180556.3 133677.5 115447 79850.6

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 17
 Closing Raw Materials 7785.7 8725.9 7326.9 6300.6 3497.2

Other Direct Purchases /

Brought in cost 0 14592 9987.4 6651.2 4679.8
Others 15981.1 0 0 18.2 0
Power & Fuel Cost 3251.9 3274.1 2585.1 2378.1 2145.2
Employee Cost 15260.1 13556.3 11332.5 10295.1 8745.6
Other Manufacturing
Expenses 22395.1 19651.3 14852.1 12666.4 9172.6

General and Administration

Expenses 1695 1584.4 1354.6 810.3 755.4

Selling and Distribution

Expenses 9939.5 12330.5 9919.1 8665.8 7809.3

Miscellaneous Expenses 3631.1 1669.9 850 481.1 468.8

Less: Pre-operative
Expenses Capitalised 0 0 0 0 0
Total Expenditure 258404.6 243078.9 180962.9 153151.6 113930.6

Operating Profit (Excl OI) 28903.6 31621.4 25059.1 21039.7 18301.6

Other Income 7640.3 3658.4 3562.5 2297.5 1001.2
Interest 1432.4 554.4 671.4 636.6 412.2
Dividend 1318.9 869.4 414 198.7 30.8

Profits on sale of FA 0 0 0 0 0
Profits on sale of
Investments 1518.1 354.8 1776.4 312 39.8

Forex Exchange Gains 1376.1 652.1 0 0 0

Other 1994.8 1227.7 700.7 1150.2 518.4
Operating Profit 36543.9 35279.8 28621.6 23337.2 19302.8
Interest 4256.1 3685.1 2934.9 2178.1 2024.8
PBDT 32287.8 31594.7 25686.7 21159.1 17278
Depreciation 6523.1 5862.9 5209.4 4501.6 3826

Profit Before Taxation &

Exceptional Items 25764.7 25731.8 20477.3 16657.5 13452

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 18
Exceptional Income /
Expenses 0 0 56.5 -138.5 -528.6
Profit Before Tax 25764.7 25731.8 20533.8 16519 12923.4
Provision for Tax 5475.5 6597.2 5245 4149.5 4820

Current Income Tax 1390.1 4760 3633.5 3638.2 960

Deferred Tax 4015.4 1772.2 1421.5 511.3 3860
Fringe Benefit tax 70 65 190 0 0
Others 0 0 0 0 0
Profits After Tax 20289.2 19134.6 15288.8 12369.5 8103.4
Appropriations 30427.5 26902.2 20945.4 16027.5 9340.5
General Reserve 0 0 0 0 0

Proposed Equity Dividend 5784.3 5780.7 4979.4 4521.9 2821.1

Preference Dividend 0 0 0 0 0

Corporate Dividend Tax 812.5 982.5 698.4 634.2 361.4

Statutory Reserve 0 0 0 0 0

Other Appropriation 0 0.7 0 15.4 0

Profit & Loss Balance C/F 13830.7 10138.3 7767.6 5856 3658
Equity Dividend % 150 150 130 125 80
Earnings Per Share 52.63 49.65 39.94 34.19 22.96
Book Value 202.54 177.33 143.58 113.15 101.08

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 19
 Ratios Analysis
Sr.No: Profitability Ratios 2008 2007 2006 2005
Return on Investment
(ROI)/Return on Capital (Operating Profit)/(Share
Employed [Operating Capital+Reserves &
1 Profit/Capital Employed] Surplus+Long Term Loans) 25.88% 32.43% 33.78% 35.32%
(Net Profit after Income
Tax)/(Share Capital + Total
2 Return on Shareholders Fund Reserves) 25.88% 27.85% 27.61% 30.09%
(Net Profit after Interest, Tax
& Preference
Return on Equity Shareholders Dividend)/(Equity Capital +
3 Fund Total Reserves) 25.88% 27.85% 27.61% 30.09%
Net Profit after Tax/(Total
4 Return on Total Assets Assets) 14.37% 17.59% 18.04% 18.72%
Return on Gross Capital Net PBIT/(Net Fixed Assets +
5 Employed Current Assets) 21.26% 27.04% 27.63% 28.51%
Net Profit after Tax/(Equity
Capital/Face Value of the
6 Earning per Share (EPS) Share) 52.63 49.65 39.93 34.19
Market Price per Equity
7 Price Earning Ratio Share/Earning Per Share 7.60 8.06 10.02 11.70

(Net Sales - Cost of goods

Sold)/Net Sales = (Net Sales -
8 Gross Profit Ratio Rawmaterial Cost)/Net Sales 29.61% 30.47% 32.01% 32.34%
Net Operating Profit/Net
9 Net Profit Ratio Sales 12.72% 12.84% 13.89% 13.40%
Operating Cost/Net Sales =
# Operating (OR) Expense Ratio (1-Net Operating Ratio) 89.94% 88.49% 87.84% 87.92%
Dividend per Equity
Share/Earning per Equity
# Pay-Out Ratio Share 28.51% 30.20% 32.35% 34.31%
Retained Earnings/Total
Earnings = ( 1 - Pay-Out
# Retained Earnings Ratio Ratio ) 71.49% 69.79% 67.43% 63.44%
Dividend per Share/Market
# Dividend Yield Ratio Price per Share 3.75%
Coverage Ratios
Income before Interest &
1 Fixed Interest Cover Tax/Interest Charges 7.05 7.98 7.98 8.65
Net Profit after Interest &
2 Fixed Dividend Cover Tax/Preferred Dividend NA NA NA NA
3 Debt Service Coverage Ratio
Turnover Ratios (Activity (OR)
Efficiency Ratios
1 Fixed Asset Turn Over Ratio Net Sales/Net Fixed Assets 5.33 7.08 5.77 5.52
Working Capital Turn Over Net Sales/(Currents Assets -
2 Ratio Current Liabilities) -105.30 9.87 8.09 31.94

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 20
 Total Sales/Accounts
3 Debtors Turnover Ratio Receivable 29.27 40.68 33.54 25.25

Accounts
Receivables(Debtors)/Monthly
4 Debt Collection Period Ratio Credit Sales (Units in Months) 0.41 0.29 0.36 0.48
Total Purchaces/Accounts
Payables = (Rawmaterial
5 Creditors Turnover Ratio Cost/Sundry Creditors) 4.34 4.75 5.03 5.26
Average Accounts
Debt Payment Period Enjoyed Payable/(Average Monthly
Ratio (Average age of Credit Purchase) (Units in
6 Payable) Months) 1.69 1.54 1.42 1.33
Stock Turnover (OR) Inventory Costs of Goods Sold during
7 Turnover Ratio the year/Average Inventory 3.51 3.35 3.28 3.52

Balance Sheet

Balance Sheet

(Rs.in Millions)
Particulars Mar 2008 Mar 2007 Mar 2006 Mar 2005 Mar 2004

SOURCES OF FUNDS
- Share Capital 3855.40 3854.10 3828.70 3617.90 3530.00
Equity - Paid Up 3854.90 3853.60 3828.20 3617.40 3529.50
Adjustments to Equitys 0.00 0.00 0.00 0.00 0.00

Preference Capital Paid Up 0.00 0.00 0.00 0.00 0.00

Unclassified Shares Paid Up 0.00 0.00 0.00 0.00 0.00
Face Value 10.00 10.00 10.00 10.00 10.00
Share warrants & Outstandings 0.00 0.00 0.00 0.00 38.30

- Total Reserve 74539.60 64843.40 51542.00 37496.00 32367.70

Securities Premium 15372.20 19364.00 18287.00 14738.90 16813.40
Capital Reserves 0.00 0.00 0.00 0.00 0.00

Profit & Loss Account Balance 13830.70 10138.30 7767.60 5856.00 3658.00
General Reserves 41164.30 31164.30 21306.20 13536.30 8531.50

Debenture Redemption Reserve 3343.50 3343.50 3343.50 3341.50 3341.50

Capital Redemption Reserve 22.80 22.80 22.80 22.80 22.80
Exchange Fluctuation reserve 0.00 0.00 0.00 0.00 0.00

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 21
 Statutory Reserves 0.00 0.00 0.00 0.00 0.00
Other Reserves 805.60 810.00 814.40 0.00 0.00
Revaluation reserve 255.10 259.50 263.90 0.00 0.00
Shareholder's Funds 78395.00 68697.50 55370.70 41113.90 35897.70
- Secured Loans 24619.90 20220.40 8227.60 4898.10 9426.50

Non Convertible Debentures 1705.00 755.00 755.00 825.00 1625.00

Term Loans – Banks 0.00 0.00 0.00 0.00 2859.80

Term Loans – Institutions 0.00 0.00 0.00 2217.60 2251.10
Working Capital Loans - Bank 0.00 0.00 0.00 0.00 0.00
Deferred Credit 0.00 0.00 0.00 0.00 0.00

Hire Purchase / Financial Lease 0.00 0.00 0.00 0.00 0.00

Other Secured 24619.90 20220.40 8227.60 2680.50 4315.60

- Unsecured Loans 38185.30 19871.00 21140.80 20056.10 3171.20

Fixed Deposits – Public 0.00 0.00 0.00 0.00 0.00
Commercial Paper 1000.00 0.00 0.00 0.00 0.00

Deferred Tax Loan 0.00 0.00 3.60 1.70 2.90

Other Unsecured Loan 37185.30 19871.00 21137.20 20054.40 3168.30
Total Debts 62805.20 40091.40 29368.40 24954.20 12597.70

Total Liabilities 141200.20 108788.90 84739.10 66068.10 48495.40

APPLICATION OF FUNDS :
Gross Block 108308.30 87758.00 79715.50 66119.50 59854.00

Less: Accumulated Depreciation 54435.20 48945.40 44015.10 34542.80 30236.90

Less: Impairment of Assets 0.00 0.00 0.00 0.00 0.00
Net Block 53873.10 38812.60 35700.40 31576.70 29617.10
Lease Adjustment A/c 0.00 0.00 0.00 0.00 0.00
Capital Work in Progress 50649.60 25133.20 9511.90 5388.40 2860.90

Pre-operative Expenses pending 0.00 0.00 0.00 0.00 0.00

Assets in transit 0.00 0.00 0.00 0.00 0.00

- Investments 49102.70 24770.00 20151.50 29120.60 30567.70

Quoted Equity 4896.90 2182.80 2182.80 2772.80 2779.00
Unquoted Equity 10170.50 4133.30 4127.70 3737.30 4142.20
Units 7907.90 519.90 1755.50 10007.50 14909.60

Other Investments 26127.40 17934.00 12085.50 12603.00 8736.90

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 22
 Market Value of Quoted Investements 25305.50 13230.80 15500.00 12608.50 7327.60

Current Assets, Loans & Advances

- Inventories 24218.30 25009.50 20122.40 16013.60 11474.40
Raw Materials 7785.70 8725.90 7326.90 6300.60 3497.20
Work-in Progress 2960.00 3013.20 2863.10 2644.60 1766.40
Finished Goods 0.00 0.00 0.00 0.00 0.00
Stores and Spare 1111.50 1390.00 1355.00 1423.50 1078.10
Other Inventory 12361.10 11880.40 8577.40 5644.90 5132.70

- Sundry Debtors 11307.30 7821.80 7157.80 8113.20 6149.90

Debtors more than Six months 956.80 883.60 698.60 717.40 1379.20
Debtors Others 10696.50 7256.20 6802.10 7916.80 5801.10

Less : Provisions for Doubtful Debts 346.00 318.00 342.90 521.00 1030.40
Cash and Bank 23973.10 8267.60 11194.30 20050.40 7704.90
Other Current Assets 8402.00 7217.90 353.20 309.40 212.60
Loans and Advances 35937.10 56803.70 57785.40 26975.40 11415.20
Total Current Assets 103837.80 105120.50 96613.10 71462.00 36957.00

Less : Current Liabilities and Provisions

Sundry Creditors 46531.80 40799.40 28384.80 22697.30 22771.40

Acceptances 37385.10 20038.00 26973.90 28072.80 15843.30

Bank Overdraft / Short term credit 0.00 0.00 0.00 0.00 0.00

Unclaimed Dividend 80.40 66.30 54.80 35.40 70.10

Interest Accrued But Not Due 287.50 254.20 190.80 195.90 160.40

Other Liabilities 2387.20 2478.90 3398.90 3746.30 3398.80

- Provisions 19894.30 13643.20 12150.40 11260.60 4306.40

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 23
 Proposed Equity Dividend 5784.30 5780.70 4979.40 4521.90 1421.60

Provision for Corporate Dividend Tax 812.50 982.50 698.40 634.20 182.10

Provision for Tax 0.00 0.00 0.00 0.00 0.00

Other Provisions 13297.50 6880.00 6472.60 6104.50 2702.70

Total Current Liabilities 106566.30 77280.00 71153.60 66008.30 46550.40

Net Current Assets -2728.50 27840.50 25459.50 5453.70 -9593.40

Miscellaneous Expenses not written off 60.50 100.90 141.20 181.60 221.90

Deferred Tax Assets 3974.50 1766.00 1507.50 1026.90 1350.60

Deferred Tax Liability 13731.70 9634.30 7732.90 6679.70 6492.10

Deferred Tax Assets / Liabilities -9757.20 -7868.30 -6225.40 -5652.80 -5141.50

Total Assets 141200.20 108788.90 84739.10 66068.20 48532.70

Contingent Liabilities 20430.00 14717.50 9928.60 3116.20 2672.80

------- Management Accounting ---- Ratio Analysis – TATA Motors Limited ------- 24