14340902 capital structure of tata motors 200708

8/9/2019 14340902 Capital Structure of Tata Motors 200708

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Capital Structureof Tata Motors

MBA- B Section - Previous

Vineeth N (Roll No.260)

Vijay (Roll No.259)

Shariff (Retail Management, Roll No

103)


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Introduction

Profile Tata Motors Limited is Indias largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8

billion) in 2007-08.

It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles withwinning products in the compact, midsize car and utility vehicle segments.

The company is the worlds fourth largest truck manufacturer, and the worlds second largest busmanufacturer.

The companys 23,000 employees are guided by the vision to be best in the manner in which weoperate 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 4 million Tata vehicles ply on Indian roads, since the first rolled out in 1954.

The companys manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune(Maharashtra), Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand).

Among them is Jaguar Land Rover, a business comprising the two iconic British brands that was acquired in2008.

In 2004, it acquired the Daewoo Commercial Vehicles Company, South Koreas second largest truck maker.The rechristened Tata Daewoo Commercial Vehicles Company has launched several new products in theKorean market, while also exporting these products to several international markets. Today two-thirds ofheavy commercial vehicle exports out of South Korea are from Tata Daewoo.

In 2006, Tata Motors entered into joint venture with Thonburi Automotive Assembly PlantCompany of Thailand to manufacture and market the companys pickup vehicles in Thailand. Thenew plant of Tata Motors (Thailand) has begun production of the Xenon pickup truck, with theXenon having been launched in Thailand at the Bangkok Motor Show 2008.

Milestones

1945 Tata Engineering and Locomotive Co. Ltd. was established to manufacturelocomotives 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 mediumcommercial vehicles. The first vehicle rolled out within 6 months of the contract.

1959 Research and Development Centre set up at Jamshedpur.

1977 First commercial vehicle manufactured in Pune.

1983 Manufacture ofHeavy Commercial Vehicle commences.

1985 First hydraulic excavator produced with Hitachi collaboration.

1986 Production offirst light commercial vehicle, Tata 407, indigenously designed, followed

by Tata 608.

1991 Launch of the 1st indigenous passenger car Tata Sierra.

One millionth vehicle rolled out.


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1994 Launch ofTata Sumo - the multi utility vehicle.

1995 Mercedes Benz car E220 launched.

1996 Tata Sumo deluxe launched.

1997 Tata Sierra Turbo launched.

1998 Tata Safari - India's first sports utility vehicle launched.

2 millionth vehicle rolled out.

Indica, India's first fully indigenous passenger car launched.

2001 Indica V2 launched - 2nd generation Indica.

100,000th Indica wheeled out.

Launch of the Tata Safari EX

2002 2,00,000th Indica 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 On 29th July, J. R. D. Tata's birth anniversary, Tata Engineering becomes Tata MotorsLimited.

3 millionth vehicle produced.

First CityRover rolled out

2004 Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment agreement and

completes acquisition of Daewoo Commercial Vehicle Company

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 Ace, India's first mini truck launched

The power packed Safari Dicor is launched

Tata Motors launches Indica V2 Turbo Diesel.

One millionth passenger car produced and sold

Inauguration of new factory at Jamshedpur for Novus Launch ofTata 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

Indica V2 Xeta launched

Passenger Vehicle sales in India cross one-million mark

Tata Motors first plant for small car to come up in West Bengal

Tata Motors and Fiat Group announce three additional cooperation agreements


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2007 Construction of Small Car plant at Singur, West Bengal, begins on January 21

New 2007 Indica V2 range is launched

Tata Motors and Thonburi Automotive Assembly Plant Co. (Thonburi), announce

formation of a joint venture company in Thailand to manufacture, assemble andmarket 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 TataSpacio.

Launch of Magic, a comfortable, safe, four-wheeler public transportation mode,developed on the Ace platform

Launch of Winger, Indias 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 utilityvehicle, 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 InjectionCommon Rail (DICOR) engine.

Rollout of the one millionth passenger car off the Indica platform.

2008 Latest common rail diesel offering- the Indica V2 DICOR, launched.

Indigo CS (Compact Sedan), worlds first sub four-metre 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 Jaguarand 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 IIICommonwealth 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.


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Profit And Loss Account(Rs in Crs)

YearMar08(12)

Mar07(12)

Mar06(12)

Mar05(12)

Mar04(12)

Mar03(12)

INCOME :

Sales Turnover32,885.

0331,611.

2123,673.

4320,152.

0315,165.

8510,585.

43

Excise Duty4,355.6

34,425.4

43,380.1

33,063.4

42,270.3

01,743.7

9

Net Sales28,529.

4027,185.

7720,293.

3017,088.

5912,895.

558,841.6

4

Other Income 972.93 574.11 693.92 560.29 427.79 323.65

Stock Adjustments -40.48 349.68 256.91 144 -141.98 119.74

Total Income29,461

.8528,109

.5621,244

.1317,792

.8813,181

.369,285.

03

EXPENDITURE :

Raw Materials

20,190.

19

19,374.

93

14,263.

86

11,929.

48

8,341.3

9

5,699.5

8Power & Fuel Cost 325.19 327.41 258.51 237.81 214.52 193.51

Employee Cost1,534.4

11,361.2

01,141.4

81,037.9

3 879.49 720.37

Other Manufacturing Expenses1,847.4

31,618.6

81,251.0

21,017.1

1 722.95 510.39Selling and Administration

Expenses1,442.9

11,322.8

8 985.74 795.03 645.73 606.25

Miscellaneous Expenses1,598.7

31,153.5

3 784.56 673.78 644.75 529.6Less: Pre-operative Expenses

Capitalised1,131.4

0 577.05 308.85 218.13 144.89 156.46

Total Expenditure25,807.

4624,581.

5818,376.

3215,473.

0111,303.

948,103.2

4

Operating Profit3,654.3

93,527.9

82,867.8

12,319.8

71,877.4

21,181.7

9

Interest 425.61 368.51 293.49 217.81 202.48 309.29

Gross Profit3,228.7

83,159.4

72,574.3

22,102.0

61,674.9

4 872.5

Depreciation 652.31 586.29 520.94 450.16 382.6 362.13

Profit Before Tax2,576.4

72,573.1

82,053.3

81,651.9

01,292.3

4 510.37

Tax 139.01 476 363.35 363.82 96 19.71

Deferred Tax 401.54 177.22 142.15 51.13 386 190.55

Reported Net Profit2,028.9

21,913.4

61,528.8

81,236.9

5 810.34 300.11

Extraordinary Items 149.49 37.4 145.42 24.77 -29.95 4.94

Adjusted Net Profit1,879.4

31,876.0

61,383.4

61,212.1

8 840.29 295.17

Adjst. below Net Profit 0 0 0 0 0 0

P & L Balance brought forward1,013.8

3 776.76 585.6 365.8 123.71 0

Statutory Appropriations 0 0 0 0 0 0


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Appropriations1,659.6

81,676.3

91,337.7

21,017.1

5 568.25 176.4

P & L Balance carried down1,383.0

71,013.8

3 776.76 585.6 365.8 123.71

Dividend 578.43 578.07 497.94 452.19 282.11 127.91

Preference Dividend 0 0 19.94 0 0 0

Equity Dividend % 150 150 130 125 80 40

Earnings Per Share-Unit Curr 50.52 47.1 37.59 32.44 21.93 8.87Book Value-Unit Curr 202.68 177.57 143.93 113.64 101.69 81.2

http://www.capitaline.com

Balance Sheet

(Rs in Crs)

Year Mar 08 Mar 07Mar06

Mar05 Mar 04

SOURCES OF FUNDS :

Share Capital 385.54 385.41 382.87 361.79 353

Reserves Total7,453.9

66,484.3

45,154.

203,749.

60 3,236.77

Total Shareholders Funds7,839.

506,869.

755,537.

074,111.

393,589.7

7

Secured Loans

2,461.9

9

2,022.0

4 822.76 489.81 942.65

Unsecured Loans3,818.5

31,987.1

02,114.

082,005.

61 317.12

Total Debt6,280.

524,009.

142,936.

842,495.

421,259.7

7

Total Liabilities14,120

.0210,878

.898,473.

916,606.

814,849.5

4

APPLICATION OF FUNDS :

Gross Block10,830.

838,775.8

07,971.

556,611.

95 5,985.40Less : Accumulated

Depreciation

5,443.5

2

4,894.5

4

4,401.

51

3,454.

28 3,023.69

Net Block5,387.3

13,881.2

63,570.

043,157.

67 2,961.71

Lease Adjustment 0 0 0 0 0

Capital Work in Progress5,064.9

62,513.3

2 951.19 538.84 286.09

Investments4,910.2

72,477.0

02,015.

152,912.

06 3,056.77Current Assets, Loans &

Advances
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Inventories2,421.8

32,500.9

52,012.

241,601.

36 1,147.44

Sundry Debtors1,130.7

3 782.18 716.6 798.58 614.99

Cash and Bank2,397.3

1 826.761,119.

432,005.

04 770.49

Loans and Advances

4,433.9

1

6,402.1

6

5,639.

54

2,681.

05 1,162.78

Total Current Assets10,383.

7810,512.

059,487.

817,086.

03 3,695.70

Less : Current Liabilities and Provisions

Current Liabilities8,667.2

06,363.6

85,726.

825,414.

61 4,228.13

Provisions1,989.4

31,364.3

21,215.

041,126.

06 430.64

Total Current Liabilities10,656.

637,728.0

06,941.

866,540.

67 4,658.77

Net Current Assets -272.85

2,784.0

5

2,545.

95 545.36 -963.07Miscellaneous Expenses notwritten off 6.05 10.09 14.12 18.16 22.19

Deferred Tax Assets 397.45 176.6 150.75 102.69 135.06

Deferred Tax Liability1,373.1

7 963.43 773.29 667.97 649.21

Net Deferred Tax -975.72 -786.83-

622.54-

565.28 -514.15

Total Assets14,120

.0210,878

.898,473.

916,606.

814,849.5

4

Contingent Liabilities

2,953.5

7

2,527.7

8

1,558.

65

1,102.

68 839.45

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Year Dividend Per Share(DPS) in Rs.

2003-04 8

2004-05 12.50

2005-06 13.00

2006-07 15.00

2007-08 15.00

OBJECTIVE

To calculate Weighted Average Cost of Capital (WACC) To calculate Return on Investment(ROI)

Compare WACC and ROI.

If ROI is greater than WACC, then the company is getting returnsmore than the capital employed. Vice Versa.


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Capital Structure


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Rs in Crs

Year 2008 2007 2006 2005 2004

DPS(Rs) 15 15 13 12.5 8

Book Value(Rs.) 202.68 177.57 143.93 113.64 101.69

Payout(%) 29.7 31.85 34.6 38.66 36.44Retention Ratio 0.703 0.6815 0.654 0.6134 0.6356

PBT 2576.47 2573.18 2053.38 1651.9 1292.34

Tax 139.01 476 363.35 363.82 96

PAT 2437.46 2097.18 1690.03 1288.08 1196.34

Preference Divident 0 0 19.94 0 0

Equity 385.54 385.41 382.87 361.79 353

Reserves 7453.96 6484.34 5154.2 3749.6 3236.77P & L Account(DrBalance) 0 0 0 0 0

Equity Shareholder Fund 7839.5 6869.75 5537.07 4111.39 3589.77

ROE 0.31 0.31 0.30 0.31 0.33

Growth Rate(%) 21.86 20.80 19.73 19.22 21.18

Cost of Equity(%) 29.26 29.25 28.76 30.22 29.05

Interest 425.61 368.51 293.49 217.81 202.48

Total Debt 6280.52 4009.14 2936.84 2495.42 1259.77

Cost of Debt(%) 6.78 9.19 9.99 8.73 16.07

PBIT 3002.08 2941.69 2346.87 1869.71 1494.82

Capital Employeed 14094.51 10852.94 8447.52 6606.81 4849.54

ROI(%) 21.30 27.11 27.78 28.30 30.82


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Weighted Average Cost of Capital


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Year 2008

Source AmountProportio

n(%)Cost(%

)

Weighted

Cost(%)

Equity 385.54 6.14 29.26 1.80

Debt 6280.52 94.22 6.78 6.38

6666.06 100.36 8.18

Year 2007


n(%)Cost(%

)

Weighted

Cost(%)

Equity 385.41 9.61 29.25 2.81Debt 4009.14 91.23 9.19 8.39

4394.55 100.84 11.20

Year 2006


n(%)Cost(%

)

Weighted

Cost(%)

Equity 382.87 13.04 28.76 3.75

Debt 2936.84 88.47 9.99 8.843319.71 101.50 12.59

Year 2005


n(%)Cost(%

)

Weighted

Cost(%)

Equity 361.79 14.50 30.22 4.38

Debt 2495.42 87.34 8.73 7.62

2857.21 101.84 12.00Year 2004


n(%)Cost(%

)

Weighted

Cost(%)

Equity 353 28.02 29.05 8.14

Debt 1259.77 78.11 16.07 12.55

1612.77 106.13 20.69


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Financial Performance

The year 2007-08 was a historic year for the Company marked with two significant eventsviz., the unveiling of Tata Nano -the world's least expensive car and the signing of thedefinitive agreement with Ford Motor Company for purchase of Jaguar and Land Rover,

which has since been completed on June 2, 2008.

During the year, the Company recorded its highest ever sale of 5, 85,649 vehicles and grewits turnover to Rs. 33,094 crores to remain as India's largest automobile company byrevenue.

The Company's margins were under pressure during the year due to rising interest rates

constraints in availability of vehicle financing from outside sources and unprecedentedincrease in prices of raw materials.

The EBIDTA (earnings before interest, taxes, depreciation, and amortization) margin at 10.8%

was lower than last year as increase in input costs could only be partially absorbed by themarket.Note: Amortization = non-cash expense of writing off intangible assets over their useful lives.

The Profit Before-Tax at Rs.2, 576 crores was 0.1 % higher than last year, The Profit afterTax at Rs.2, 029 crores, was 6.1 % higher than last year.

With significant increase in the Company's capital expenditure programs and the growingbusiness requirement, the overall borrowings of the Company stood at Rs.6, 280.52 croresat a Debt: Equity ratio of 0.80:1.

The Indian economy remained in high growth phase but witnessed moderation in GDPgrowth to 90/ in FY 07-08 as compared to over 9% growth achieved in the previous two

years. The commercial vehicle industry which grew by over 33% in FY 06-07 was impactedby moderation in economic growth as wet as substantial reduction in vehicle financing andposted a 8.1% growth this fiscal. The passenger vehicle industry also witnessed a slowdownbut managed to grow by 11.1 % by increasing discounts on mature products, launching newmodels and due to reduction in excise duty announced by the government in Budget during

February'08. Vehicle exports also grew, albeit at a slightly lower rate of 11.9% as comparedto 14.8% witnessed in the previous year.

Amidst moderation in economic growth, a high interest rate regime and tightening of theliquidity position, the domestic passenger vehicle industry was able to grow by 11.3% to anall time high of over 1.5 million vehicles, albeit at a lower growth rate than 21% of the last

fiscal. The Industry's growth rate in fact fell to single digit in the last four months of thefiscal. Growth was primarily driven by new launches and discounts on existing volumemodels. Along with two wheelers, entry level cars (price point below Rs 3 lacs) declined by2%.The luxury segment however doubled in size to over 5,000 vehicles and were

immune to the slowing market conditions. Of over 90 models in the industry the top 10

constitute 65% of the industry sales.


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After six years of consecutive growth, the Company's passenger vehicle sales decreasedmarginally by 4.5% to 2, 18,055 vehicles (including 3,297 Fiat branded vehicles) and theCompany had a 14.2% share in the passenger vehicle market between TATA and Fiabranded vehicles.

Fiscal 2007-08, the first year of 11th Five Year Plan saw a marginal fall in GDP growth rate of9%. In view of the slow down in economy, increase in inflation, poor credit availability,

hardening of interest rates, rise in prices of input materials, proposed increase in fuel pricesand volatility in foreign exchange rates, the commercial and passenger vehicle industry hasa challenging year ahead, with pressure on volumes and margins.

Financial Performance as a measure of Operational Performance

In a challenging environment, the Company has been able to marginally grow its revenuesand profits. Whilst the Company's profit after tax improved to Rs.2,028.92 crores from

Rs.1,913.46crores in the previous year, the margins were under pressure mainly due to therising input costs and lower volume growth.

Turnover, net of excise duties increased by 4.6% to another record high of Rs. 28,730.82crores from Rs.27, 470.03 crores in FY 2006-07.The total number of vehicles sold during theyear increased by 0.9% to 585,649 units from 580,280 units in FY 2006-07.The domestic

volumes increased by 0.8% to 530,990 units from 526,806 units in FY 2006-07, whileexport volumes increased by 2.22% to 54,659 units in FY 2007-08 from 53,474 units in FY2006-07.

Net Raw Material consumption inclusive of processing charges increased by 6.2%to Rs.21082.10 crores in FY 2007-08, from Rs.19,849.04 crores in FY 2006-07. Material Cost as a %

of net turnover has increased to 73.4% from 72.3% for the last year. This was largely aresult of increase in prices of steel, aluminum, nickel, copper and natural rubber. However

the Company managed to lower the impact through its on going cost reduction program withinitiatives like global sourcing, vendor rationalization and value engineering.

Employee Cost increased by 12.9% during the year to Rs. 1,544.57 crores from Rs

1,368.09 crores registered in the previous year mainly inline with trends in industry andeconomy. The manpower increased marginally to 23,230 from 22,349 with increases also inflexible manpower.

Manufacturing and Other Expenses increased by 2.4% to Rs. 3,011.83 crores in FY 2007-08

from Rs.2,940.53 crores in FY 2006-07.These were 10.5% of net turnover for the year as

compared to 10.7% for the previous year.

Profit before depreciation, interest and tax increased by 0.5% to Rs.3,575.50 crores fromRs.3,557.56 crores in FY 2006-07.The margin decreased to 12.4% from 13% in FY 2006-07

Depreciation (including product development expenditure) for 2007-08 increased by 6.8% toRs. 716.66 crores from Rs.671.31 crores in FY 2006-07 on account of increase in fixedassets. It represents 2.5% of net turnover as compared to 2.4% for FY 2006-07.

Net interest cost decreased to Rs. 282.37 crores in FY 2007-08 from Rs.313.07 crores in FY


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2006-07. Despite increase in interest rates and increase in capital expenditure, thereduction was mainly on account of significant reduction in the Company's vehicle financingportfolio (on account of securitization), better working capital management, interesearnings and larger capitalization of interest in line with the increase in capital expenditure.

Profit before Tax (PBT) of the Company increased by 0.13% to Rs. 2,576.47 crores from Rs2,573.18 crores in FY 2006-07.

Profit after Tax (PAT) increased by 6.03% to Rs. 2,028.92 crores from Rs.1, 913.46 croresin FY 2006-07. This was mainly on account of a lower tax provision owing to the increase inspends on Research and Development and income from capital gains, which is subject to a

lower tax rate. Basic Earning Per Share (EPS) increased by 5.79% to Rs.52.64 as comparedto Rs.49.76 last year.

Investments increased to Rs.4, 910.27 crores in FY 2007-08 from Rs.2, 477.00 crores in FY2006-07.


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14340902 capital structure of tata motors 200708

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