Acf Project on Working Capital

7/29/2019 Acf Project on Working Capital

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Institute for Integrated Learning in Management

IILM Graduate School of Management

GREATER NOIDA

PROJECT ON WORKING CAPITAL OF TATA MOTORS

SUBMITTED TO: SUBMITTED BY:

DR.ANUBHA GUPTA PUNAM PANDEY

FT-FS-11-335


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Content

Introduction

Market share

Comparison with companies

Graphs & details

Analysis

Interpretation


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INTRODUCTION

Tata Motors Limited was founded in 1945 by Jamshedji Tata and is headquarteredin Mumbai.

Its products include passenger cars, trucks, vans and coaches. It is the world's eighteenth-largest motor vehicle manufacturing company, fourth-largest truck manufacturer and

second-largest bus manufacturer by volume.

The subsidiaries of Tata Motors are Jaguar Land Rover, Tata Daewoo and Tata Hispano.

Tata Motors was ranked as India's 3rd Most Reputed Car manufacturer in the ReputationBenchmark Study - Auto (Cars) Sector, launched in April 2012. Tata Motors has been ranked314th in the Fortune Global 500 rankings in the year 2012.

Market share of tata motor

Comparison with competitors (ET 500)


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RANK COMPTURN

OVERASSET

21

Mahindra &

Mahindra

Ltd.

37026.37 36926.19

19

Maruti

Suzuki India

Ltd.

38140.69 14762.90

67Ashok

Leyland Ltd.

11133.04 6621.16

7Tata Motors

Ltd.123222.91 52209.48

396Force

Motors Ltd.1574.05 583.79

148Eicher

Motors Ltd.5138.64 474.14

212 Escorts Ltd. 3167.19 2036.43

SALES FIGURES OF CARS IN 2012


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Tata Motors sold 83,363 cars in March 2011 and in March 2012, they reported a 20% growth andpegged sales at a whooping 100,414 units. The drivers of the overall increase in sales figures for

March were Nano (10,475 units, up 20%), Indica (11420 units, up 65%) and the Sumo-Safarisegment (6,794 units, up 40%).

Trend of the market price


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CURRENT RATIO:-Year Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

Current

Ratio0.51 0.53 0.44 0.44 0.64

Current Ratio = Current Assets/ Current Liabilities.

It assesses short term solvency i.e. the ability to meet short term obligation of the company.

When compared with other players, the ratio is the least in amount, Mahindra (avg. of0.9)and Maruti (avg. of 1.22).

The Low value can indicate that the company is having difficulty in meeting currentobligations.

On the other hand, it can also be said that the organization has good long-term prospects, so it is

able to borrow against those prospects to meet current obligations.

DEBT-EQUITY RATIO

YEAR Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

Debt Equity

Ratio0.57 0.80 1.12 1.06 0.80

Debt Equity Ratio = Outsiders Funds/ Insiders Funds .

Maruti Suzuki is having an avg. D/E Ratio of 0.068, that of Mahindra & Mahindra is 0.46,which indicates that the D/E Ratio of Tata Motors is quite high.

A higher ratio shows a large share of financing is done by the creditors of the firmcompared to that of the owners. This can indicate that owners do not have faith in their

company and thus is investing less in the company.

Looking at the figures above, it can be said that the D/E Ratio of Tata Motors is showing adecreasing trend which is a positive sign for the company.


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ASSET TURNOVER RATIO


Asset

TurnoverRatio

2.65 2.22 1.95 1.88 2.69

Fixed Assets Turnover Ratio = Net Sales/ Fixed Assets.

This ratio shows the extent to which the investment in fixed asset contributes to sales andhow efficiently the fixed assets are utilized.

Maruti Suzuki is having an avg. Asset Turnover Ratio of 2.65, that of Mahindra &Mahindra is 3.662, which indicates that the Asset Turnover Ratio of Tata Motors is less

compared to its competitors.

According to the above figures, Tata Motors has experienced a growth in the Asset

Turnover Ratio, which indicates that the company has utilized all its assets efficiently togenerate sales recently compared to the previous years.

NET PROFIT MARGIN


Net Profit

Margin(%)2.26 3.74 6.26 3.77 6.96

Net Profit Ratio = (Net Profit After Tax/ Net Sales) X 100. Maruti Suzuki is having an avg. Net Profit Ratio of 6.812, that of Mahindra & Mahindra is

9.368, which indicates that the Net Profit earned by Tata Motors is much less compared tothe others.

This factor can either indicate that either the Net Profit is less or the amount of sales ishigh, but the company is not able to maintain a good profit margin which may be due to thepricing of products of the company.

The sharp decline in the Ratio (by 39.57%) can be attributed to the increase in cost ofmanufacturing due to importation costs (Depreciation of Rupees), which led to higherexpenditure and lower returns.


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RETURN ON CAPITAL EMPLOYED


Return On

Capital

Employed(%)

10.36 10.19 10.37 6.41 18.96

Return on Capital Employed= (Net Profit after tax/ Average Capital Employed) X 100.

It indicates the efficiency of the usage of the long term funds of the creditors and owners.

Maruti Suzuki is having an avg. ROCE of 21.33, that of Mahindra & Mahindra is 22.09,which indicates that the Net Profit earned by Tata Motors is much less compared to theothers.

ROCE for the Tata Motors has increased in the recent years which indicates that the firm isefficiently using the long term funds of the creditors and owners.

This has a positive impact on investors because it indicates that the company has a good

opportunity to grow.

EARNINGS PER SHARE


Earnings

Per Share3.91 28.55 39.26 19.48 53.63

Earning per Share = Net Profit available to Equity shareholders/Number of Equity Shares.

Maruti Suzuki is having an avg. EPS of 64.87, that of Mahindra & Mahindra is 41.53,which indicates that the EPS of Tata Motors way below.

The sharp decrease in the EPS indicates that the profit which theoretically belongs to theowners is very, which can give a negative impression about the company.

This negative impact can lead to a decrease in the overall demand of the shares, which

leads to a decrease in the share price.


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DIVIDEND PER SHARE

YEAR Mar 12 Mar 11 Mar 10 Mar09 Mar08

Dividend Per

Share4.00 20.00 15.00 6.00

15.00

DPS = Net distributed profit to equity shareholders/ Number of Equity Shares.

Maruti Suzuki is having an avg. DPS of 5.90, that of Mahindra & Mahindra is 11.00.

The above figures indicate that the dividend paid to the ordinary shareholders (calculated

per share basis) has decreased rapidly from Rs.20 to Rs.4, which indicates that the exactamount of profit received by the owners has decreased.

This will decrease the demand of the shares of the company.

DIVIDEND PAYOUT RATIO


DIVIDEND

PAYOUT RATIO117.71 80.96 44.28 34.52 32.51

Maruti Suzuki is having an avg. DPR of 10.66, that of Mahindra & Mahindra is 31.31.

This ratio tries to establish the relationship between the profit belonging to equityshareholders and amount paid to them. Since, the EPS amount is very small in the case ofTata, the DPR % is very high, which is indicating that the actual amount paid is higher than

the amount entailed. Dividend payout ratio in % when subtracted from 100, that shows the percentage of profit

retained by the business, i. e, the amount of profit retained by the company is negative.


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PROFIT EARNING RATIO

TATA MARUTI MAHINDRA75.05 22.68 16.05

Price Earning Ratio: Market Price of share/EPS.

The current market price of the shares of Tata, Maruti and Mahindra are Rs. 247.90, Rs.1183.05 and Rs. 783.80 respectively.

This ratio represents that for every rupee of earning per share, how much the price is beingpaid by the market.

The Tata Motors P/E Ratio is high compared to the others, which indicates that either theM.P. is very high or the EPS is very low. Considering the previous ratios, it can be said that

due to the low EPS value of Tata, the P/E Ratio is very high.

RETURN ON EQUITY


ROE(%) 6.42 9.06 15.15 8.09 25.98

Return on equity (ROE) measures the rate of return on the ownership interest(shareholders' equity) of the common stock owners.

It measures a firm's efficiency at generating profits from every unit of shareholders' equity.

It shows how well a company uses investment funds to generate earnings growth.ROE= Net Income/Shareholders Equity.

Profit & Loss - Tata Motors Ltd.

Mar'12 Mar'11 Mar'10 Mar'09 Mar'08

12 Months 12 Months 12 Months 12 Months 12 Months

INCOME

Sales Turnover 59,220.94 52,067.87 38,173.39 28,538.20 33,123.54


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Excise Duty 5,003.72 4,110.63 2,800.10 2,877.53 4,355.63

NET SALES 54,217.22 47,957.24 35,373.29 25,660.67 28,767.91

Other Income 0.00 0.00 0.00 0.00 0.00

TOTAL INCOME 54,791.30 48,377.93 35,775.56 26,502.21 29,127.33

EXPENDITURE:

Manufacturing Expenses 2,937.80 2,224.74 1,652.22 1,171.59 1,230.14

Material Consumed 40,457.95 34,692.83 24,759.49 19,039.41 20,931.81

Personal Expenses 2,691.45 2,294.02 1,836.13 1,551.39 1,544.57

Selling Expenses 2,370.44 2,289.11 1,583.24 1,224.15 1,179.48

Administrative Expenses 2,489.16 2,568.50 2,249.92 1,867.05 1,982.79

Expenses Capitalised -907.13 -817.68 -740.54 -916.02 -1,131.40

Provisions Made 0.00 0.00 0.00 0.00 0.00

TOTAL EXPENDITURE 50,039.67 43,251.52 31,340.46 23,937.57 25,737.39

Operating Profit 4,177.55 4,705.72 4,032.83 1,723.10 3,030.52

EBITDA 4,751.63 5,126.41 4,435.10 2,564.64 3,389.94

Depreciation 1,606.74 1,360.77 1,033.87 874.54 652.31

Other Write-offs 0.00 106.17 144.03 51.17 64.35

EBIT 3,144.89 3,659.47 3,257.20 1,638.93 2,673.28

Interest 1,218.62 1,383.79 1,246.25 704.92 471.56

EBT 1,926.27 2,275.68 2,010.95 934.01 2,201.72

Taxes 98.80 384.70 589.46 12.50 547.55

Profit and Loss for the Year 1,827.47 1,890.98 1,421.49 921.51 1,654.17

Interpretation

After going through the figure of profit & loss account we come to know that in the net profit

there is decrease of 3.35% . if we go to overall figure in the profit & loss statement we can say

condition of Tata motors in this year as compare to last year is good.


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But as compare to other companies in the market of automobiles the condition of this company is

not so good it will take some time to recover to come in the competition level of other key

players like Maruti Suzuki,Mahindra etc.

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Acf Project on Working Capital