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Obu Tata Motors Final Draft
Obu Tata Motors Final Draft
Table of Contents
PART 1
PROJECT
OBJECTIVES
&
OVERALL
RESEARCH
APPROACH......................................................................................................2
INTRODUCTION...............................................................................................................................
..................................2
REASON
FOR
CHOOSING
THE
TOPIC......................................................................................................................................2
CHOSEN
ORGANIZATION
&
RATIONAL
BEHIND
CHOOSING
TATA
MOTORS
LIMITED........................................................................2
TATA
COMPANY
PROFILE .......................................................................................................................................
............3
PROJECT AIM &
OBJECTIVES........................................................................................................................
.........4
BACKGROUND
OF
RESEARCH
APPROACH................................................................................................................................5
PART 2
INFORMATION
GATHERING
&
ACCOUNTING
TECHNIQUS...................................................................................6
&
BUSINESS
SOURCE
OF
INFORMATION........................................................................................................................
...........................6
METHODS
USED
TO
COLLECT
INFORMATION............................................................................................................................7
LIMITATION
IN
INFORMATION
GATHERING...........................................................................................................................
...7
LIMITATION
IN
FINANCIAL
RATIO..........................................................................................................................................
8
LIMITATION
OF
SWOT
ANALYSIS.......................................................................................................................................
...8
LIMITATION
OF
PESTEL
ANALYSIS.......................................................................................................................................
.8
ETHICAL
ISSUES..........................................................................................................................................
.......................9
AN
EXPLANATION
OF
ACCOUNTING
&
BUSINESS
TECHNIQUES.................................................................................................. 10
1 | Page
PART 3
RESULTS,
ANALYSIS,
CONCLUSION
&
RECOMMENDATIONS................................................................................................14
FINANCIAL
PERFORMANCE
ANALYSIS..................................................................................................................................14
INDIAN
AUTOMOBILE
INDUSTRY
OVERVIEW.........................................................................................................................24
FUTURE
OF
INDIAN
AUTO
SECTOR......................................................................................................................................2
5
PESTEL
ANALYSIS.......................................................................................................................................
...................26
SWOT
ANALYSIS.......................................................................................................................................
.....................31
CONCLUSION
&
RECOMMENDATION..........................................................................................................................
.........34
Introduction
The BSc (Hons) in Applied Accounting is an integrated program with ACCA
and this degree is awarded by Oxford Brookes University. This degree will
help me to assure to my employers that I have al relevant skill and
knowledge in accounting and finance, but that it is from a university that has
a reputation for excellence.
2 | Page
For fair comparison purpose, I have chosen Tata Motors Limited and
Mahindra & Mahindra due to the research and analysis of the project. In this
regard, I want to state that, for achieving my purpose I use Annual Report
(standalone) of Tata Motors Limited as well as Annual Report (standalone) of
Mahindra Motors.
To find out the current position and exact situation of Tata Motors Limited in
the automobile industry I study the financial statements for three years
(2013-2015) of this company. To accomplish my goal I will apply my
knowledge which connected with related topic. My rational behind the
choosing of Tata Motors Limited for analysing the business and financial
performance are as follows:
o Consistently Tata Motors Limited maintain faster growth pace
than it competitor and become as one of the most successful
market leader in commercial vehicle in Indian automobile
industry.
3 | Page
o Global Presence
Tata Motors has comprehensive global distribution network which in 175
country and 6600 sales and service points (Annual Report Standalone2014ofTATA Motors
Limited).It
continents.
o Joint Venture
In 2006, Tata Motors formed 51:49 joint ventures with the Brazil-based
company, Marcopolo, a global leader in body-building for buses and coaches
and the joint efforts help to manufacture fully-built buses and coaches for
India
into joint venture with a Thailand based auto manufacturer name, Thonburi
Automotive Assembly Plant Company to grab the market of the companys
pickup vehicles in Thailand. Tata Motors (SA) (Proprietary) Ltd., also entered
in joint venture with Tata Africa Holding (Pty) Ltd. And this joint effort enables
TATA to set up an assembly plant in Rosslyn, north of Pretoria , in 2011
(Annual Report Standalone2014ofTATA Motors Limited).
4 | Page
o Acquisition
Jaguar Land Rover, acquired in 2008. TATA also acquired the Daewoo
Commercial Vehicles Company, South Koreas second largest truck maker, in
2004
o roduction Facility
TATAs manufacturing base spread across Jamshedpur (Jharkhand), Pune
(Maharashtra), Lacknow (Uttar Pradesh), Pantnagar (Uttarakhand), Sanand
(Gujarat) and Dharwad (Karnataka)
Limited).
5 | Page
o Business performance:
There are few business models use in business world to understand business
performance of any company. It would be determined by answering the
following questions:
i. What are
threats
ii. What are industry situation and companys
capability to cope up with it?
Profitability
Liquidity
Gearing
Investor ratios
6 | Page
PART-2
Information Gathering and Accounting and
Business Techniques
Sources of information
Ease
of
available
Access:
because
Secondary
of
information
availability
of
is
online
highly
access;
primary information.
Low cost to acquire: To acquire secondary information a
researchers need not to expense high. A researchers can
7 | Page
themselves
Clarification
of
Research
Question:
The
use
of
8 | Page
justification.
o Ratios deal with quantity rather than quality ratio does not
address issues like product quality, customer service, after sales
service, these qualitative factors play an important role in
determining financial performance of the company.
9 | Page
Ethical issues
As I have attempted the ACCA Professional Ethics Module, which was, a
prerequisite to beginning work on my project. Ethics is significant to
everyday life in general and also applying ethical issue in the accounting
field in particular is very much crucial. Throughout the various ACCA papers
like P1 I have been learning various ethical issues. The ethical issue that
came into mind is as follows:
o Integrity:
Considering the issue of plagiarism, I have tried to reference others work,
report, ideas accordingly in order to safeguard against this threat. For
completing my research, I have relied mostly on secondary information,
which I have stated clearly.
o Objectivity:
Accordingly, in the R.A.P preparation guide, I have tried to be unbiased when
undertaking my research. I never try to provide only that information that
supports my view of the company have selected. According to me, neatly
sums up the other ethical issue I faced. Undoubtedly Tata Motors Limited is
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doing well than its rivals therefore I could run the risk of slanting my
research.
indicator
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Current
Ratio:
current
ratio
is
liquidity
measure
liabilities.
Gearing Ratio: This ratio show the financial leverage. it
explain the degree to which a firms activities are funded
Business Techniques
o SWOT Analysis:
SWOT is a critical method for analyzing the internal and external
environment of the company. We can try to find out whether the internal and
external environment favourable or non-favourable for the growth of the
company or not.
Strengths:
Strength
of
the
company
mainly
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advantage
by
developing
holistic
system,
PESTEL Analysis:
PESTEL Analysis is a useful tool for understanding the big picture of the
environment in which you are operating, and for thinking about the
opportunities and threats that lie within it. By understanding your
environment, you can take advantage of the opportunities and minimize the
threats.
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Economical:
Economic
activities
and
growth
of
the
Social:
companys
overall
growth
can
positively
or
age
profile
of
the
conducted
by
PART -3
15 | P a g e
o Profitability Ratios
Profitability is a companys ability to generate revenues in excess of the
costs incurred in producing those revenues.
Profitably is analysed as follows:
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Society of Indian Automobile Manufacturer
Through out here financial years TATA Motors maintain a stable trends in
exporting as well as domestic sales. In FY 2015 sales of TATA motors
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International
&
Domestic
Sales
Trend
(Commercial Vehicle)
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Society of Indian Automobile Manufacturer
Sales of Commercial vehicles of Tata Motor are declining year to year. There
is declining trend has been observed throughout three financial years. This
declining is the reflection of overall failing trend in industry. Although overall
industry sales have declined but still Tata has grab the more 53.82% of total
market share.
The overall weak economy has effect the Tata Motors Limited revenue but in
case of Mahindra revenue is increasing year to year.
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
The above mentioned graph reveals the fact that, Tata Motors losing its
revenue consistently two financial years. But in FY 2015 Tata revenue
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Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
The company has experienced almost stable revenue but Gross profit margin
(GPM) is slightly fall in FY2015 compare to last financial year. The decreasing
trend of Tatas GPM is a result of increasing Cost of Goods Sold (COGS).
COGS, which is increased by 32.68% compare to FY2014 forced GPM decline
even after rise in revenue from FY2014 to FY 2015. On the other hand,
Mahindra keep their GPM stable and constant.
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Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
Net Profit Margin of Tata Motors Limited is very in FY 2013 and FY2014. But in
FY 2015 it appeared nil. Increasing finance cost as well as net operating loss
cause of this result. Finance cost increased by 20.50% compare to last
financial years in FY 2015. Tata Motors Limited made loss in FY2015.
Increasing finance cost as well as higher tax payment forced to incur loss in
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net profit. On the other hand, due to improvement in revenue, net profit
margin showing increasing and stable trend throughout three financial years.
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
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Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
o Liquidity Ratio
Liquidity ratio, expresses a company's ability to repay short-term creditors
out of its total cash. The following liquidity ratios would be analyses for the
research work.
Current Ratio
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Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
A company is using current ratio to get the view of its capability to pay off its
short term liability by using its current asset. Tata motors current asset is
mainly comprise of inventories which is 56.01% in FY2015 and 57.32% in
FY2014 this indicates that inventory portion in current asset slight decline
year but as of decline in current investment, trade receivables and cash in
hand of the company decline which reduce the asset base of the company
and put the business in pressure to pay off its short term liability of the
company as Tata Motors current ratio is less than1 in each of the three years
which means the company is in a risky position to meet its short term
payment.
norm, which indicates that the company is capable in paying its short term
obligation at any given time.
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
Acid test ratio indicates the companys capability to pay off its current
liability by using it current asset excluding inventories. Comparing with
current ratio, acid test shows that there is a significant contribution of
22 | P a g e
Receivables Days
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
Receivables days indicate about the fact how well a company manages its
debtor and how efficiently debt collection team is collecting debt. Tata
Motors is taking fewer days in collecting receivables. The company is trying
to maintain stable pattern in receivables. Analysis of three years data gives
the impressive impression about the company. In FY 2015 it is 10.66 days,
11.65 days in FY2014 and 17.63 days in 2013 took to realize working capital
tied up with receivables. Receivable of the company is always in a
acceptable manner. It shows strong credit control policy of the company. On
the other hand, Mahindra and Mahindra doing relatively poor compare to
Tata Motors.
23 | P a g e
Payables Days
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
payables days of Mahindra showing stable trend all over three financial
years. Mahindra is paying suppliers early whereas Tata Motors is doing the
opposite.
Inventory Days
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Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
Gearing Ratio
Source: Annual Report 2013, 2014 & 2015 of Tata Motors Limited (Standalone) & Mahindra & Mahindra
(Standalone)
25 | P a g e
o Investor Ratio
EPS
EPS is very crucial and important figure for common stockholders, because
through this they get to know earning of the company in future and
based on this value of the stock may increase, Tata Motors EPS figure
is low which indicates lower earning of the company and weak financial
position, but in this case it is very important to mention that we are
considering only Stand Alone Annual Report for fair comparison but
if Consolidated Annual Report is chosen the EPS will be appeared
Rs.43.51 in FY2014 and Rs.31.05 in FY2013
Price/Earnings Ratio
The price earnings (P/E) ratio reflects the worth of the company, it is stock
markets evaluation regarding companys worth. It indicates whether the
stock markets has assurance in the companys future growth or not. Tata
Motors Limited P/E is improving as it is rising from FY2015 was caused vitally
for rise in average share prices because of improved earnings if we consider
26 | P a g e
27 | P a g e
28 | P a g e
PESTEL ANALYSES
The Indian automotive industry has flourished in recent years. This
extraordinary growth that the Indian automotive industry has witnessed is a
result of a two factors namely, the improvement in the living standard of the
middle class and an increase in their disposable incomes. In addition to this,
relaxation of government monetary policy also helps the industry to grow
leaps and bound.
29 | P a g e
o POLITICAL Environment
Make in India Campaign:
Make in India campaign is a major national program designed to transform
India into global manufacturing destination. This campaign allures foreign
direct investor to invest in India. This is one of the bold initiative has been
taken by Prime Minister Narendra Modi led Government. It includes plans to
cut red tape, develop infrastructure and make it easier for companies to do
business
(www.bbc.com/news/world-asia-india-29357627).
This
new
E-Biz Mission:
To ease the business environment and to ensure more transparent business
environment within Indian Territory, Indian government has taken The eBiz
Project. Therefore, business environment of the country become more
efficient, convenient, transparent, and integrated electronic service to
investors, industries, and business in the areas of information on forms &
procedures, license, permits, registration, approvals, clearness, permission,
filing, payments and compliances throughout the life-cycle of an industry or
business life cycle (Department of Industrial Policy & Promotion, Annual
Report 2013-14).
o ECONOMIC Environment
FDI Inflow:
30 | P a g e
production
is
consistently
increasing
and
contribution
of
31 | P a g e
o SOCIAL Environment
Population Growth
Population growth has impact on the number of motor vehicles in developing
countries. With increasing of population consumption of service and goods
per person also increase, therefore, size of transportation sector is
population growth sensitive.
Urbanization
Rapid urbanization is playing important role to the growth of automobile
industry. As urbanization force more people to migrate to cities because of
jobs, education and medical treatment which influence the number.
Many analysts indentify these primary factors that influence the growth rate
of motor vehicle in many developing countries and they are population
growth, increased urbanization and economic development (Riley, 2002).
According to World Urbanization Prospects 2014,
32 | P a g e
Thousands)
millions)
281416
285748
294668
301224
307721
314145
321623
329112
336746
371460
52.37
54.99
58.92
67.01
72.72
81.5
89.61
100.7
110.52
121.63
o TECHNOLOGICAL Environment
Electric Mobility 2020:
Indian government has taken initiative for greener and cleaner environment
as well as protecting National Fuel Security by reducing fuel consumption.
Therefore Indian government has initiated a collaborative approach between
government and industry to encourage reliable, affordable and efficient xEVs
(hybrid and electric vehicles that meet consumer performance and price
expectation (Make in India, 2015). This collaborative approach also helps to
develop indigenous manufacturing capabilities, required infrastructure,
consumer awareness and technology. (Make in India 2015)
o LEGAL Environment
India- EU Trade Liberalization Pact:
Indian government is going to sign a deal with EU which helps to liberalize
the trade between India and EU by reducing tariff. But according to SIAM
(Society of Indian Automobile Industry) this proposed pact hurt the domestic
automobile firms. SIAM also saidFTAs with competing countries do not benefit automobile industry, it is
against the concept of Make in India for local value addition and local
employment and such completely built (CBUs) of vehicles and engines
should be kept in Indias negative list under India-EU FTA
Indian auto industry will be hurt because of reduction of tariff which is more
clear by the below mentioned statement of SIAMIndians car can already be exported at 10 per cent duty to Europe.
Obviously, India will not gain much by further reduction of EU duties for our
cars but if Indian duties are reduced by 50 per cent or even more, it will be
substantial reduction in tariff. The gains will be clearly be for the EU
34 | P a g e
SWOT Analysis
o Strength
o Weaknesses
vehicles
for
domestic
market.
That
is
Wrong
Advertisement-
Company
is
lacking
in
o Opportunities
to
have
trustworthy
providers
as
well
as
employees.
Political - According
to
The
Economic
Times the
Social - Times
of
India
published
the
following
on
36 | P a g e
o Threats
costs
has
dampened
domestic
demand,
Social - Times
of
India
(timesofindia.com)
states
the
37 | P a g e
38 | P a g e
Annual Report 2015, investor are likely to be demoralized and net loss left
negative EPS.
Being multinational Tata has to abide by laws and restrictions, corporate
governance code, human right which the company is meeting successfully.
Moreover Tata manages its risk of losing market share by investing more in
R&D and inventing more friendly commercial vehicle. Adoption of robust
marketing, policy, purchasing or raw material, attachment with government,
and central bank and proactive approach made Tata even more credible.
Reference
1.
Society of Indian Automobile Manufacturers, Domestic Market Share for20142015. Available from:: http://www.siamindia.com/statistics.aspx?
mpgid=8&pgidtrail=12 (Accessed:25 April2015)
2.
3.
4.
PTI 2015, India to grow at 7.4% this year, outpacing China, The Economic Times 9
February. Available From:
http://economictimes.indiatimes.com/news/economy/indicators/india-to-grow-at-7-4this-year-outpacing-china/articleshow/46179512.cms (Accessed:25 April 2015
5.
PTI 2015, India to grow at 7.4% this year, outpacing China, The Economic Times 9
February.
Available
From:http://economictimes.indiatimes.com/news/economy/indicators/india-to-grow-
39 | P a g e
(Accessed:25
April
2015)
6.
7.
8.
9.
10.
Tata Motors n.d. Tata Motors Limited Company Profile. Available from:
http://www.tatamotors.com/about-us/company-profile.php (Accessed:26 April
2015)
11.
Tata Motors n.d. Tata Motors Limited Company Profile. Available from:
http://www.tatamotors.com/about-us/company-profile.php (Accessed:27April
2015)
12.
Tata Motors n.d. Tata Motors Limited Company Profile. Available from:
http://www.tatamotors.com/about-us/company-profile.php (Accessed:28April
2015)
13.
Tata Motors n.d. Tata Motors Limited Company Profile. Available from:
http://www.tatamotors.com/about-us/company-profile.php (Accessed:28 April
2015)
14.
15.
16.
40 | P a g e
19.
http://www.worldbank.org/en/country/india/publication/development-update21.
http://esa.un.org/unpd/wup/Highlights/WUP2014-Highlights.pdf
22.
APPENDIX
41 | P a g e
42 | P a g e
2,015
2,014
381,762
381,212
(270,41
7)
111,345
29%
0
(130,93
8)
(19,593
)
(16,117
)
0
(35,710
)
(259,13
5)
122,077
32%
0
(113,55
1)
468,539.2
0
(359,457.0
0)
109,082
23.28%
0.00
(89,196.30
)
8,526
19,886
(13,375
)
0
(13,877.60
)
0
(4,849)
6,008.30
(7,642)
13,603
1,269
(43,352
)
8,754
7,277
(43,352
)
8,754
7,277
(4,038)
(47,390
)
18,796
(5,399)
(4,259)
3,355
3,018
15,440
12,422
18,796
15,440
12,422
(28,594
)
18,796
15,440
Revenue
Less : Cost Of Sales/Services
Gross Profit
GP Margin
Other Operating Income
Less : Operating Cost
Profit/(Loss) From Operations
Net Finance Costs
Non-Operating Income
Profit/(Loss) Before Tax
Pre-Acquisition Loss/(Profit)
Profit/(Loss) Attributable To Minority
Interests And Others/tax holiday reserve
Profit/(Loss)
After
Tax
And
Before
Extraordinary
Item
Attributable
To
Shareholders
Extraordinary Item
Net
Profit/(Loss)
For
The
Year
Attributable To Shareholders
Retained Profit/(Loss) Brought Forward
Prior Year Adjustments
Restated Retained Profit/(Loss) Brought
Forward
Profit/(Loss) Available For Appropriation
43 | P a g e
2,013
2,015
2,014
2,013
218,240
195,462
413,702
215,955
213,999
429,954
420,498
0
420,498
48,021
11,145
0
9,448
9,448
17,117
85,730
38,625
12,167
0
2,261
2,261
14,337
67,390
44,550
18,180
0
4,629
4,629
33,989
101,347
77,620
88,527
31,429
6,131
203,706
(117,977)
47,690
96,724
24,632
18,929
187,975
(120,585)
62,169
84,550
49,231
15,096
211,046
(109,699)
295,725
309,369
310,799
6,438
142,188
6,438
185,329
6,381
184,965
148,626
191,767
191,346
148,626
191,767
191,346
123,190
0
23,910
97,465
431
19,707
80,518
32,024
6,912
Minority Interests
NON-CURRENT LIABILITIES
Borrowings
Provisions For Liabilities
Other Non-Current
Liabilities
44 | P a g e
117,602
309,369
119,453
310,799
2,015
2,014
2,013
2,015
2,014
2,013
Revenue
397,943
412,265
409,903.3
0
(279,553
)
(294,323
)
(304,152.
40)
Gross Profit
118,390
117,942
105,751
GP Margin
30%
29%
25.80%
(77,914)
(72,183)
(60,274.3
0)
40,475
45,759
45,477
(2,143)
(2,592)
(1,911.90)
38,332
43,166
43,564.70
(8,478)
(6,111)
(10,943)
29,855
37,056
32,622
45 | P a g e
NON-CURRENT LIABILITIES
Borrowings
46 | P a g e
2,015
2,014
2,013
81,082
147,083
228,165
71,054
128,943
199,997
58,213
126,888
185,102
24,376
25,580
20,648
30,678
101,282
28,036
25,098
29,504
30,251
112,889
24,198
22,084
17,814
25,339
89,434
1,063
53,654
35,025
89,742
11,540
7
60,688
26,973
87,668
25,221
546
55,797
25,161
81,504
7,930
239,705
225,219
193,032
2,957
189,594
2,952
164,960
2,952
143,638
192,551
192,551
167,912
167,912
146,589
146,589
25,140
37,445
31,724
6,073
15,940
5,103
14,759
4,416
10,303
47,154
239,705
57,307
225,219
46,443
193,032
APPENDIX 5
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48 | P a g e