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Time series Analysis of Economic Data of TATA Motors Co. from 1996-2016

Preprint · November 2019

DOI: 10.13140/RG.2.2.20837.76003

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 Time series Analysis of Economic Data
Author - Bhargav Jairam Shetgaonkar1
1School of Mechanical Engineering – Vellore Institute of Technology, Vellore, Tamil Nadu
Email Id : bhargav.shetgaonkar@outlook.com

Abstract – Most modern businesses seek to evolve with time and often understand and analyse
their performance with respect to Intrinsic and Extrinsic factors using data analysis tool. In a global
business community we observe large inter-dependence between enterprises and related
governmental policies, fuel prices, liquidity, growth rate of the company, among others. Time series
models are the simplest longitudinal models, and longitudinal modelling is important in many fields,
from modelling business processes to understanding the evolution of disease or social processes and
predicting the weather. An investor too must understand the underlying forces behind a certain trend
in performance to make a sound investment. In this paper, we aim to analyse and understand the
importance of Time Series analysis of Economic data of an Indian multinational automotive company,
TATA Motor Co. for a 20 year span from 1998 to 2018. The tool used is ‘Analysis ToolPak’ in MS
Excel and large officially released data is used to draw a correlation between organizational and
external factors to the performance of the company. This analysis can guide prospective investors in
company stocks to better judge and predict their return on investment through a comprehensive study.

INTRODUCTION
Time-Series Analysis
Time-series methods use economic theory mainly as a guide to variable selection, and rely on past
patterns in the data to predict the future.
Our society is increasingly influenced by modern information and communication technology
(ICT), Data warehouse, data mining and time series data mining etc.
Time series data mining can also be treated as a subset of generalized data mining.
Also one should take note that the nature of time series data is large data size, high dimensionality
and necessary to update continuously. As we know the markets are a very unpredictable and unstable
area to work in. They keep fluctuating and changing, so to make money of the change in markets and
predict what happens next companies use a set of tools to evaluate the market.
One of the methods used is Time-Series Analysis. A time series is a series of data points indexed
(listed or graphed) in time order. Most commonly, a time series is a sequence taken at successive
equally spaced points in time. Thus it is a sequence of discrete-time data.

LITERATURE REVIEW
As we know Time-Series Analysis has been here for a long period of time so there are bound to be
a large number of different types of time series analysis evolved a few of them are taken care of
here
Classification of Time Series Depending on the character of the data that they carry, the time series
could be
(a). Stationary and non-stationary.
(b). Seasonal and non-seasonal.
(c). Linear and nonlinear.
(d).Univariate and multivariate.

There are may ways to which one can choose to obtain the variables which are goin to be used in
the analysis. These come under Time-Series Analysis
 Deterministic Models
It is one in which every set of variable states is uniquely determined by parameters in the
model and by sets of previous state of these variables. Therefore, deterministic models
perform is the same way for a given set of initial conditions.
 Stochastic Models
 Randomness is the main property of stochastic model. In it, variable states are not described
by unique values, but by probability distributions. It is statistically viewed as functions of
random variables.

Forecasting -Time-series forecasts are used in a wide range of economic activities, including
setting monetary and fiscal policies, state and local budgeting, financial management, and financial
engineering. The main element of forecasting involves the model chosen. This is quintessential as a
model should be chosen which is appropriate for the problem provided.
Time-series models are usefully separated into univariate and multivariate models. In univariate
variables, Xt consists solely of current and past values of y. In multivariate models, this is
augmented by data on other time series observed at date.

SUBJECT OF STUDY
TATA Motor Co – an Indian multinational automotive manufacturing company headquartered in
Mumbai, Maharashtra, India. It is a part of Tata Group, an Indian conglomerate.
Historical time series data of TATA MOTORS.CO can be summarized by the following charts.

The following data only concludes sales starting from the financial year 2000.This has been
provided just to give out a gist of the company’s performance. A lot of the data that has been used in
this report has been taken from annual reports of the TATA MOTORS financial reports (sometimes
including external sources to gain additional data).
 CAPITAL ACCOUNTS (Rs in lakhs) REVENUE ACCOUNTS (Rs in lakhs) RATIOS
Year Capital Reserves and Surplus Borrowings Gross block Deprociation Net block Turn over Deprociation Profit/loss before taxes taxes Profit/loss aftter taxes Dividend including
PATtax
to Sales Earning per Share Dividend per share Net Worth per share
(Basic)
ordinary "A" Ordinary ordinary "A" Ordinary
share Share share Share
1989-90 10444 37870 48883 91488 43070 48418 196910 4891 14829 4575 10254 3126 5.20% 9.87 - 3 - 47
1990-90 10387 47921 48323 100894 48219 52675 259599 5426 23455 9250 14205 4154 5.50% 13.69 - 4 - 56
1991-92 11765 61863 105168 123100 54609 68491 317965 6475 20884 7800 13084 4389 4.10% 12.45 - 4 - 67
1992-93 12510 64207 144145 153612 61710 91902 309156 7456 3030 26 3004 3642 1% 2.47 - 3 - 63
1993-94 12867 70745 141320 177824 70285 107539 374786 9410 10195 20 10175 5020 2.70% 7.91 - 4 - 65
1994-95 13694 128338 115569 217084 81595 135489 568312 11967 45141 13246 31895 8068 5.60% 23.29 - 6 - 104
1995-96 24182 217400 128097 294239 96980 197259 790967 16444 76072 23070 53200 14300 6.70% 21.92 - 6 - 100
1996-97 25588 339169 253717 385116 117009 268107 1012843 20954 100046 23810 76236 22067 7.50% 30.4 - 8 - 143
1997-98 25588 349930 330874 487073 141899 345174 736279 25943 32820 3414 29466 15484 4% 11.51 - 5.5 - 147
1998-99 25590 350505 344523 569865 165334 404531 659395 28132 10716 970 9746 8520 1.50% 3.81 - 3 - 147
1999-00 25590 349822 300426 581233 182818 398415 896114 34261 7520 400 7120 7803 0.80% 2.78 - 2.5 - 147
2000-01 25590 299788 299888 591427 209067 382360 816422 34737 50034 - 50034 - - 18.45 - - - 127
2001-02 31982 214524 230772 591006 243172 347834 891806 35468 10921 5548 5373 - - 1.98 - - - 77
2002-03 25983 227733 145831 608114 271307 336807 1085874 36213 51037 21026 30011 14430 2.80% 9.38 - 4 - 81
2003-04 35683 323677 125977 627149 302369 324780 1555242 38260 129234 48200 81034 31825 5.20% 24.68 - 8 - 102
2004-05 36179 374960 249542 715079 345428 369651 2064866 45016 165190 41495 123695 51715 6% 34.38 - 12.5 - 114
2005-06 38287 515420 293684 892274 440151 452123 2429052 52094 205338 52450 152888 56778 6.30% 40.57 - 13 - 145
2006-07 38541 684434 400914 1128912 489454 639458 3206467 58629 257318 65972 191346 67639 6% 49.76 - 15 - 178
2007-08 38554 745396 628052 1589579 544352 1045227 3357711 65231 257647 54755 202892 65968 6% 52.64 - 15 - 203
2008-09 51404 1171610 1316556 2085206 625990 1459216 2949418 87545 101376 1250 100126 34570 3.40% 22.7 23.2 6 6.5 238++
2009-10 57070 1439487 1659454 2362896 721292 1643604 4012755 103387 282954 58946 224008 99194 5.60% 42.37 42.87 15 15 262^
2010-11 63771 1937559 1591543 2568235 846625 1721610 5160692 136077 219652 38470 181182 146703 3.50% 30.28 30.87 20 20 315^^
2011-12 63475 1899126 1588057 2902206 996587 1906619 5979502 160674 134103 9880 124223 146372 2.50% 3.9** 4** 4** 4 62
2012-13 63807 1849677 1679895 3183998 1161144 2020854 5104793 181762 17493 12688 30181 72423 0.60% 0.93 1.03 2 2 60
2013-14 64378 1853287 1505280 3514652 1355088 2159564 4159103 207030 102580 136032 33452 66627 0.80% 1.03 1.13 2 2 60
2014-15 64378 1421881 2113441 3785550 1603098 2182402 4141264 260322 397472 76423 473895 9340 - 14.72 14.72 - - 46
2015-16 67918 2168890 1588725 4077235 1852749 2224486 4877959 245375 15039 8384 23423 7300 0.50% 0.68 0.78 0.2 0.3 66++

The link for the above table has been given below:
http://www.tatamotors.com/investors/financials/71-ar-html/pdf/Financial-Statistics.pdf
Furthermore various other external data which may or may not affect TATA MOTORS has been
obtained from websites which may or may not be related to the company mentioned. The values
were duely noted from the original table on Stand alone comany financial statistics.
FUELS PRICES HISTORICAL DATA

The link for the entire tabular data is given below.

https://in.reuters.com/article/india-fuel-reforms/table-fuel-prices-in-indias-capital-since-1989-
idINSGE65209520100625
Various other forms of data regarding the population and GDP have been obtained from the
WORLDBANK website.
https://data.worldbank.org/country/india

The tool used in this report is the ‘tool Pak’ tool from Microsoft Excel.
Initially variables {internal variables} were taken individually and all the other variables were held
constant, and the effect the individual variable had on the dependant variable was accounted for
using regression analysis.
This was carried out for multiple individual variables, showcased below:

Capital and Turnover

Here we are comparing the capital and turnover data for the TATA MOTORS.CO for the last 20
years data provided by the company and to see which one is dependent and which on is
independent.
After regression analysis:
INFERENCE
1. The value of R2 is pretty high which showcases that capital largely influences the turnover
of TATA MOTORS, provided all the variables are held constant.

R^2=0.892 , which is high

2. The model explains all the variability of the response data around its mean therefore, we
can conclude that the model directly fits the data. The model is useful. The dependant
variable here is the turnover of the firm and independent variable is the capital.

 The dividend and PAT[Profit after Tax]

Here the Divident per share and profit after tax has been put on graph to check the variability of
each other.
 After regression analysis:

 Dividend-
The earning of the company per share and the part of it they give out to the shareholders. A
dividend is a distribution of a portion of a company's earnings, decided by the board of
directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of
stock, or other property.

 PAT-
After-tax profit margin is a financial performance ratio, calculated by dividing net profit
after taxes by revenue. A company's after-tax profit margin is important because it tells investors
the percentage of money a company actually earns per dollar of revenue

INFERENCE
1. The R^2 value found out is 0.637, which is a low value of coefficient of
determination. This in turn implies that the given regression model does not fit the
data that efficiently. The model is ineffective to explain the variability of
the response data around its mean. The dependant variable in this case is dividend such that
that each share-holder
earns and the independent variable is profits after tax. Here, we must consider
that the company has no control over the tax policy of the area of operation.
2. This and more such extrinsic factors do a great deal in changing the net profit earned and in
turned the firm must alter its dividend percentage. This clearly explains the low degree of
dependence and high variability of the low R^2 value obtained.

 The earning of the company per share and the part of it

they give out to the shareholders [Dividend].
Here we are comparing earning of the company per share and dividend to see weather they are
corelated or not.
After regression analysis:
 INFERENCE
The dividend is taken as the dependent variable and the earning as the dependent variable. This
clearly comes from the idea that how much a company returns to its share holders must depend
upon how much it earns itself.
The R^2 value that we have observed here is 0.732. This is close to a moderate value and shows
that the dividend goes in line with the earning to a great extent

 Turnover and reserves

Here we will be comparing the Turnover and reserves to check weather Turnover is dependent on
reserves or not.
After regression analysis:

Turnover- is an accounting term that calculates how quickly a business collects cash from accounts
receivable or how fast the company sells its inventory. In the investment industry, turnover
represents the percentage of a portfolio that is sold in a particular month or year. A quick turnover
rate generates more commissions for trades placed by a broker.
Reserves- A reserve is profits that have been appropriated for a particular purpose. Reserves are
sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off
debt, pay for repairs and maintenance, and so forth.
R^2 value observed=0.88, which is a high value, showing a great extent of dependence of
turnover on the reserves that the firm has set aside.

Up to this point factors have been taken individually and seen their effect on the dependant variable.
From this point onward we will consider relevant internal factors on one end and relevant
external factors on the other end influencing the dividend per share.

INTRINSIC factors:
These include:

1. Access to capital markets:A firm with record of high and stable earnings will have easy
access to capital market sources. The easier access to capital markets which is more
particularly true of large and well established ventures may encourage the management to
formulate liberal dividend policy to pay out sizeable portion of the income

2. Growth Rate of the Firm:Closely related to age of the firm is rate at which a firm is
expanding its business. A rapidly growing concern will have constant need of long-term
funds to seize favourable opportunities and for that purpose it may find it expedient to
finance greater part of its expansion out of its earnings.

3. Liquidity Position of the Firm and Its Funds Requirements: A firm with high profitability
and large reserves may not necessarily have sufficient cash balances to pay cash dividends
particularly when most of the sales have been affected through credit and/or firm’s cash
balances have been seriously depleted through the expansion of current or fixed assets or
through the reduction of its liabilities. In such a situation it would be unwise to drain off
additional cash by paying dividends. Even if firm’s cash position is comfortable, but it needs
cash to repay bank loan and to purchase raw materials for production purposes, prudent
manager would not impair liquidity position of the firm for sake of maintaining regularity in
dividend payment though, of course, the latter is also important.
After multiple regression analysis:

From this we can infer that the most influential factor in deciding the dividend the shareholders get
is the earning of the company and the second most influencing factor is the profit after tax.
Factors such as taxes can be ignored from the analysis and the final table will not have much of a
difference is we eliminate those factors.
EXTRINSIC factors:
1. GDP
2. Petrol price
3. Diesel price

After regression analysis:

From this analysis we can infer that Petrol Price, GDP, Diesel Price are all influencing factors in the
Dividend per share as they all have lower p-values [significant]. As, extrinsic factors these are
independent in nature and the firm has no power to control them. Yet, they have a great dependence
and effect on the dividend per share. For e.g. Tata Motors cannot control the GDP of all nations of
its operations, so it has to set it policies and strategies in such a way so as to reduce any form of loss
to the firm by such uncontrollable changes.
 The lower p value (<0.05) shows strong evidence against the null hypothesis and therefore it can be
rejected. All the mentioned extrinsic factors have lower p values.
INFERENCE
Time Series analysis was performed using regression analysis of various variables from data of
TATA Motors over the past 20 years. All our analysis was performed using the ToolPak kit provided
in MS-Excel to obtain results.
We used regression analysis to observe the effect the individual variable had on the dependant
variable taking intrinsic variables individually and keeping all other variables constant.
Above R2 tests have shown that independent variables capital and reserves influence the
independent variable turnover.
From the analysis of intrinsic factors it is evident that the one most influential factor that affects the
dividend the shareholder gets is the earning of the company, followed by the profit after tax at
second. While other factors such as tax play a very small role in determining the final result, so such
inconsequential factors can be omitted from the final table.
The final analysis shows that fuel price (both petrol and diesel) along with GDP greatly influence
the dividend per share as they have low p-values. Since these are extrinsic factors, the firm has no
control over these as they are independent. But the opposite is not true. The dividend per share is
affected by these. TATA Motors has set its policies and goal along with strategies in such a way to
reduce their losses to account for government policy changes and unexpected occurrences.

CONCLUSION
Thus, to get the maximum ROI (Return on investment), i.e. to say higher dividends while investing
in the stocks of a particular company, TATA Motors in this case, intrinsic factors like access to
capital markets, growth rate of the firm and liquidity position of the firm and its fund requirements
along with extrinsic factors like GDP, petrol price and diesel price have to be taken into account to
make a sound decision. This research can also be further be extended like in ‘A Study of Financial
Performance Analysis of Mahindra & Mahindra and Tata Motors’ (International Research Journal of
Commerce Arts and Science Volume 9 Issue 5) [10] to compare and analyse companies of the
Automotive Industry.

REFERENCES
1. http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=05499DFCA39033C37A3DA3677046
392A?doi=10.1.1.259.485&rep=rep1&type=pdf
2. https://scholar.harvard.edu/files/stock/files/time_series_economic_forecasting.pdf
3. http://www.tatamotors.com/investors/financials/71-ar-html/pdf/Financial-Statistics.pdf
4. https://data.worldbank.org/country/india
5. https://in.reuters.com/article/india-fuel-reforms/table-fuel-prices-in-indias-capital-since-1989-
idINSGE65209520100625
6. https://iocl.com/Products/PetrolDomesticPrices.aspx
7. http://profit.ndtv.com/stock/tata-motors-ltd_tatamotors/financials-historical-profit-loss
8. https://data.worldbank.org/country/india
9. https://www.tatamotors.com/investors/results-press-releases/
10. https://www.academia.edu/38294138/A_Study_of_Financial_Performance_Analysis_of_Mahin
dra_and_Mahindra_and_Tata_Motors?auto=download

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