Brand Valuation

CAGR of NOPAT on the basis of last 5 years: In the case of Tata Motors Ltd. the NOPAT
of the company was way different than that of PAT of the last year.

NOPAT -942.28 1791.51 3395.76 5978.0 10344.50

1

Brand Valuation: It is the value of the brand which others party willing to pay for the
acquisition of the brand and it depends on the various factors and can be calculated according
to the understanding of the management.
On the basis of the CAGR the profit after tax of the company has been predicted for the
future 5 years, which means that it has been growing at 2.60% every year. And on the basis
of the past records of the non-operating income it has been fluctuating from loss one year and
profit in another.
After arriving at NOPAT cost of capital employed has been deducted which is arrived on the
basis of the WACC for the FY21 which is 10.78% and the value of equity is increased by the
NOPAT in each year cumulatively. By this the future EVA of the company has been arrived,
which is given below in the following table.
Tata Motors Ltd.
Interbrand Valuation Approach
Particulars   2021 2022 2023 2024 2025
PBIT   -1346.11 2559.30 4851.08 8540.02 14477.85
Add: Terminal Gain   0 0 0 0 300
PBIT   -1346.11 2559.30 4851.08 8540.02 14777.85
TAX @ 30% 30% -403.83 767.79 1455.33 2562.01 4433.36
NOPAT   -942.28 1791.51 3395.76 5978.01 10344.50
Less: Charge for the capital used to
generate the brand's revenues and
margins @ WACC 7.96%   4088.34 4088.34 4088.34 4088.34 4088.34
Economic Profit (EVA) from the Brand   -5030.62 -2296.83 -692.58 1889.67 6256.15
Role of Brand Index 60% 0.60 0.60 0.60 0.60 0.60
Brand Earnings   -3018.37 -1378.10 -415.55 1133.80 3753.69
Brand specific discount rate on the 10.00
basis of brand strength score %   0.10 0.10 0.10 0.10
Present Value Factor @ 10%     0.91 0.83 0.75 0.68
Present Value of Brand Earnings     -1252.82 -343.43 851.84 2563.82
Brand Value (Aggregate of Present
Values of Brand Earnings)     ₹ 1,819.42
Brand Value Rounded     ₹ 1,819.00
 Calculation of WACC
Particulars   2021 2022 2023 2024 2025
Equity   765.81 765.81 765.81 765.81 765.81
18290.1 18,290.1 18,290.1 18,290.1 18,290.1
Other Equity   6 6 6 6 6
18869.2
Borrowing*   7 18869.27 18869.27 18869.27 18869.27
37925.2
Total   4 37925.24 37925.24 37925.24 37925.24
37925.2
Average   4 37925.24 37925.24 37925.24 37925.24
10.78
WACC % 4088.34 4088.34 4088.34 4088.34 4088.34

Assumptions:            
Terminal Gain (PAT) based on brand's expected financial performance beyond the explicit  
forecast period is expected 300
Role of Brand Index (RBI)     60%      
Brand Specific Discount Rate     10.00%      
All amount in Rs. Crore            
Losses of the company are carried forward and are not set off from other equity    

Calculation of PV Factor @ 10%

Period 1 2 3 4
  1.10 1.21 1.33 1.46
PVF 0.91 0.83 0.75 0.68

Role of Brand Index: Brand Finance describes the expansion of TATA Motors' image value
and product capabilities as the consequence of the company's deliberate efforts to integrate
the most significant customer product, which also serves as a secret to the progress engine.
To better comprehend this philosophy, the company has continued to invest in new and
improved products.
We had conducted a survey to measure the same and got the following conclusions:
 65% of the respondents attribute themselves to the brand for its product features. For
example: Tata motors vehicle, post sales services which they offer different financing
schemes which they have to offer. These self-contained pieces of information help to
break down the repositories, increase the combined effort, and close the gaps in the
experience. Such integration adds the differentiating factor in its products compared
to other rivals.
 35% of the respondents take into consideration all the factors such as price,
convenience, etc. before associating themselves with the brand.
Brand Strength score: External Factors:
1. Authenticity – Out of 30%, we have given TATA motors 100% for their authenticity
since Tata Motors has been in the industry for a very long time and has established
itself as a successful
2. Relevance – Out of 13%, we have given Tata Motors 84% for their relevance.
 3. Differentiation – Out of 13%, we have given Tata Motors 76.9% for their
differentiation.
4. Consistency - Out of 30%, we have given Tata Motors 100% for their consistency.
5. Presence - Out of 30%, we have given Tata Motors 93.3% for their presence.
6. Understanding - Out of 13%, we have given Tata Motors 84% for their understanding.
Therefore, we have taken brand index as 70% as the total income generated through
according to our survey and understanding is 70%.
Through this company’s future brand earnings are calculated which has been decreasing as
the cost of capital has been increasing in each year. The value of NOPAT is also increasing in
each year but the company is raising funds through equity only and it is a costly source of
funds, due to which the value of the brand is diminishing in each year despite the increase in
the value of NOPAT. Due to this the company’s overall brand value is affected.
According to the external factors we have given brand strength score as 90% to our brand and
according to the relative discounting method the discounting factor for the calculation of the
present values of the brand earnings comes out to be 6.67% and by multiplying this, we got
the present value of brand earnings.
By adding all the present value brand earnings value, we get the total of Rs. 30368 crore of
brand valuation of Tata Motors as per the calculation shown in the table. The company can
increase its value if they are able to grow more than 2.6% per year and also by infusing debt
in the capital structure rather than depending on equity only.

DEV RAJ’S PART

TATA MOTORS
Earnings Call Analysis
Earnings call Highlights
Business Highlights
• Tata Motors' JLR says chip shortages continue to hurt retail sales
• Poor JLR sales put Tata Motors among top Nifty laggards
• Tata Motors Group global wholesales at 3,34,884 units in Mar quarter of FY22
• Tata Motors bags order for 1,300 commercial vehicles from VRL Logistics
• Sri Lanka is facing economic crisis.
• Ukraine – Russia war leads to uncertain crude oil prices.
• Ukraine – Russia war leads to uncertain Gass prices.
• Container availability remains a challenge.
Electric Vehicle
• Tata Motors unveils concept of new electric SUV Curvv.
• Electric vehicle retail sales zoom over three-fold in FY22
• Tata Motors expects EV volumes to double in FY-23, says PV market may hit a new
peak.
• Strategic partnership with Tata Power to setup EV charging infrastructure across
country.
• The company is Eligible for PLI scheme announced for EV vehicles.
• Strategic investment in Supply chain. Rs. 130 crores at 2%-3%.
Future Assessment
Some insights for the coming years from the analysis, management discussions and con calls
are as follows:
• Tata Motors is transitioning into a digital-age firm with a brand that is connected,
sustainable, and electrified. The firm is dedicated to leading the way in EV and green fuel
technology development, as well as the electrification of the country's four-wheeler
industry.
• The company has good fundamentals and profitability through which it will
overcome the temporary slowdown. The stock also remains a good investment considering
the future expansion and long-term outlook for the company.
• Chip shortage is affecting its premium market at larger scale
• The low demand in auto sector will keep effecting negatively.
Because the firm works in an asset-heavy industry, depreciation has a significant impact on
operational and net profitability. Working capital has been negative, and Capital
Expenditure has been linear as well. Overall, the company's revenue has remained stable,
but its operational profitability has decreased.
With this, the company is looking forward to become a leader in context of market share
and its strong EV sector is a pillar for this goal.