Tata Motors Capital Structure

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<ul><li><ul><li>Established in 1945 </li></ul><ul><li>Indias largest automobile company, with revenues of Rs. 35651.48 crores (USD 8.8 billion) in 2007-08. </li></ul><ul><li>Leader in commercial vehicles . </li></ul><ul><li>Top 3 in passenger vehicles . </li></ul><ul><li>Worlds 4 th largest truck manufacturer . </li></ul><ul><li>Worlds 2nd largest bus manufacturer. </li></ul><ul><li>23,000 employees . </li></ul></li><li><ul><li>1945-Tata Engineering and Locomotive Co. Ltd. was established to manufacture locomotives and other engineering products. </li></ul><ul><li>1948 -Steam road roller introduced in collaboration with Marshall Sons (UK). </li></ul><ul><li>1954 -Collaboration with Daimler Benz AG, West Germany, for manufacture of medium commercial vehicles. The first vehicle rolled out within 6 months of the contract. </li></ul><ul><li>1959 -Research and Development Centre set up at Jamshedpur. </li></ul><ul><li>1977-First commercial vehicle manufactured in Pune. </li></ul><ul><li>1983-Manufacture of Heavy Commercial Vehicle commences. </li></ul><ul><li>1985 -First hydraulic excavator produced with Hitachi collaboration. </li></ul><ul><li>1986 -Production of first light commercial vehicle, Tata 407, indigenously designed, followed by Tata 608. </li></ul><ul><li>1991 -Launch of the 1st indigenous passenger car Tata Sierra. </li></ul><ul><li>- One millionth vehicle rolled out. </li></ul><ul><li>1994-Launch of Tata Sumo - the multi utility vehicle. </li></ul><ul><li>1995 -Mercedes Benz car E220 launched. </li></ul></li><li><ul><li>1996 -Tata Sumo deluxe launched. </li></ul><ul><li>1997 -Tata Sierra Turbo launched. </li></ul><ul><li>1998 -Tata Safari - India's first sports utility vehicle launched. </li></ul><ul><li>2001 -Indica V2 launched - 2nd generation Indica. </li></ul><ul><li>-100,000th Indica wheeled out. </li></ul><ul><li>2002 -2,00,000th Indica rolled out. </li></ul><ul><li>-Launch of the Tata Sumo'+' Series </li></ul><ul><li>-Tata signed a product agreement with MG Rover of the UK. </li></ul><ul><li>2003-On 29th July, J. R. D. Tata's birth anniversary, Tata Engineering becomes Tata Motors Limited. </li></ul><ul><li>2004-Tata Motors and Daewoo Commercial Vehicle Co. Ltd. sign investment agreement and completes acquisition of Daewoo Commercial Vehicle Company </li></ul><ul><li>-Tata Daewoo Commercial Vehicle Co. Ltd. (TDCV) launches the heavy duty truck 'NOVUS' , in Korea </li></ul><ul><li>-Sumo Victa launched </li></ul><ul><li>-Indigo Marina launched </li></ul><ul><li>-Tata Motors lists on the NYSE </li></ul></li><li><ul><li>2005-Tata Motors rolls out the 500,000th Passenger Car from its Car Plant Facility in Pune </li></ul><ul><li>-Tata Ace,India's first mini truck launched </li></ul><ul><li>-The power packed Safari Dicor is launched </li></ul><ul><li>-Launch of Tata Novus </li></ul><ul><li>2006-Tata Motors vehicle sales in India cross four million mark </li></ul><ul><li>-Indica V2 Xeta launched </li></ul><ul><li>2007-Construction of Small Car plant at Singur, West Bengal, begins on January </li></ul><ul><li>-Roll out of 100,000th Ace </li></ul><ul><li>-Launch of Winger, Indias only maxi-van </li></ul><ul><li>-Launch of new Safari DICOR 2.2 VTT range, powered by a new 2.2 L </li></ul><ul><li>2008-Latest common rail diesel offering- the Indica V2 DICOR, launched. </li></ul><ul><li>-Tata Motors unveils its People's Car, Nano, at the ninth Auto Expo. </li></ul><ul><li>-Tata Motors signs definitive agreement with Ford Motor Company to purchase Jaguar and Land Rover. </li></ul><ul><li>-Indica Vista the second generation Indica, is launched. </li></ul></li><li><ul><li>Annual Reports from 2003-2008 </li></ul></li><li>P &amp; L Account (Rs in Crs) Year Mar 08(12) Mar 07(12) Mar 06(12) Mar 05(12) Mar 04(12) INCOME : Sales Turnover 32,885.03 31,611.21 23,673.43 20,152.03 15,165.85 Excise Duty 4,355.63 4,425.44 3,380.13 3,063.44 2,270.30 Net Sales 28,529.40 27,185.77 20,293.30 17,088.59 12,895.55 Other Income 972.93 574.11 693.92 560.29 427.79 Stock Adjustments -40.48 349.68 256.91 144 -141.98 Total Income 29,461.85 28,109.56 21,244.13 17,792.88 13,181.36 EXPENDITURE : Raw Materials 20,190.19 19,374.93 14,263.86 11,929.48 8,341.39 Power &amp; Fuel Cost 325.19 327.41 258.51 237.81 214.52 Employee Cost 1,534.41 1,361.20 1,141.48 1,037.93 879.49 Other Manufacturing Expenses 1,847.43 1,618.68 1,251.02 1,017.11 722.95 Selling and Administration Expenses 1,442.91 1,322.88 985.74 795.03 645.73 Miscellaneous Expenses 1,598.73 1,153.53 784.56 673.78 644.75 Less: Pre-operative Expenses Capitalised 1,131.40 577.05 308.85 218.13 144.89 Total Expenditure 25,807.46 24,581.58 18,376.32 15,473.01 11,303.94 Operating Profit 3,654.39 3,527.98 2,867.81 2,319.87 1,877.42 Interest 425.61 368.51 293.49 217.81 202.48 Gross Profit 3,228.78 3,159.47 2,574.32 2,102.06 1,674.94 Depreciation 652.31 586.29 520.94 450.16 382.6 Profit Before Tax 2,576.47 2,573.18 2,053.38 1,651.90 1,292.34 Tax 139.01 476 363.35 363.82 96 Deferred Tax 401.54 177.22 142.15 51.13 386 Reported Net Profit 2,028.92 1,913.46 1,528.88 1,236.95 810.34 Extraordinary Items 149.49 37.4 145.42 24.77 -29.95 Adjusted Net Profit 1,879.43 1,876.06 1,383.46 1,212.18 840.29 Adjst. below Net Profit 0 0 0 0 0 P &amp; L Balance brought forward 1,013.83 776.76 585.6 365.8 123.71 Statutory Appropriations 0 0 0 0 0 Appropriations 1,659.68 1,676.39 1,337.72 1,017.15 568.25 P &amp; L Balance carried down 1,383.07 1,013.83 776.76 585.6 365.8 Dividend 578.43 578.07 497.94 452.19 282.11 Preference Dividend 0 0 19.94 0 0 Equity Dividend % 150 150 130 125 80 Earnings Per Share-Unit Curr 50.52 47.1 37.59 32.44 21.93 Book Value-Unit Curr 202.68 177.57 143.93 113.64 101.69 http://www.capitaline.com </li><li>Balance Sheet (Rs in Crs) Year Mar 08 Mar 07 Mar 06 Mar 05 Mar 04 SOURCES OF FUNDS : Share Capital 385.54 385.41 382.87 361.79 353 Reserves Total 7,453.96 6,484.34 5,154.20 3,749.60 3,236.77 Total Shareholders Funds 7,839.50 6,869.75 5,537.07 4,111.39 3,589.77 Secured Loans 2,461.99 2,022.04 822.76 489.81 942.65 Unsecured Loans 3,818.53 1,987.10 2,114.08 2,005.61 317.12 Total Debt 6,280.52 4,009.14 2,936.84 2,495.42 1,259.77 Total Liabilities 14,120.02 10,878.89 8,473.91 6,606.81 4,849.54 APPLICATION OF FUNDS : Gross Block 10,830.83 8,775.80 7,971.55 6,611.95 5,985.40 Less : Accumulated Depreciation 5,443.52 4,894.54 4,401.51 3,454.28 3,023.69 Net Block 5,387.31 3,881.26 3,570.04 3,157.67 2,961.71 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 5,064.96 2,513.32 951.19 538.84 286.09 Investments 4,910.27 2,477.00 2,015.15 2,912.06 3,056.77 Current Assets, Loans &amp; Advances Inventories 2,421.83 2,500.95 2,012.24 1,601.36 1,147.44 Sundry Debtors 1,130.73 782.18 716.6 798.58 614.99 Cash and Bank 2,397.31 826.76 1,119.43 2,005.04 770.49 Loans and Advances 4,433.91 6,402.16 5,639.54 2,681.05 1,162.78 Total Current Assets 10,383.78 10,512.05 9,487.81 7,086.03 3,695.70 Less : Current Liabilities and Provisions Current Liabilities 8,667.20 6,363.68 5,726.82 5,414.61 4,228.13 Provisions 1,989.43 1,364.32 1,215.04 1,126.06 430.64 Total Current Liabilities 10,656.63 7,728.00 6,941.86 6,540.67 4,658.77 Net Current Assets -272.85 2,784.05 2,545.95 545.36 -963.07 Miscellaneous Expenses not written 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 Liability 1,373.17 963.43 773.29 667.97 649.21 Net Deferred Tax -975.72 -786.83 -622.54 -565.28 -514.15 Total Assets 14,120.02 10,878.89 8,473.91 6,606.81 4,849.54 Contingent Liabilities 2,953.57 2,527.78 1,558.65 1,102.68 839.45 http://www.capitaline.com </li><li>Financial Overview (Rs in Crs) Year 2008-03 2007-03 2006-03 2005-03 2004-03 Equity Paid Up 385.54 385.41 382.87 361.79 353 Networth 7813.99 6843.8 5510.68 4111.39 3589.77 Capital Employed 14094.51 10852.94 8447.52 6606.81 4849.54 Gross Block 10805.32 8749.85 7945.16 6611.95 5985.4 Net Working Capital ( Incl. Def. Tax) -1248.57 1997.22 1923.41 -19.92 -1477.22 Current Assets ( Incl. Def. Tax) 10781.23 10688.65 9638.56 7188.72 3830.76 Current Liabilities and Provisions ( Incl. Def. Tax) 12029.8 8691.43 7715.15 7208.64 5307.98 Total Assets/Liabilities (excl Reval &amp; W.off) 26118.26 19534.28 16148.55 13797.29 10135.33 Gross Sales 32885.03 31611.21 23673.43 20152.03 15165.85 Net Sales 28529.4 27185.77 20293.3 17088.59 12895.55 Other Income 972.93 574.11 693.92 560.29 427.79 Value Of Output 28488.92 27535.45 20550.21 17232.59 12753.57 Cost of Production 24611.49 23290.95 17447.8 14614.45 10511.53 Selling Cost 1179.48 1068.56 759.54 581.41 455.56 PBIDT 3654.39 3527.98 2867.81 2319.87 1877.42 PBDT 3228.78 3159.47 2574.32 2102.06 1674.94 PBIT 3002.08 2941.69 2346.87 1869.71 1494.82 PBT 2576.47 2573.18 2053.38 1651.9 1292.34 PAT 2028.92 1913.46 1528.88 1236.95 810.34 CP 2681.23 2499.75 2049.82 1687.11 1192.94 Revenue earnings in forex 2844.12 2714.68 2384.81 1497.85 1016.64 Revenue expenses in forex 1695.58 1504.74 1132.9 671.4 354.38 Capital earnings in forex 0 0 0 0 0 Capital expenses in forex 1314.31 472.76 264.88 226.84 43.22 Book Value (Unit Curr) 202.68 177.57 143.93 113.64 101.69 Market Capitalisation 24037.11 28048.94 35707.39 14976.3 17331.23 CEPS (annualised) (Unit Curr) 67.44 62.31 51.19 44.88 32.77 EPS (annualised) (Unit Curr) 50.52 47.1 37.59 32.44 21.93 Dividend (annualised%) 150 150 130 125 80 Payout (%) 29.7 31.85 34.6 38.66 36.44 </li><li>Financial Statistics 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 </li><li><ul><li>To calculate Weighted Average Cost of Capital (WACC) </li></ul><ul><li>To calculate Return on Investment(ROI) </li></ul><ul><li>Compare WACC and ROI. </li></ul><ul><li>If ROI is greater than WACC, then the company is getting returns more than the capital employed . </li></ul><ul><li>Vice Versa. </li></ul>OBJECTIVE </li><li><ul><li>Cost of Equity, </li></ul><ul><li>Cost of Debt, </li></ul>Weighted Average Cost of Capital </li><li>Return on Investment(ROI) PBIT Profit Before Interest and Tax </li><li>Analysis </li><li>Formulae at Glance Cost of Debt, Cost of Equity, <ul><li><ul><li>Dividend Per Yield = Dividend Per Share / Book Value </li></ul></li></ul><ul><li><ul><li>Growth rate (G) = Retention Ratio x ROE </li></ul></li></ul><ul><li><ul><li> = (1 Payout Ratio) x ROE </li></ul></li></ul><ul><li><ul><li>ROE = ( PAT Preference Dividend ) / Equity Shareholder Funds </li></ul></li></ul><ul><li><ul><li>Equity Shareholder Funds = Equity Share Capital + Reserves </li></ul></li></ul><ul><li><ul><li> P &amp; L A/c (Dr Balance) </li></ul></li></ul></li><li>Capital Structure 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 36.44 Retention 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 3236.77 P &amp; L Account(Dr Balance) 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 </li><li>Weighted Average Cost of Capital Rs in Crs Year 2008 Source Amount Proportion(%) 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 Source Amount Proportion(%) Cost(%) Weighted Cost(%) Equity 385.41 9.61 29.25 2.81 Debt 4009.14 91.23 9.19 8.39 4394.55 100.84 11.20 Year 2006 Source Amount Proportion(%) Cost(%) Weighted Cost(%) Equity 382.87 13.04 28.76 3.75 Debt 2936.84 88.47 9.99 8.84 3319.71 101.50 12.59 Year 2005 Source Amount Proportion(%) 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 12.00 Year 2004 Source Amount Proportion(%) 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 </li><li>WACC Vs ROI Year WACC(%) ROI(%) Difference 2008 8.18 21.30 13.12 2007 11.20 27.11 15.91 2006 12.59 27.78 15.19 2005 12.00 28.30 16.30 2004 20.69 30.82 10.13 </li><li>Reasons <ul><li>Fiscal 2007-08, the first year of 11 th Five Year Plan saw a marginal fall in GDP growth rate of 9%. </li></ul><ul><li>The slow down in economy . </li></ul><ul><li>Increase in inflation . </li></ul><ul><li>Poor credit availability . </li></ul><ul><li>Hardening of interest rates </li></ul><ul><li>Rise in prices of input materials . </li></ul><ul><li>Proposed increase in fuel prices and volatility in foreign exchange rates . </li></ul><ul><li>Manufacturing expenses , employee cost increased </li></ul><ul><li>Net raw material consumption inclusive of processing charges increased , with pressure on volumes and margins. </li></ul></li><li>The year 2007-08 was a historic year for the Company marked with two significant events viz., the unveiling of Tata Nano -the world's least expensive car. During the year, the Company recorded its highest ever sale of 5, 85,649 vehicles and grew its turnover to Rs. 33,094 crores to remain as India's largest automobile company by revenue. The Profit Before-Tax at Rs.2, 576 crores was 0.1 % higher than last year, The Profit after Tax at Rs.2, 029 crores , was 6.1 % higher than last year. Financial performance of a company is satisfactory and attaining good returns of the capital employed even in peak stage as WACC is less than ROI about 13.12% . Conclusion </li><li><ul><li>Sources : </li></ul><ul><li>www.capitaline.com </li></ul><ul><li>www.tatamotors.com </li></ul><ul><li>www.google.com </li></ul><ul><li>Society of Indian Automobile Manufacturers report and Company Analysis </li></ul><ul><li>http://deadpresident.blogspot.com/2008/08/tata-motors-2007-2008-annual-report.html </li></ul><ul><li>Bibliography : </li></ul><ul><li>Financial Management, I M Pandey </li></ul><ul><li>Financial Management, R K Sharma &amp; Shashi Gupta </li></ul>Sources and Bibliography </li><li><ul><li>Cost of Equity, </li></ul><ul><li><ul><li>Dividend Per Yield = Dividend Per Share / Book Value </li></ul></li></ul><ul><li><ul><li>Growth rate (G) = Retention Ratio x ROE </li></ul></li></ul><ul><li><ul><li> = (1 Payout Ratio) x ROE </li></ul></li></ul><ul><li><ul><li>ROE = ( PAT Preference Dividend ) / Equity Shareholder Funds </li></ul></li></ul><ul><li><ul><li>Equity Shareholder Funds = Equity Share Capital + Reserves </li></ul></li></ul><ul><li><ul><li> P &amp; L A/c (Dr Balance) </li></ul></li></ul><ul><li><ul><li>ROE Return on Equity ; PAT Profit After Tax </li></ul></li></ul>Cost of Equity </li></ul>