Assignment

Financial Management

4/10/2013 Manmeet Singh MBA Gen B

Submitted to : Prof . Sumit Khemka

TATA MOTORS Graphs of:

NET INCOME COMPARISON(in Crores)with Ashok Leyland & Eicher

60,000.00 50,000.00 40,000.00 Ashok Leyland 30,000.00 20,000.00 10,000.00 0.00 2008 2009 2010 2011 2012 Eicher Motors Tata Motors

Graph of DIVIDEND COMPARISON (in Crores) with Ashok Leyland & Eicher

1400 1200 1000 800 600 400 200 0 2008 2009 2010 2011 2012 Ashok Leyland Eicher Motors Tata Motors

Graph of

P/E ratio and comparison with Ashok Leyland & Eicher Motors

100 80 60 40 20 0 2008 2009 2010 2011 2012 Tata Motors Ashok Leyland Ashok Leyland Eicher Motors Tata Motors

DIVIDEND YIELD and comparison with Ashok Leyland & Eicher Motors

7 6 5 4 3 2 1 0 2008 2009 2010 2011 2012 Tata Motors Ashok Leyland Ashok Leyland Eicher Motors Tata Motors

DATA OF THE ABOVE CHARTS NET INCOME COMPARISON(in Crores)with Ashok Leyland & Eicher

Ashok Leyland 2008 2009 2010 2011 2012

8,165.15 6,241.11 7,777.37 11,623.29 13,526.30

Eicher Motors
719 410.54 498.97 760.45 1,116.31

Tata Motors
29,461.60 26,343.92 37,200.78 48,652.99 54,829.90

DIVIDEND COMPARISON (in Crores) with Ashok Leyland & Eicher Ashok Leyland 2008 2009 2010 2011 2012
199.77 133.03 199.55 266.07 266.07

Eicher Motors
55.6 60.5 70.5 99.4 112.23

Tata Motors
578.43 311.61 859.05 1,274.23 1,280.70

P/E ratio and comparison with Ashok Leyland & Eicher Motors
Ashok Eicher Tata Leyland Motors Motors 17.87 63.5 86.3 14.7 64.65 84.3 9.4 60.3 80.40 12.4 67.2 48.3 10.76 52.26 75.18

2008 2009 2010 2011 2012

DIVIDEND YIELD and comparison with Ashok Leyland & Eicher Motors
Ashok Eicher Tata Leyland Motors Motors 5.5 1.44 2.98 6.33 1.23 3.4 7 1.2 3.50 6.2 2.34 1 4.56 0.71 1.44

2008 2009 2010 2011 2012

TATA MOTORS Capital Budgeting Decision

Tata Motors have been consistently paying dividends and hence keeping shareholder interests alive. Moreover, they have been busy establishing new plants to meet their commitment of Nano. The development of Nano itself must have forced them to incur heavy expenses in R&D. Hence, overall the situation for Tata Motors is not in favor of Debt financing given that mortgage charges against such huge plant and machinery equipment plus the long term interest rates may add large burdens on their already not so promising fundamentals. But, Purchase of Jaguar and Land Rover again has happened at more than 20% of their annual revenues which already must have put them into liquidity troubles. Hence, they may end up bending towards debt financing if they undergo financial distress in the near future. Also, interest rates of debt financing from 2006 onwards have not been attractive. They have been performing quite well on the NYSE and the Bombay Stock Exchange (SENSEX). However, their performance in 2009 will determine how much they can continue with equity financing. As per theories discussed above, increase in debt financing will affect their dividend payments as well which may lead to further reduction in equity component.